## Executive Summary — Ethiopia: RFI request and ECF‑EFF program adjustments (1ethea2020002)

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---

### Context and immediate situation
- Ethiopia faced a pronounced economic slowdown and an urgent balance of payments need owing to the COVID-19 pandemic.
- Prior to the pandemic, the ECF‑EFF arrangements had gotten off to a promising start: the authorities met all but one performance criterion for the first review, were on track toward meeting most structural benchmarks, and progress included narrowing the spread between the official and parallel exchange rates from 35 percent in mid‑November to 27.5 percent as of April 22.
- Fiscal and monetary position prior to the shock:
  - Fiscal deficit in the first half of the fiscal year was narrower than programmed amid strong revenues.
  - SOE debt continued to edge down as a share of GDP as of December 2019.
  - T‑bill auctions are progressing; the NBE kept monetary conditions tight, though inflation remained close to recent peaks on the back of rising food prices.
- A continuous performance criterion on the non‑accumulation of new external arrears was breached with a total breach of US$210 million; authorities have since cleared these arrears and taken corrective actions.

### Requests for IMF and other support
- Authorities requested emergency financing under the Rapid Financing Instrument (RFI).
  - Requested RFI financing amount: SDR 300.7 million (100 percent of quota), intended for budget support.
- To comply with GRA normal access limits, authorities requested rephasing of disbursements/purchases under the ECF‑EFF arrangements, reductions in the second and third EFF purchases, and an overall reduction in access under the EFF arrangement by SDR 150.35 million (50 percent of quota).
- Authorities also requested grant assistance under the Catastrophe Containment (CC) window of the Catastrophe Containment and Relief Trust (CCRT).
- Authorities intend to request debt service relief from official bilateral creditors under the G20 initiative and are seeking additional financing from multilateral and bilateral donors.

### Outlook and financing gaps (staff revised projections)
- Real GDP growth (staff revised):
  - 2019/20: revised from 6.2 percent to 3.2 percent.
  - 2020/21: revised from 6.1 percent to 3.7 percent.
- The shock is expected to materialize mostly in Q2 and Q3 of 2020; recovery would start gradually in Q4 2020, with real GDP remaining below pre‑shock projections throughout the medium term.
- External financing gaps (additional):
  - 2019/20: US$1.7 billion (financing gap: 1,667).
  - 2020/21: US$731 million (financing gap: 731).
- Selected components from Text Table 1 (exact figures preserved as provided):
  - External financing requirement: -702 (2019/20), -195 (2020/21)
  - Exports: -2,379 (2019/20), -1,606 (2020/21)
  - Imports: -5,120 (2019/20), -5,199 (2020/21)
  - Private transfers: -2,108 (2019/20), -3,484 (2020/21)
  - Foreign direct investment, excl. privatization: -2,265 (2019/20), -871 (2020/21)
  - IMF: 323 (2019/20), -97 (2020/21)
  - ECF‑EFF: -104 (2019/20), -104 (2020/21)
  - RFI: 415 (2019/20), 0 (2020/21)
  - Exceptional financing (CCR Trust debt relief): 117 (2019/20)
  - Expected donor financing: 81 (2019/20), 50 (2020/21)

### Risks
- Risks are tilted to the downside:
  - Prolonged outbreak, protracted containment measures, and uncertainty could further deteriorate the outlook, impair balance sheets, threaten debt sustainability, and slow the recovery.
  - Widespread social discontent and political instability related to the crisis fallout could complicate adjustment.
  - Locust infestation in East Africa poses additional risk if it spreads to major crop‑producing regions and reignites inflation.
  - Political instability in the run‑up to elections could delay reform implementation.

---

### Economic policies to address the COVID‑19 shock

### Key near‑term objectives
- Provide the health sector with sufficient resources to combat the pandemic.
- Augment the spending envelope and allow for a temporarily wider fiscal deficit to support the economy and protect the most vulnerable.
- Accelerate the pace of exchange rate depreciation to support activity.
- Address tight liquidity conditions in commercial banks to prepare for potential deterioration in asset quality.
- Continue progressing with key commitments under the ECF‑EFF arrangements.

### A. Fiscal policy and emergency spending
- Authorities are loosening the fiscal stance temporarily:
  - Initial health sector support package: 5 billion birr (US$154 million; 0.15 percent of GDP).
  - On April 3, authorities announced additional spending needs for the remainder of the fiscal year totaling US$1.64 billion (1.6 percent of GDP).
  - With tax revenues declining and despite higher‑than‑expected grants, the 2019/20 general government deficit is projected to increase by 1½ percent of GDP to 4 percent of GDP.
- Fiscal measures and prioritization:
  - Partially offset the wider deficit by constraining spending of SOEs not engaged in emergency response measures.
  - Commit to transparent and accountable delivery, including an independent and robust ex‑post audit of emergency relief fund spending.
- Box 1: Selected policy measures (figures preserved exactly):
  - Initial healthcare measures:
    - 300‑million‑birr package initially; augmented to 5 billion birr (US$154 million or 0.15 percent of GDP).
  - Initial stabilization measures (announced March 27):
    - Tax exemptions and preferential access to currency for importers of materials and equipment to be used in the prevention and containment of COVID‑19.
    - NBE liquidity support of 15 billion birr (US$457 million or 0.45 percent of GDP) to private banks by redeeming NBE bills (associated with the abolished “27 percent rule”) to facilitate debt restructuring.
    - Increased mobile banking transfer limits at the Commercial Bank of Ethiopia to limit in‑person transactions.
    - Intensified enforcement action against businesses found to be illegally increasing consumer prices.
  - Spending measures for remainder of 2019/20 (US$1.64 billion; about 1.6 percent of GDP), allocated as follows:
    - US$635 million (0.6 percent of GDP) for emergency food distribution to 15 million individuals vulnerable to food insecurity and not currently covered by the rural and urban PSNPs.
    - US$430 million (0.4 percent of GDP) for health sector response under a worst‑case scenario of community spread with over 100,000 Covid‑19 cases of infection in the country, primarily in urban areas.
    - US$282 million (0.3 percent of GDP) for provision of emergency shelter and non‑food items.
    - The remainder: US$293 million (0.3 percent of GDP) allocated to agricultural sector support, nutrition, the protection of vulnerable groups, additional education outlays, logistics, refugee support and site management support.

