News: IMF hints program negotiating team will be sent to Ethiopia in fall ‘provided conditions are met’


By Getahun Tsegaye @GetahunTsegay12

Addis Ababa – The International Monitoring Fund (IMF) briefed the creditors’ committee meeting under the G20 common framework on Tuesday July 19 and hinted that it would send a “programme negotiation mission” to Ethiopia between “late September and early/mid-October” this year, “provided the conditions are met”. on the right,” according to a document seen by Addis standard.

“This means that Ethiopia will see a new program by 2024, and it will give confidence to creditors to restructure [Ethiopia’s] debt,” said an economic analyst who is closely monitoring developments. Addis standard.

An IMF team, led by Sonali Jain-Chandra, was in Ethiopia for a technical visit from June 13-17. The Fund told creditors on Tuesday that the visit laid “the foundation to begin program negotiations in the fall.”

Ethiopia’s creditors’ committee met this week to discuss options for restructuring its debts under a common framework set up by the Group of 20 economies. But the results of the meeting are not public at the publication of this news. A week before the creditors’ meeting, Dr. Eyob Tekalign, Ethiopian Minister of State for Finance, met with Paris Club Co-Chair William Roos and received an update on Ethiopia’s request to process the debt within the common framework of the G20.

The Ministry of Finance then said that “Mr. Roos briefed the Ethiopian delegation on the promising progress of the creditors’ committee and assured that all bilateral creditors who are part of the committee are ready to support Ethiopia’s request.” The committee met three times under the chairmanship of France and the People’s Republic of China ahead of this week’s meeting.

The IMF document presented at the meeting promises that the Fund is “committed to supporting Ethiopia”, but warned that “the timetable is not entirely in the hands of IMF staff and management – to move forward Quickly, assurances from donors and assurances of financing from creditors for debt relief will be needed, and support from the Fund’s Board of Trustees.

The Fund also discussed “key steps on the path to new Fund financing” and outlined four steps: 1) updating the macroeconomic framework to reflect recent developments; identify financing needs as well as the need for a debt operation in coordination with the World Bank, taking into account uncertainty and risks; discuss with donors how funding gaps can be filled. 2) Mission of staff agreement on policies with the authorities reflecting a level of ambition consistent with the level of access sought. 3) Present to creditors the envelope for debt restructuring in accordance with the approval of the IMF Board of Directors (reduction of financing gaps and reduction of over-indebtedness). And 4) board meeting. »

The Fund’s outlook on Ethiopia’s economy says it “remains under pressure with high inflation, growing imbalances and threadbare foreign exchange reserves.” He expects Ethiopia’s deficit to widen to 4.1% of GDP from 2.8% in 2020/21, on top of lower tax revenue (1.8pp of GDP in below 9% of GDP in 2020/21), a deficit in subsidies and an increase in recurrent income. defense and reconstruction spending (0.8% of GDP above 2020/21 levels) were mentioned as key drivers. The “first 10 months of 2021/22 saw the trade balance deteriorate by 30% year on year,” the IMF said, as official disbursements (grants and loans) slowed significantly amid the civil war. “Inadequate [Forex] reserves are expected to fall further below one month of imports by the end of June 2021.”

He acknowledged the formation of a committee by the government in mid-June to negotiate with Tigray authorities, and Tigray’s willingness to negotiate for peace as a positive step.

But challenges remain, he says, as some tensions linger, “particularly given the risks of fighting with regional Amhara forces, ethnic tensions in Oromia and escalating hostilities with Eritrean troops. Security issues are unlikely to completely disappear in the near future,” he observed. In addition, key development partners “noted that further progress is needed to fully normalize their bilateral relations, including restoring basic services and providing greater quantities of fuel to Tigray, and taking further concrete steps to report violations of human rights”.

The 2019 Extended Credit Facility – Extended Funding Facility (ECF-EFF) had a funding gap of $8.4 billion, with the Fund filling approximately $3 billion of the gap. But “given the current macro environment, the new program is likely to have a larger funding gap.”

The new program will therefore fill part of the financing gap, and the rest will have to be filled with the help of development partners, including other international financial institutions (IFIs), and debt treatment through the Common Framework for debt processing (CF). “The program will need to be fully funded with adequate burden sharing.” AS


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