IMF Lauds Economic Reforms Introduced by Ethiopian Govt

The International Monetary Fund (IMF) on Friday appreciated the Ethiopian govt for macro economic reforms. The lending institution, in its executive board’s meeting, allowed disbursement of $340.7 million to Ethiopia while approving the first review of Ethiopia’s $3.4 billion lending program.

“The implementation of the authorities’ economic program, including the transition to the new exchange rate regime, has been commendable. The spread between the formal and parallel market exchange rates has narrowed to low levels, with little sign of disruption to the broader economy, ” IMF said in a statement appreciating the Ethiopian government for new macro economic reforms.

The macro economic reforms were introduced by the Ethiopian government in July to get a bailout package from the IMF and World Bank. The reforms led to massive devaluation of birr, the Ethiopian currency. Ethiopian birr has lost more than 100% of its value since July.

The rise in the prices of basic commodities, fuel etc is making the cost of living high, and unaffordable in some cases. It is due to the macro economic reforms that the National Bank of Ethiopia has no say in the determination of foreign exchange rates. Private banks are free to release conversion rates of currencies. Since birr has fallen significantly against dollar, prices of indigenous and local items are rising.

In Friday’s statement, the International Monetary Fund (IMF) urged the National Bank of Ethiopia not to intervene in foreign exchange market. It said, “Continuing to restrict NBE’s FX interventions and additional policy measures to support FX market development will be critical to enhance market efficiency and deepening.”

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