Ethiopia Secures $1 Billion Credit from World Bank Amid Debt Restructuring Efforts

The World Bank has approved a $1 billion credit for Ethiopia as it continues its debt restructuring. This follows a $3.4 billion IMF program and a floated birr currency. The IDA will also grant $500 million to support economic reforms. Ethiopia's debt restructuring has gained momentum after the Tigray civil war.

The World Bank announced on Tuesday that its board had approved a $1 billion credit for Ethiopia, assisting the Horn of Africa country as it continues its long-term debt restructuring.

Just a day earlier, Ethiopia secured a $3.4 billion, four-year program from the International Monetary Fund (IMF) after the country's central bank floated its birr currency, enabling further progress in its debt overhaul. Additionally, the World Bank's International Development Association (IDA) will provide a $500 million concessional credit to Ethiopia, according to a statement by the global lender.

The IDA aims to offer around $6 billion in new commitments over the next three fiscal years to support economic reforms via fast-disbursing budget support, as stated by the World Bank. This funding is part of a $10.7 billion financing package by the IMF, World Bank, and other creditors, Ethiopian officials reported. Despite efforts to restructure its sovereign debt since 2021 under the G20 Common Framework, progress was delayed due to a civil war in Tigray, which ended last year.

Fresh momentum in Ethiopia's debt restructuring has followed the completion of similar overhauls by Chad and Zambia, with Ghana also nearing the end of its own restructuring under the same initiative. Ethiopia's development partners have welcomed the shift to a market-based foreign exchange rate, but some analysts caution that this could lead to increased inflation and living costs, particularly affecting the nation's poorest residents.

In addition to its debt challenges, Ethiopia faces other significant issues such as the impacts of climate change and post-war reconstruction in Tigray.

(With inputs from agencies.)