The Federal Democratic Republic of Ethiopia: Second Review Under the Extended Credit Facility Arrangement and Financing Assurances Review-Press Release; Staff Report; Staff Supplement; and Statement by the Executive Director for The Federal Democratic Republic of Ethiopia

SECONDREVIEWUNDER THE EXTENDED CREDIT FACILITYARRANGEMENTAND FINANCING ASSURANCES REVIEW—PRESS RELEASE;STAFF REPORT;ANDSTATEMENT BY THEEXECUTIVE DIRECTORFORTHE FEDERAL DEMOCRATICREPUBLIC OF ETHIOPIA In the context oftheRequest of an ArrangementUnder theExtended CreditFacility,the following documents have been released and are included in this package: •APress Releaseincluding astatement by theChairof the Executive Board.•TheStaff Reportprepared by a staff team of the IMF for the Executive Board’sconsideration onJanuary17, 2025, followingthediscussions that ended onNovember26, 2024, with the officials ofThe Federal Democratic Republic ofEthiopiaon economic developments and policies underpinning the IMFArrangements under theExtended Credit Facilityprogram.Based on informationavailable at the time of thesediscussions, the Staff Report was completed onDecember18, 2024.•ADebt Sustainability Analysisprepared by staffs of the World Bank and the IMF.•ASupplementary InformationoftheStaff Report prepared by IMF staff.•AStatementbythe Executive DirectorforThe Federal Democratic Republic ofEthiopia. TheIMF’s transparency policy allows for the deletion of market-sensitive informationand premature disclosure of the authorities’ policy intentions in published staff reportsand other documents. Copies of this report are available to the public fromInternational Monetary Fund•Publication ServicesPO Box 92780•Washington, D.C. 20090Telephone: (202) 623-7430•Fax: (202) 623-7201E-mail:publications@imf.org Web:http://www.imf.orgPrice: $18.00per printed copy International Monetary FundWashington, D.C. IMF Executive Board Completes the Second Review under theExtended Credit Facility (ECF) Arrangement for Ethiopia FOR IMMEDIATE RELEASE •The IMF Executive Board completed the second review of the arrangement under theExtended Credit Facility (ECF) for Ethiopia, allowing the authorities to draw the equivalentof about US$248 million (SDR 191.7 million). The ECF was approved by the IMF ExecutiveBoard in July 2024 and forms part of a US$10.7 billion support package from developmentpartners and creditors for Ethiopia. •The Ethiopian authorities have demonstrated strong commitment to achieving theobjectives of the Fund-supported program. Implementation of ECF-supported reforms isadvancing well. Washington, DC–January 17, 2025:The Executive Board of the International MonetaryFund (IMF) completed today the second review of the 48-monthExtended Credit Facility(ECF) for Ethiopia. The Board’s decision allows for an immediate disbursement of aboutUS$248 million (SDR 191.7 million), which will help Ethiopia meet its balance of paymentsneeds. The completion of the review brings total disbursements under the arrangement toabout US$1.611 billion. Ethiopia’s ECF arrangement for a total of SDR 2.556 billion (850 percent of quota) or aboutUS$3.4 billion at the time of program approval on July 29, 2024 (seePress Release 24/291) isaimed at supporting the authorities’ Homegrown Economic Reform Agenda (HGER) toaddress macroeconomic imbalances and lay the foundations for private sector led growth. All quantitative performance criteria were met. The government’s contribution to the targetedsocial safety nets (indicative target) was lower-than-targeted mostly due to preparationsneeded to expand safety net programs and absorb the significantly increased budgetaryenvelope. The structural benchmark on finalizing the audited accounts of the National Bank ofEthiopia (NBE) has been reset from end-January 2025 to end-March 2025 to allow time forcompletion. Foreign exchange market functioning has continued to improve with the authorities takingsignificant policy actions to strengthen market efficiency. NBE has maintained tight monetaryand financial conditions, and modernization of the monetary policy framework is advancing. Progress in raising domestic fiscal revenues, strengthening state-owned enterprises, andanchoring financial stability is promising, with continued commitment needed to sustain theachievements thus far. Expanding social safety nets is critical to mitigating the impact ofreforms on vulnerable people. The authorities continue their efforts to restore debt sustainability and are taking steps tosecure a debt treatment. The progress made on debt restructuring negotiations under theCommon Framework is welcome. The financing assurances received, and adjustment effortsmade are consistent with IMF policy requirements and program parameters. Following the Executive Board discussion, Mr. Nigel Clarke, Deputy Managing Director, andChairman of the Board, made the following statement: “The authorities continue to make strong progress in implementing their Fund-supportedprogram and addressing macroeconomic imbalances. The transition to a flexible exchangerate has advanced further, supported by macroeconomic and foreign exchange market policymeasures, and the parallel market premium has stabilized in single digits with rising FXsupply. “Continuing