The World Bank’s board has approved a $1 billion credit for Ethiopia as the country continues its efforts to restructure its sovereign debt. This announcement, made on Tuesday, comes shortly after Ethiopia secured a four-year, $3.4 billion programme from the International Monetary Fund (IMF) on Monday. The IMF’s support is a significant step forward following the Ethiopian central bank’s decision to float its birr currency, which aims to facilitate the debt restructuring process.
In addition to the $1 billion credit, the World Bank’s International Development Association (IDA) will provide a $500 million concessional credit to Ethiopia. According to the World Bank, IDA anticipates delivering approximately $6 billion in new commitments over the next three fiscal years to support economic reforms through rapid budget support. This funding is part of a larger $10.7 billion financing package involving the IMF, World Bank, and other creditors.
Ethiopia’s debt restructuring efforts began in 2021 under the G20 Common Framework, which aims to offer relief to developing nations. However, progress was impeded by a civil war in the Tigray region, which ended the following year. Recent developments have included debt restructurings for Chad and Zambia under the Common Framework, while Ghana is nearing completion of its own restructuring process.
The transition to a market-based foreign exchange rate has been welcomed by Ethiopia’s development partners, although some analysts have expressed concerns that it may lead to increased inflation and higher living costs for the country’s most vulnerable populations. Ethiopia also faces challenges related to climate change and the reconstruction of Tigray following the conflict.
The World Bank’s support reflects a broader commitment to assisting Ethiopia through its economic reforms and debt restructuring journey.