### Fiscal stance, revenue shock, and 2020/21 measures
- Tax revenues are projected to drop by nearly ¾ percent of GDP relative to 2018/19 due to the severity of the shock.
- Grant receipts are expected to come in ¾ percent of GDP higher than previously anticipated.
- Higher spending and lower tax revenues are projected to result in a fiscal financing gap of 1.4 percent of GDP.
- Financing for the gap is expected to come from:
  - Budget support under the RFI: 0.4 percent of GDP.
  - Unidentified financing from donors and domestic banks: 1 percent of GDP.
- Authorities committed to introducing measures to raise tax revenues for 2020/21 by 1 percentage point of GDP; staff would support delaying implementation if the pandemic renders this difficult and introducing them later in a supplementary budget law.
- Spending needs to counter the pandemic are expected to amount to 0.9 percent of GDP.
- With slightly higher grants than previously projected (0.1 percent of GDP), the deficit would increase to 3½ percent of GDP, 1¼ percent of GDP higher than anticipated at ECF‑EFF approval in December.
- The deficit is projected to return to its previously projected path by 2021/22.

### Key fiscal numbers (Text Table 2 — selected, exact values preserved)
- Total revenue and grants: Program 12.5; 2019/2020 IMF Staff 12.3; Program 2020/21 13.8; IMF Staff 13.1
- Revenue: Program 11.7; IMF Staff 10.7; Program 2020/21 13.0; IMF Staff 12.2
- Tax revenue: Program 10.1; IMF Staff 9.3; Program 2020/21 11.5; IMF Staff 10.7
- Grants: Program 0.9; IMF Staff 1.6; Program 2020/21 0.8; IMF Staff 0.9
- Of which: Unidentified Covid‑19 grant financing: Program 0.0; IMF Staff 0.4; Program 2020/21 0.0; IMF Staff 0.0
- Total expenditure and net lending (cash basis): Program 15.0; IMF Staff 16.3; Program 2020/21 16.0; IMF Staff 16.7
- Poverty‑reducing expenditure: Program 4.5; IMF Staff 5.9; Program 2020/21 4.7; IMF Staff 5.5
- Of which: Covid‑19 response current costs: Program 0.0; IMF Staff 1.5; Program 2020/21 0.0; IMF Staff 0.9
- Overall balance including grants: Program -2.5; IMF Staff -4.0; Program 2020/21 -2.2; IMF Staff -3.5
- Excluding grants: Program -3.4; IMF Staff -5.6; Program 2020/21 -3.0; IMF Staff -4.5
- Net external financing: Program 1.2; IMF Staff 1.9; Program 2020/21 1.0; IMF Staff 1.0
- Budget Support: Program 0.5; IMF Staff 1.3; Program 2020/21 0.5; IMF Staff 0.5
- IMF RFI: Program 0.0; IMF Staff 0.4; Program 2020/21 0.0; IMF Staff 0.0
- Total unidentified financing needed for Covid‑19 response: Program 0.0; IMF Staff 1.0; Program 2020/21 0.0; IMF Staff 0.0
- Memorandum: Poverty‑reducing expenditure: Program 9.1; IMF Staff 10.6; Program 2020/21 9.2; IMF Staff 10.1
- Primary fiscal balance, including grants: Program -2.0; IMF Staff -3.5; Program 2020/21 -1.6; IMF Staff -2.8

---

### B. Monetary, exchange rate, and financial sector response

### Liquidity and CBE concerns
- NBE liquidity injections and plans:
  - NBE injected 15 billion birr (0.45 percent of GDP) into private banks in March by redeeming NBE bills.
  - NBE plans to extend 16 billion birr (0.5 percent of GDP) in liquidity to the CBE.
- Staff view:
  - Providing adequate liquidity to commercial banks is appropriate.
  - NBE lending to the CBE should reflect terms available to private banks and avoid implicit solvency support.
  - Structural weaknesses in the balance sheet of the systemically important bank (Commercial Bank of Ethiopia) should be addressed through a comprehensive solution tackling SOE debt sustainability challenges.
- Asset quality and monitoring:
  - Asset quality at the CBE remains a concern amid large SOE exposures.
  - Deposit funding remained stable to date, but borrower requests to delay loan payments—especially in sectors directly affected by the pandemic—could weaken asset quality and intensify liquidity pressures.
  - Authorities encourage banks to reschedule loan repayments on a case‑by‑case basis; loan classification rules have not been changed.
  - Staff recommended close monitoring of liquidity positions, loan‑to‑deposit ratios, and asset quality; stepped‑up supervisory review; and consideration of emergency liquidity measures and reserve requirement adjustments if needed.

