The International Monetary Fund has raised Ethiopia’s net international reserves target to facilitate payments of upcoming hard currency bills.
The East African nation secured a 3.4 billion dollars four-year financing programme from the IMF in July after carrying out a series of reforms including floating its birr currency.
It is also in the midst of a fresh push to put its debt restructuring back on track.
“An increase in near-term target is warranted by Ethiopia’s vulnerabilities and heightened uncertainty around the outlook,” the IMF said in a report published late Monday.
The IMF said that lower-than-expected volumes of hard currency sales by the central bank through auctions and higher gold exports contributed to an over-performance of the net international reserves target for August.
The net international reserves stood at 1.3 billion dollars in mid-August, more than double the target of 630 million dollars the Fund said.
It raised the end-June 2025 target by 300 million dollars to 400 million dollars to help create a buffer for the country to settle maturing letters of credit for fuel imports issued before reforms started.
The IMF said that the flotation of the birr currency resulted in the convergence of the official and the black-market rates, but market activities had picked up at a slower pace than expected, leading to persistent unmet demand for dollars.
Ethiopia plans to reach a deal with bilateral creditors by year-end, the Fund said, followed by a deal with its Eurobond investors “as soon as is feasible” after that.
Bondholders have rejected the size of the proposed reduction in the principal amount, known as a haircut, indicated at 18 per cent in a recent investor presentation, saying the government was ignoring the fact that Ethiopia faces a liquidity issue, not an insolvency one.
“The authorities are making good faith efforts to agree terms with Eurobond holders,’’ the IMF said. (Reuters/NAN)
