The Federal Democratic Republic of Ethiopia: First Review Under the Extended Credit Facility Arrangement, Request for Modification of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for The Federal Democratic Republic of Ethiopia

FIRST REVIEWUNDER THE EXTENDED CREDIT FACILITYARRANGEMENT, REQUEST FOR MODIFICATION OFPERFORMANCE CRITERIA, AND FINANCING ASSURANCESREVIEW—PRESS RELEASE;STAFF REPORT;AND STATEMENTBY THE EXECUTIVE DIRECTORFORTHE FEDERALDEMOCRATIC REPUBLIC 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 onOctober18, 2024, followingthediscussions that ended onSeptember26, 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 onOctober7, 2024. •Statementbythe 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 from International 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 First Review Under theExtended Credit Facility (ECF) Arrangement for Ethiopia FOR IMMEDIATE RELEASE •The IMF Board completed the first review under the Extended Credit Facility (ECF) forEthiopia, allowing the authorities to draw the equivalent of about US$340.7 million (SDR255.6 million). The ECF was approved by IMF Board in July 2024 and forms part of aUS$10.7 billion support package from development partners and creditors for Ethiopia. •The Ethiopian authorities have shown strong commitment to their homegrown economicreform program. Implementation of ECF-supported reforms is advancing well. Washington, DC–October 18,2024:The Executive Board of the International MonetaryFund (IMF) completed today the first review of the 48-monthExtended Credit Facility(ECF)for Ethiopia. The Board’s decision allows for an immediate disbursement of about US$340.7million (SDR 255.6 million), which will help Ethiopia meet its balance of payments needs. Thecompletion of the review brings total disbursements under the arrangement to aboutUS$1.363 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 and four out of five structural benchmarks for the firstreview have been met. The emergency liquidity assistance framework has been finalized priorto Board approval with a slight delay from end-September target date. The implementation of the authorities’ economic program, including the transition to the newexchange rate regime, has been commendable. The spread between the formal and parallelmarket exchange rates has narrowed to low levels, with little sign of disruption to the broadereconomy. The supply of foreign exchange is picking up, helping alleviate acute foreignexchange shortages. Nonetheless, some unmet foreign exchange demand persists aseconomic agents are still adjusting to the new FX regime. Steady implementation of the HGER reform plan will be key to macroeconomic stability andstronger economic growth. Continued tight monetary policy and elimination of monetaryfinancing of the government will be key to durably reducing inflation. Expanding social safetynets is critical to mitigating the impact of reforms on vulnerable people. Maintainingmomentum on domestic revenue mobilization and structural reforms in the SOE sector isessential to creating sufficient space for social and developmental capital spending. The authorities continue their efforts to restore debt sustainability. Financing assurances andadjustment efforts are consistent with IMF policy requirements and program parameters. Following the Executive Board discussion, Mr. Bo Li, Deputy Managing Director and Chairmanof the Board, made the following statement: “Ethiopia’s program under the ECF has made a solid start, and the transition to a more flexibleexchange rate has progressed well. Transitional one-off arrangements to address the foreignexchange (FX) backlog from past fuel imports are in place, relying principally on marketparticipants with an additional contribution from the National Bank of Ethiopia (NBE). Aseconomic agents adjust to the new FX regime, reform momentum and clear communicat