### Inflation and exchange rate
- Inflation objective and stance:
  - Staff emphasized close monitoring of inflation to ensure the single‑digit inflation objective can be achieved as planned.
  - Planned liquidity injections will expand reserve money beyond levels projected at ECF‑EFF approval; a significant tightening of policy will be needed once conditions normalize to bring inflation down to the single‑digit objective.
  - In the meantime, first‑round effects from the crisis should be accommodated.
- Exchange rate policy:
  - Staff urged stepping up the pace of exchange rate depreciation to act as a shock absorber and reduce real overvaluation.
  - Authorities committed to closing the gap with the parallel rate and eventually moving to a market‑clearing exchange rate, while proceeding cautiously.

---

### Commitments under the ECF‑EFF program, DSA, and safeguards

### ECF‑EFF commitments and SOE reforms
- Authorities remain committed to objectives of the ECF‑EFF arrangements and to furthering the reform agenda, including:
  - Gradually ending financial repression by increasing T‑bill issuances.
  - Ceasing new NBE financing to the Development Bank of Ethiopia (DBE) in June.
  - Gradually reducing direct NBE advances to the government.
  - Implementing the FX roadmap to be finalized by end‑April to lay groundwork for an eventual market‑clearing exchange rate.
  - Dealing comprehensively with debt sustainability challenges in SOEs to strengthen bank balance sheets.
  - Strengthening governance under the ECF‑EFF arrangements.

### Debt Sustainability Analysis (DSA) — key findings
- Joint World Bank–IMF DSA: public debt is projected to remain sustainable but downside risks and liquidity pressures have increased.
- Risk ratings and assessments:
  - Risk of external debt distress: High
  - Risk of overall debt distress: High
  - Under the baseline, two external debt indicators breach their thresholds; Ethiopia assessed at “high” risk of debt distress.
- Reprofiling and debt relief:
  - First phase of reprofiling made progress but not finalized (included in the baseline scenario); identified cashflow relief from first reprofiling phase: US$1.65 billion until FY 2022/23.
  - Progress on the second phase is uncertain; staff emphasized the need for specific and credible assurances ahead of the first review.
  - Authorities intend to request G20 debt service relief (not included in baseline pending formal request).
- DSA numeric and macro assumptions (selected):
  - Real GDP growth: 3.2 percent (2019/20), 3.7 percent (2020/21), medium‑term convergence to 8.0 percent.
  - World Bank COVID‑19 project: US$82.6 million.
  - IMF requests and access adjustments: RFI SDR 300.7 million; Reduction of access under EFF SDR 150.35 million; CCRT grant request to cover IMF debt service until April 13, 2022.

### Safeguards, capacity to repay, and governance
- Capacity to repay the Fund assessed as adequate.
  - With proposed RFI access and modified ECF‑EFF access:
    - Debt service to the Fund will peak at 0.3 percent of GDP, 2.9 percent of exports, and 1.7 percent of revenues in 2027/28.
    - Outstanding Fund credit to gross reserves ratio would peak at 41.3 percent in 2021/22, compared to 32.7 percent at ECF‑EFF approval.
- Safeguards assessment of the NBE underway; initial findings suggest:
  - Amendments to the NBE Law are needed to address governance and autonomy weaknesses, strengthen oversight, and improve financial reporting and external audit arrangements.
  - Fiscal dominance has weakened the central bank’s financial position.
  - Preparation of annual financial statements is significantly delayed.
  - The external auditor has an unusually long tenure, raising concerns about independence and audit quality.
  - The framework for emergency liquidity support to banks is underdeveloped.
- Authorities will establish a memorandum of understanding between the central bank and the ministry of finance clarifying responsibilities for timely servicing of IMF obligations.
- Staff recommended corrective steps to address these shortcomings and requested cooperation in providing external audit reports and access for IMF staff.

---

### Policy recommendations, staff support, and modalities of IMF support

### Staff recommendations and support
- Staff supports authorities’ plan to accommodate COVID‑related fiscal measures and to resume fiscal adjustment when the crisis subsides.
- To contain upward pressure on public debt, consider further tightening the spending envelope for SOEs not directly engaged in the COVID‑19 emergency response.
- Provide adequate liquidity to commercial banks while addressing structural weaknesses at the systemically important bank via comprehensive solutions focused on SOE debt sustainability.
- Closely monitor inflation to preserve the single‑digit inflation objective.
- Step up exchange rate depreciation as a shock absorber.
- Continue implementing reforms agreed under the ECF‑EFF arrangements while addressing the immediate crisis.

