The World Bank announced on Tuesday that its board had approved a $1 billion credit for Ethiopia, supporting the country’s efforts to progress with its extended debt restructuring process.
Ethiopia, the second-most populous country in Africa after Nigeria, secured a four-year, $3.4 billion program from the International Monetary Fund on Monday.
This came just hours after the central bank floated its birr currency, facilitating the progress of its debt restructuring efforts.
In a statement, the World Bank revealed that its International Development Association (IDA) will also extend a $500 million concessional credit to Ethiopia.
According to the World Bank, “IDA plans to offer approximately $6 billion in new commitments over the next three fiscal years and support economic reforms through rapid-disbursing budget aid.”
Ethiopian officials stated that this funding is part of a gigantic $10.7 billion financing package from the IMF, World Bank, and other creditors.
Ethiopia made actions to restructure its sovereign debt in 2021 under the G20 Common Framework enterprise planned to deliver solace to developing nations.
However, advancement was impeded by a civil war in the northern Tigray region, which concluded the next year.
New signs of progress in Ethiopia’s convoluted debt restructuring process appeared after Chad and Zambia completed their debt overhauls under the Common Framework.
Ghana is also in the final stages of its debt restructuring for the same purpose.
While Ethiopia’s development partners have supported the motion to a market-based foreign exchange rate, some analysts have expressed concerns that it could lead to higher inflation and increased living costs, particularly for the country’s impoverished residents.
The country also grapples with various other issues, such as the effects of climate change and the reconstruction of Tigray following the conflict.
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