Ethiopia secures $1 billion World Bank credit after currency float

The World Bank announced on Tuesday that its board has approved a $1 billion credit for Ethiopia as the country continues its efforts toward long-term debt restructuring.

Ethiopia also secured a four-year, $3.4 billion program from the International Monetary Fund (IMF) on Monday, Reuters reported.

The World Bank’s International Development Association (IDA) will also grant a $500 million concessional credit to Ethiopia, the global lender announced in a statement.

“IDA expects to provide around $6 billion in new commitments over the next three fiscal years and support economic reforms through fast-disbursing budget support”, the World Bank said.

The funding is part of a $10.7 billion financing package by the IMF, World Bank and other creditors, according to Ethiopian officials.

Ethiopia sought to restructure its sovereign debt in 2021 under the G20 Common Framework initiative, designed to offer relief to developing nations.

However, progress was hindered by a civil war in the northern Tigray region, which concluded the following year. Recently, there have been signs of renewed momentum in Ethiopia’s debt restructuring efforts, inspired by the successful debt overhauls of Chad and Zambia under the same framework.

Ethiopia’s development partners have welcomed the shift to a market-based foreign exchange rate. However, some analysts argue that higher inflation can reduce consumers’ purchasing power, leading to a higher cost of living and potential social unrest.

Also, the initial volatility and uncertainty might deter some investors in the short term, making it challenging for companies and investors to conduct business in Ethiopia.