### Staff support for specific requests
- Staff supports:
  - Request for a purchase under the RFI in the amount of SDR 300.7 million (100 percent of quota).
  - Rephasing of access under the ECF‑EFF arrangements and reduction of access under the EFF arrangement by SDR 150.35 million (50 percent of quota).
  - Request for debt relief under the CCRT; staff assesses Ethiopia is eligible.
- Rationale for support:
  - Severity of the pandemic’s impact, urgent balance of payments need, appropriateness of authorities’ policies, and policy commitments to the ECF‑EFF objectives.
  - Use of RFI financing as budget support is supported because additional financing needs stem primarily from healthcare and social protection outlays.

### Modalities and operational points
- RFI purchase amount requested: SDR 300.7 million (100 percent of quota).
- Reduction of access under EFF arrangement proposed: SDR 150.35 million (50 percent of quota).
- Ethiopia is PRGT eligible with GNI per capita of US$790 in 2018 (below threshold US$1,175).
- Eligible debt service for CCRT consideration:
  - SDR 8.56 million falling due during the initial period until October 13, 2020.
  - Eligible debt service falling due amounts to SDR 14 million between the CCRT request approval date and April 13, 2022 (maximum potential period, subject to availability of resources and Executive Board decisions).
- Authorities requested rephasing of future disbursements/purchases (the third and subsequent ECF‑EFF disbursements) due to delays in first review discussions and to comply with GRA annual access limits.
- Authorities will authorize IMF publication of the Letter of Intent and staff report for the RFI purchase and CCRT grant assistance request.

*Source: EXECUTIVE SUMMARY, Appendix I Letter of Intent, and related sections (1ethea2020002).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- Ethiopia faced a pronounced economic slowdown and an urgent balance of payments need owing to the COVID-19 pandemic.
- Prior to the pandemic, the ECF-EFF arrangements had gotten off to a promising start: the authorities met all but one performance criterion for the first review, were on track toward meeting most structural benchmarks, and progress included narrowing the spread between the official and parallel exchange rates from 35 percent in mid-November to 27.5 percent as of April 22.
- The fiscal deficit in the first half of the fiscal year was narrower than programmed amid strong revenues; SOE debt continued to edge down as a share of GDP as of December 2019; T-bill auctions are progressing; and the NBE kept monetary conditions tight, though inflation remained close to recent peaks on the back of rising food prices.
- A continuous performance criterion on the non-accumulation of new external arrears was breached with a total breach of US$210 million; authorities have since cleared these arrears and taken corrective actions.

### Request for IMF support
- Authorities requested emergency financing under the Rapid Financing Instrument (RFI) to meet urgent balance of payments needs stemming from the COVID-19 shock.
- Requested RFI financing amount: SDR 300.7 million (100 percent of quota), intended for budget support.
- To comply with GRA normal access limits, authorities requested rephasing of disbursements/purchases under the ECF-EFF arrangements, reductions in the second and third EFF purchases, and an overall reduction in access under the EFF arrangement by SDR 150.35 million (50 percent of quota).
- Authorities also requested grant assistance under the Catastrophe Containment (CC) window of the Catastrophe Containment and Relief Trust (CCRT).
- Authorities intend to request debt service relief from official bilateral creditors under the G20 initiative and are seeking additional financing from multilateral and bilateral donors.

### Outlook and risks amid COVID-19
- Growth projections (staff revised) for real GDP:
  - 2019/20: revised from 6.2 percent to 3.2 percent.
  - 2020/21: revised from 6.1 percent to 3.7 percent.
- The shock is expected to materialize mostly in Q2 and Q3 of 2020, spreading the negative impact on GDP across two fiscal years; recovery would start gradually in Q4 2020, with real GDP remaining below pre-shock projections throughout the medium-term.
- External accounts:
  - An additional financing gap of US$1.7 billion has emerged for 2019/20.
  - In 2020/21, the additional financing gap is projected at US$731 million.
  - Text Table 1 highlights components (selected figures):
    - External financing requirement: -702 (2019/20), -195 (2020/21)
    - Exports: -2,379 (2019/20), -1,606 (2020/21)
    - Imports: -5,120 (2019/20), -5,199 (2020/21)
    - Private transfers: -2,108 (2019/20), -3,484 (2020/21)
    - Foreign direct investment, excl. privatization: -2,265 (2019/20), -871 (2020/21)
    - Financing gap (+ = need for financing): 1,667 (2019/20), 731 (2020/21)
    - IMF: 323 (2019/20), -97 (2020/21)
    - ECF-EFF: -104 (2019/20), -104 (2020/21)
    - RFI: 415 (2019/20), 0 (2020/21)
    - Exceptional financing (CCR Trust debt relief): 117 (2019/20)
    - Expected donor financing: 81 (2019/20), 50 (2020/21)
- Risks are tilted to the downside:
  - A prolonged outbreak, protracted containment measures, and uncertainty could further deteriorate the outlook, impair balance sheets, threaten debt sustainability, and slow the recovery.
  - Widespread social discontent and political instability related to the crisis fallout could complicate adjustment.
  - Locust infestation in East Africa poses additional risk if it spreads to major crop-producing regions and reignites inflation.
  - Political instability in the run-up to elections could delay reform implementation.

### Economic policies to combat the COVID crisis
Key near-term objectives:
- Provide the health sector with sufficient resources to combat the pandemic.
- Augment the spending envelope and allow for a temporarily wider fiscal deficit to support the economy and protect the most vulnerable.
- Accelerate the pace of exchange rate depreciation to support activity.
- Address tight liquidity conditions in commercial banks to prepare for potential deterioration in asset quality.
- Continue progressing with key commitments under the ECF-EFF arrangements.

