IMF Executive Board Completes Second and Final Review Under Ethiopia’s ESF Arrangement and Approves US$62.67 Million Disbursement

Press Release No. 10/432
November 15, 2010

The Executive Board of the International Monetary Fund (IMF) approved on November 12, 2010 the second and final review of Ethiopia’s economic performance under the 14-month arrangement under the high-access component of the Exogenous Shocks Facility (ESF). The approval will enable Ethiopia to draw SDR 40.11 million (about US$ 62.67 million), bringing total disbursements to the total available under the arrangement (SDR 153.755 million; about US$ 240.24 million).

The Executive Board approved a 14-month arrangement under the high-access component of the ESF in August 2009 (see Press Release No. 09/289), which was extended in October 2010 to allow for completion of this second and final review and allow for the final disbursement.

Following the Executive Board's discussion on Ethiopia, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:

“The Federal Democratic Republic of Ethiopia has successfully implemented policies to reduce inflation and rebuild external reserves under the Exogenous Shocks Facility supported program. Program performance has been satisfactory with all of the quantitative performance targets met with margins and structural benchmarks implemented. Inflation has continued to decline, reflecting monetary restraint and aided by favorable weather conditions. International reserves have risen to about 2.1 months of imports coverage. The mild impact of the global recession on the Ethiopian economy has allowed for better performance on the external targets.

“Fiscal performance in 2009/10 was strong. Continuing the pace of tax reforms will be important for durably raising revenues and creating fiscal space for the ambitious public investment plans while maintaining macroeconomic stability.

“The recent reframing of monetary policy to adopt a reserve money nominal anchor, backed by a phasing out of direct credit to government, holds out the prospect of ending financial repression. This would set the stage for monetization, financial deepening and faster economic growth through increased domestic savings and investment.

“The ESF-supported program has achieved its objectives but much remains to be done to sustain and accelerate growth. A focus on improving the investment climate, trade and exchange liberalization, and development of the financial sector, anchored by sound fiscal and monetary policies, is essential to improve competitiveness and sustain high growth. Continued flexibility of the exchange rate and strengthening of financial sector supervision and regulation, particularly in the context of the expected monetization, will also be important” Mr. Shinohara added.



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