The $2 billion loan for Ethiopia will need clear commitments from development partners and financing assurances from G20 Common Framework creditors, the International Monetary Fund has said.
The Horn of Africa nation requires new funding to rework up to $28.2 billion of external debt under the Group of 20’s so-called Common Framework, Bloomberg reported.
“An IMF program would support the Homegrown Economic Reform Agenda, help address key macroeconomic vulnerabilities, and help unlock Ethiopia’s considerable economic potential,” the Washington-based lender stated.
Ethiopia, Africa’s fastest-growing economy, has been hit by six consecutive years of drought, the Covid-19 pandemic and the Russia-Ukraine war.
The country’s risk premium over US Treasuries has been increasing since March, reaching its highest level in nearly nine months to above the 1,000 basis points – the threshold for debt distress, the news agency reported.
The nation’s $1 billion Eurobonds, which mature next year, rose 0.35 cents by 12:50 p.m. in London to 68.68 cents on the dollar.
In April, the IMF calculated that Ethiopia was set to face a financing gap of at least $6 billion until 2026, leaving a funding gap of roughly $4 billion over that period even if $2 billion was secured.
In the same month, the fund said Ethiopia is expected to overtake both Angola and Kenya to become the third-largest economy in sub-Saharan Africa, rising from $126 billion to $156.1 billion in 2023.
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