A. Fiscal Policy
- Authorities are loosening the fiscal stance temporarily:
  - Initial health sector support package: 5 billion birr (US$154 million; 0.15 percent of GDP).
  - On April 3, authorities announced additional spending needs for the remainder of the fiscal year totaling US$1.64 billion (1.6 percent of GDP).
  - With tax revenues declining and despite higher-than-expected grants, the 2019/20 general government deficit is projected to increase by 1½ percent of GDP to 4 percent of GDP.
- Suggested fiscal measures:
  - Partially offset the wider deficit by constraining spending of SOEs not engaged in emergency response measures.
- Box 1: Selected policy measures (figures preserved exactly as presented):
  - Initial healthcare measures:
    - 300-million-birr package initially; augmented to 5 billion birr (US$154 million or 0.15 percent of GDP).
  - Initial stabilization measures (announced March 27):
    - Tax exemptions and preferential access to currency for importers of materials and equipment to be used in the prevention and containment of COVID-19.
    - NBE liquidity support of 15 billion birr (US$457 million or 0.45 percent of GDP) to private banks by redeeming NBE bills (associated with the abolished “27 percent rule”) to facilitate debt restructuring.
    - Increased mobile banking transfer limits at the Commercial Bank of Ethiopia to limit in-person transactions.
    - Intensified enforcement action against businesses found to be illegally increasing consumer prices.
  - Spending measures for remainder of 2019/20 (US$1.64 billion; about 1.6 percent of GDP), allocated as follows:
    - US$635 million (0.6 percent of GDP) for emergency food distribution to 15 million individuals vulnerable to food insecurity and not currently covered by the rural and urban PSNPs.
    - US$430 million (0.4 percent of GDP) for health sector response under a worst-case scenario of community spread with over 100,000 Covid-19 cases of infection in the country, primarily in urban areas.
    - US$282 million (0.3 percent of GDP) for provision of emergency shelter and non-food items.
    - The remainder: US$293 million (0.3 percent of GDP) allocated to agricultural sector support, nutrition, the protection of vulnerable groups, additional education outlays, logistics, refugee support and site management support.

B. Monetary, Exchange Rate, and Financial Sector (summary of main points)
- Providing adequate liquidity to commercial banks is appropriate in the face of the shock.
- Structural weaknesses in the balance sheet of the systemically important bank (Commercial Bank of Ethiopia) should be addressed through a comprehensive solution that tackles debt sustainability challenges in the SOEs borrowing from it.
- Authorities should closely monitor inflation developments to ensure the single-digit inflation objective can be achieved as planned.
- Stepping up the pace of exchange rate depreciation would act as a shock absorber.
- Asset quality risks:
  - Asset quality at the Commercial Bank of Ethiopia remains a concern amid large SOE exposures.
  - Deposit funding in the banking system remained stable to date, but increasing calls from borrowers to delay loan payments—especially in sectors directly affected by the pandemic—could translate into weakening asset quality and intensified liquidity pressures.

### Policy recommendations and modalities of support
- Staff supports authorities’ plan to accommodate COVID-related fiscal measures and to resume fiscal adjustment when the crisis subsides.
- To contain upward pressure on public debt, consider further tightening the spending envelope for SOEs not directly engaged in the COVID-19 emergency response.
- Provide adequate liquidity to commercial banks while addressing structural weaknesses at the systemically important bank via comprehensive solutions focused on SOE debt sustainability.
- Closely monitor inflation to preserve the single-digit inflation objective.
- Step up exchange rate depreciation as a shock absorber.
- Continue implementing reforms agreed under the ECF-EFF arrangements while addressing the immediate crisis.
- Authorities requested rephasing and reduction of future ECF-EFF disbursements and purchases to remain within normal access limits while receiving RFI financing.

*Source: EXECUTIVE SUMMARY (1ethea2020002)*

### 9. Staff supports relaxing the fiscal stance to address the pandemic. Tax revenues are

### 1ethea2020002 - 9. Staff supports relaxing the fiscal stance to address the pandemic. Tax revenues are

### Fiscal stance, revenue shock, and financing gap
- Tax revenues are projected to drop by nearly ¾ percent of GDP relative to 2018/19 due to the severity of the shock.
- Grant receipts are expected to come in ¾ percent of GDP higher than previously anticipated.
- Higher spending and lower tax revenues are projected to result in a fiscal financing gap of 1.4 percent of GDP.
- Financing for the gap is expected to come from:
  - Budget support under the RFI: 0.4 percent of GDP.
  - Unidentified financing from donors and domestic banks: 1 percent of GDP.
- Staff emphasized:
  - The need to continue reassessing spending needs.
  - Preparation for potential SOE-related contingent liabilities.
  - Commitment to transparent and accountable delivery, including an independent and robust ex-post audit of emergency relief fund spending.

### 2020/21 fiscal measures, consolidation, and near-term projections
- Authorities committed to introducing measures to raise tax revenues for 2020/21 by 1 percentage point of GDP; staff would support delaying implementation if the pandemic renders this difficult and introducing them later in a supplementary budget law.
- Spending needs to counter the pandemic are expected to amount to 0.9 percent of GDP.
- With slightly higher grants than previously projected (0.1 percent of GDP), the deficit would increase to 3½ percent of GDP, 1¼ percent of GDP higher than anticipated at ECF-EFF approval in December.
- The deficit is projected to return to its previously projected path by 2021/22.

