Ethiopia receives IMF relief after easing forex curbs

Ethiopia implements foreign exchange reforms to stabilize economy, secure IMF loan, and attract foreign investment.

Cash-strapped ased foreign exchange curbs on Monday as part of a broad economic reform package as the International Monetary Fund approved a loan to the Horn of Africa nation seeking a multibillion-dollar bailout.

The value of the local currency, the birr, plunged by around 30% after the move by the country’s central bank.

“The reform introduces a competitive market-based determination of the exchange rate and addresses a long-standing distortion within the Ethiopian economy,” the National Bank of Ethiopia (NBE) said in a statement.

Africa’s second most populous country is pinning its hopes on a rescue package of at least $10.5 billion from external lenders including the IMF, but negotiations have been long and fraught.

The International Monetary Fund’s board on Monday approved a four-year loan programme worth around $3.4 billion to support the reforms, with around $1 billion immediately disbursed.

“This a landmark moment for Ethiopia” and the loan is a testament to the country’s “strong commitment to transformative reforms”, IMF Managing Director Kristalina Georgieva said in a statement.

Analysts had said the IMF was demanding several reforms of Ethiopia’s state-controlled economy, including floating the currency, in order to unlock the funding.