The International Monetary Fund (IMF) has raised Ethiopia's net international reserves target to help the country meet upcoming foreign currency payments. This follows Ethiopia’s USD 3.4 billion, four-year financing deal secured with the IMF in July, contingent on major economic reforms, including the recent flotation of the birr currency.

Ethiopia is now working to resume its debt restructuring efforts. The IMF noted that Ethiopia’s “vulnerabilities and heightened uncertainty around outlook” justified the near-term increase. As of mid-August, Ethiopia’s net international reserves reached USD 1.3 billion, over twice the initial target of USD 630 million. This improvement is attributed to lower-than-anticipated hard currency sales by the central bank and increased gold exports.

The IMF raised the reserves target for June 2025 by USD 300 million to USD 400 million, aiming to establish a financial buffer for settling pre-reform fuel import bills. The birr flotation has aligned official and black-market exchange rates, though unmet dollar demand persists.

Ethiopia seeks to finalize an agreement with bilateral creditors by year-end, with plans for talks with Eurobond investors soon after. However, bondholders have rejected an 18% principal reduction proposal, contending Ethiopia’s debt concerns relate to liquidity rather than insolvency. The IMF has acknowledged the government’s “good faith efforts” to negotiate fair terms.

Source: Reuters