### Public debt, risks, and DSA findings
- Public debt is projected to remain sustainable although downside risks and liquidity pressures have increased.
- Authorities aim to strengthen Ethiopia’s debt position to help improve the external debt distress rating to “moderate” during the ECF-EFF arrangements.
- Progress:
  - First phase of reprofiling made progress but not finalized (included in the baseline scenario).
  - Progress on the second phase is uncertain; staff emphasized the need for specific and credible assurances ahead of the first review.
- Joint World Bank–IMF Debt Sustainability Analysis (DSA) shows that debt is sustainable.
- Increased vulnerabilities:
  - Liquidity pressures to service external debt have increased.
  - Room to absorb shocks is smaller than at program approval due to lower export projections.
  - A large or more persistent COVID-19 shock could further worsen the outlook.
  - Domestic public debt vulnerable to contingent liability shocks, including from public banks.
- Ethiopian Airlines, despite severe losses due to COVID-19, intends to continue servicing its debt and does not plan to seek government support.

### Key fiscal numbers from Text Table 2 (selected, exact values preserved)
- Total revenue and grants: Program 12.5; 2019/2020 IMF Staff 12.3; Program 2020/21 13.8; IMF Staff 13.1
- Revenue: Program 11.7; IMF Staff 10.7; Program 2020/21 13.0; IMF Staff 12.2
- Tax revenue: Program 10.1; IMF Staff 9.3; Program 2020/21 11.5; IMF Staff 10.7
- Grants: Program 0.9; IMF Staff 1.6; Program 2020/21 0.8; IMF Staff 0.9
- Of which: Unidentified Covid-19 grant financing: Program 0.0; IMF Staff 0.4; Program 2020/21 0.0; IMF Staff 0.0
- Total expenditure and net lending (cash basis): Program 15.0; IMF Staff 16.3; Program 2020/21 16.0; IMF Staff 16.7
- Poverty-reducing expenditure: Program 4.5; IMF Staff 5.9; Program 2020/21 4.7; IMF Staff 5.5
- Of which: Covid-19 response current costs: Program 0.0; IMF Staff 1.5; Program 2020/21 0.0; IMF Staff 0.9
- Overall balance including grants: Program -2.5; IMF Staff -4.0; Program 2020/21 -2.2; IMF Staff -3.5
- Excluding grants: Program -3.4; IMF Staff -5.6; Program 2020/21 -3.0; IMF Staff -4.5
- Net external financing: Program 1.2; IMF Staff 1.9; Program 2020/21 1.0; IMF Staff 1.0
- Budget Support: Program 0.5; IMF Staff 1.3; Program 2020/21 0.5; IMF Staff 0.5
- IMF RFI: Program 0.0; IMF Staff 0.4; Program 2020/21 0.0; IMF Staff 0.0
- Total unidentified financing needed for Covid-19 response: Program 0.0; IMF Staff 1.0; Program 2020/21 0.0; IMF Staff 0.0
- Memorandum: Poverty-reducing expenditure: Program 9.1; IMF Staff 10.6; Program 2020/21 9.2; IMF Staff 10.1
- Primary fiscal balance, including grants: Program -2.0; IMF Staff -3.5; Program 2020/21 -1.6; IMF Staff -2.8

### Monetary policy, liquidity, and financial sector measures
- NBE liquidity injections:
  - NBE injected 15 billion birr (0.45 percent of GDP) into private banks in March by redeeming NBE bills.
  - NBE plans to extend 16 billion birr (0.5 percent of GDP) in liquidity to the CBE.
- Staff supported building adequate liquidity buffers but emphasized that NBE lending to the CBE should reflect terms available to private banks and avoid implicit solvency support.
- Structural weaknesses in CBE’s balance sheet should be addressed through a comprehensive solution covering debt sustainability challenges at its SOE borrowers.
- Authorities encourage banks to reschedule loan repayments on a case-by-case basis; loan classification rules have not been changed.
- Staff recommended:
  - Close monitoring of liquidity positions, loan-to-deposit ratios, and asset quality.
  - Urgent need to step up monitoring of deposits and bank liquidity, frequent supervisory review and reassessment of loan portfolios.
  - Consider policy options for potential further bank liquidity shortages, such as strengthening emergency lending framework and adjusting reserve requirements.
- Inflation objective:
  - Continued vigilance needed to ensure single-digit inflation objective will be achieved.
  - Planned liquidity injections will expand reserve money beyond levels projected at ECF-EFF approval.
  - A significant tightening of policy will be needed when conditions normalize to bring inflation down to the single-digit objective.
  - In the meantime, first-round effects from the crisis should be accommodated.
- Exchange rate:
  - Staff urged authorities to increase the pace of exchange rate depreciation to reduce real overvaluation and act as a shock absorber.
  - Authorities committed to closing the gap with the parallel rate and eventually moving to a market-clearing exchange rate, while continuing cautiously.

