August 28, 2009 (ADDIS ABABA) – Ethiopia on Wednesday won final approval from the International Monetary Fund for a loan of some 240.6 million U.S. dollars to help buffer Ethiopia from the impact of the global recession on its balance of payments.
Ethiopia has faced a turbulent external economic environment in the past two years, stemming from sharp movements in import prices and then the global slowdown. Surging import prices helped push reserves down to some US$900 million (1.2 months of imports) by mid-2008 and contributed to an exceptional jump in consumer price inflation, the IFM said.
The loan was approved by the IMF Executive Board under the high access component of the Exogenous Shocks Facility (ESF), a facility designed to provide policy support and financial assistance on concessional terms to eligible low-income countries facing temporary exogenous shocks.
A disbursement of about 115 million dollars will be made immediately, after the Board’s approval.
“Ethiopia has adopted an appropriate program to address the strains on the balance of payments and to keep inflation low,” said Takatoshi Kato, deputy managing director and acting chair of the IMF executive board
The program calls for a continued tight fiscal stance, a slowing of the pace of monetary growth, and gradual real exchange rate adjustment, aided by a step depreciation of the Ethiopian currency birr on July 10, 2009, according to the statement.
“Prudent implementation of this program, accompanied by planned reform measures, will provide a sound macroeconomic environment for economic growth,” said the deputy managing director.