PREVIEW
Kristalina Georgieva has lauded the government’s ‘impressive performance’ in its economic reform programme, although the World Bank is less optimistic
International Monetary Fund Managing Director Kristalina Georgieva was effusive about Ethiopia’s ‘impressive economic performance’ following a two-day visit to Addis Ababa. This comes amid claims that Prime Minister Abiy Ahmed’s government is close to agreeing a deal to restructure its US$28.9 billion debt burden.
It is a remarkable turnaround, particularly in terms of public perception, just over a year after the government defaulted on a $1bn Eurobond repayment. In July last year, following the IMF’s approved a 48-month Extended Credit Facility (ECF) worth $3.4bn, there was significant scepticism among economists that Addis’s growth projections would be met and that a debt deal could be concluded (AC Vol 65 No 18, Abiy pushes radical reforms for debt deal & Vol 65 No 19, Home-grown reforms and political muscle seal $3.4bn IMF deal). The 30% devaluation of the birr by floating the currency – a major liberalising move made, in part, to secure an IMF deal, was also a high-risk step that could have led to inflation (AC Vol 65 No 16, Central bank floats birr to secure IMF deal).
For the moment, the economy appears to be out of the danger zone.
In October, the Ethiopian government announced an 8.4% economic growth target for the 2024/2025 fiscal year, attributing this to surges in production within the agricultural, manufacturing and mining sectors, which drove an official growth rate of 8.1% last year.
Georgieva says this is because Abiy has kept to the IMF’s standard playbook of a ‘freeing space for private initiatives and higher productivity in agriculture, industries and services’.
In Addis she had seen ‘signs of a vibrant private sector-led market economy’.
The IMF boss described the debt talks as being in the ‘final stretch’, though without specifying any details. Around half of Ethiopia’s debts are owed to the IMF and other multilateral lenders. However, the World Bank is less optimistic. Last month, an internal staff memo by the Bank criticised the IMF’s assessment of Ethiopia’s debt sustainability as ‘faulty’.
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