### Commitments under ECF-EFF and SOE reforms
- Authorities remain committed to objectives of the ECF-EFF arrangements and to furthering the reform agenda.
- Commitments include:
  - Gradually ending financial repression by increasing T-bill issuances.
  - Ceasing new NBE financing to the Development Bank of Ethiopia (DBE) in June.
  - Gradually reducing direct NBE advances to the government.
  - Implementing the FX roadmap to be finalized by end-April to lay groundwork for an eventual market-clearing exchange rate.
  - Dealing comprehensively with debt sustainability challenges in SOEs to strengthen bank balance sheets.
  - Strengthening governance under the ECF-EFF arrangements.

### Modalities of IMF support requested (RFI, rephasing, CCRT)
- Authorities requested a purchase under the RFI equivalent to 100 percent of quota (SDR 300.7 million, about US$ 415 million) to be made entirely as budget support.
- To remain within GRA access limits, authorities requested:
  - A rephasing of access under the ECF-EFF arrangements.
  - A reduction of access under the EFF arrangement by SDR 150.35 million (50 percent of quota).
  - This would bring total access to GRA resources under the EFF arrangement to 250 percent of quota.
- Authorities requested rephasing of future disbursements/purchases (the third and subsequent ECF-EFF disbursements) due to delays in first review discussions and to comply with GRA annual access limits.
- Debt relief under the CCRT requested:
  - Ethiopia is PRGT eligible with GNI per capita of US$790 in 2018 (below threshold US$1,175).
  - Ethiopia has eligible debt service of SDR 8.56 million falling due during the initial period of debt service relief until October 13, 2020.
  - Eligible debt service falling due amounts to SDR 14 million between the CCRT request approval date and April 13, 2022 (maximum potential period, subject to availability of resources and Executive Board decisions).

### Capacity to repay the Fund and safeguards
- Ethiopia’s capacity to repay the Fund is assessed to be adequate.
- With proposed RFI access and modified ECF-EFF access:
  - Debt service to the Fund will peak at 0.3 percent of GDP, 2.9 percent of exports, and 1.7 percent of revenues in 2027/28.
  - Outstanding Fund credit to gross reserves ratio would peak at 41.3 percent in 2021/22, compared to 32.7 percent at ECF-EFF approval.
- Authorities will establish a memorandum of understanding between the central bank and the ministry of finance clarifying responsibilities for timely servicing of IMF obligations.
- Updated safeguards assessment of the NBE underway; initial findings suggest:
  - Amendments to the NBE Law are needed to address governance and autonomy weaknesses, strengthen oversight, and improve financial reporting and external audit arrangements.
  - Fiscal dominance has weakened the central bank’s financial position.
  - Preparation of annual financial statements is significantly delayed.
  - The external auditor has an unusually long tenure, raising concerns about independence and audit quality.
  - The framework for emergency liquidity support to banks is underdeveloped.
- Staff recommended corrective steps to address these shortcomings.

### Staff appraisal (key judgments and recommendations)
- COVID-19 has caused a pronounced economic slowdown and an urgent balance of payments need; economic growth projections revised down substantially for this fiscal year and next.
- Staff welcomes the swift policy response to contain the virus and limit human and economic fallout; authorities have strengthened the health response and announced measures to support vulnerable households.
- Staff supports expanding the fiscal deficit on a temporary basis within a continued commitment to strengthen debt sustainability; increased spending is appropriately targeted and regarded as temporary.
- Authorities should continue efforts to finalize the first phase of debt relief and secure credible assurances for the second phase ahead of the first review of the ECF-EFF arrangements.
- Strengthening bank liquidity is needed to prepare for the expected slowdown; targeted liquidity provision and comprehensive solutions for structural weaknesses in systemically important banks are important.
- Monetary policy should remain geared toward achieving the single-digit inflation objective, with adjustments as needed.
- While near-term focus is on crisis fallout, authorities should continue working toward commitments under the ECF-EFF arrangements and implement the reform agenda as conditions permit.

*Source: Ethiopian authorities and IMF staff estimates and projections contained in the provided content unit.*

### 28. Staff supports the following requests from the authorities:

### 28. Staff supports the following requests from the authorities:

### Requests supported
- Request for a purchase under the Rapid Financing Instrument (RFI) in the amount of SDR 300.7 million (100 percent of quota).
- Rephasing of access under the ECF-EFF arrangements and reduction of access under the EFF arrangement by SDR 150.35 million (50 percent of quota).
- Request for debt relief under the Catastrophe Containment and Relief Trust (CCRT); staff assesses Ethiopia is eligible.

### Rationale and conditions
- Staff support for the RFI purchase is based on:
  - The severity of the impact of the pandemic.
  - The authorities’ existing and prospective policies to address this external shock.
  - The urgent balance of payments need.
  - The authorities’ policy commitments to the objectives of the ECF-EFF arrangements.
- Staff supports the authorities’ request to use the RFI financing as budget support because the additional financing need results primarily from outlays on healthcare and social protection to face the COVID-19 shock.
- The proposed rephasing of access under the ECF-EFF arrangements, and the reduction of access under the EFF arrangement (by SDR 150.35 million; 50 percent of quota), would allow for an RFI purchase up to the maximum limit to deal with Ethiopia’s urgent balance of payments needs while remaining within the normal GRA access limits.
- Staff assesses that Ethiopia faces exceptional balance of payments needs stemming from the impact of COVID-19 and is pursuing appropriate macroeconomic policies to address the disaster, supporting eligibility for CCRT debt relief.

### Key numeric points
- RFI purchase amount requested: SDR 300.7 million (100 percent of quota).
- Reduction of access under EFF arrangement proposed: SDR 150.35 million (50 percent of quota).
- Ethiopia's quota: SDR 300.7 million (as referenced elsewhere in the document).

*Source: 1ethea2020002 - 28. Staff supports the following requests from the authorities.*

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent

### Context and timeline
- Date of letter: April 24, 2020
- Recipient: Ms. Kristalina Georgieva, Managing Director, International Monetary Fund
- Ethiopia’s first confirmed COVID-19 case: March 13
- Prior program: Progress under the ECF-EFF arrangements with the IMF

### Economic impact assessment
- Preliminary estimate: projected growth rates could decline by around 3 percentage points during 2019/20
- Outlook for 2020/21: "The impact for 2020/21 could be of a similar order of magnitude but would depend on how the pandemic evolves and corrective measures taken."
- Risk characterization: "The risks to these projections are slanted heavily to the downside."

### Sectoral effects
- Export industries, including air travel, were under pressure before first confirmed case.
- Demand for tourism and hospitality services plummeted.
- Agricultural sector: "While the impact on our largely rural and subsistence based agricultural sector should be limited, secondary and tertiary activities—especially tourism and hospitality services—are likely to be hit across the board."

### Fiscal implications (as stated)
- "It is difficult at this stage to fully and accurately assess the impact of the pandemic on the budget."
- "However, expenditures to directly fight COVID-19 in Ethiopia, as well as to support the economy and provide for affected households, are currently expected to entail additional spending of around"

*Source: Appendix I. Letter of Intent (April 24, 2020).*

### 1.6 percent of GDP. These costs could rise if the crisis deepens. Specific measures include emergency

### 1ethea2020002 - 1.6 percent of GDP. These costs could rise if the crisis deepens. Specific measures include emergency

### Fiscal response and emergency spending
- Total emergency response costs indicated: 1.6 percent of GDP.
- Specific emergency outlays listed:
  - Emergency food distribution: $635 million, 0.6 percent of GDP
  - Health sector support: $430 million, 0.4 percent of GDP
  - Emergency shelter and non-food items: $282 million, 0.3 percent of GDP
  - Remainder allocated to agricultural sector support, nutrition, protection of vulnerable groups, additional education outlays, logistics, refugee support, and site management support.
- Projected impact on general government fiscal balance relative to IMF staff projections at ECF-EFF approval in December:
  - Fiscal deficit will rise by some 1.5 percent of GDP in 2019/20
  - Fiscal deficit will rise by 1.3 percent of GDP in 2020/21
- Measures to partially offset deficit impact:
  - Further constrained spending plans for SOEs not engaged in emergency response for this year and next.
- Characterization of spending increases: viewed as strictly temporary; authorities remain committed to the multi-year fiscal adjustment plan under the ECF-EFF arrangements.

### Transparency, accountability, and anti-corruption measures
- Commitments to ensure transparent and accountable delivery of COVID-19 policy measures and mitigate corruption:
  - Publish all public contracts related to the COVID-19 response, use open and competitive bidding, and strictly limit emergency non-competitive processes to the extent possible.
  - Publish online eligibility criteria and budgeted limits for relief measures as soon as adopted.
  - Channel donor funding through the budget with full transparency on utilization.
  - Frequent monitoring of spending on crisis mitigation measures at the end of each month for the duration of the crisis.
  - Make information on emergency relief fund expenditures available to internal auditors and, as soon as practicable, to independent auditors for ex-post audits over COVID-19 related spending and revenue collection.

### Debt reprofiling, relief, and financing requests
- First phase of reprofiling under the ECF-EFF arrangements:
  - Expected to be finalized in April.
  - Total cashflow relief projected to amount to US$1.65 billion until FY 2022/23.
- Uncertainty on second phase progress due to global context; authorities continue to seek specific and credible financing assurances ahead of the first review.
- Requests to the IMF and other mechanisms:
  - Request emergency financing under the Rapid Financing Instrument (RFI) of SDR300.7 million, equivalent to 100 percent of quota, to be disbursed entirely as budget support.
  - Request rephasing of access under the ECF-EFF arrangements and a reduction of access under the EFF arrangement by SDR 150.35 million (50 percent of quota) to accommodate delays and comply with annual access limit policies.
  - Request grant assistance under the Catastrophe Containment (CC) window of the Catastrophe Containment and Relief Trust (CCRT) to cover IMF debt service falling due from approval date of the grant assistance to April 13, 2022.
  - Intention to request debt service relief from official bilateral creditors under the G20 debt service relief initiative.
- Operational arrangements:
  - A memorandum of understanding will be established between the government and the NBE on respective responsibilities for servicing IMF obligations.
  - Authorization for the IMF to publish the Letter and staff report for the RFI purchase and CCRT grant assistance request.

### Monetary policy and financial stability measures
- National Bank of Ethiopia (NBE) actions to maintain financial stability:
  - Redeemed NBE bills held by private banks.
  - Provided access to its standing liquidity facility to maintain adequate liquidity buffers.
  - Will provide additional liquidity to the Commercial Bank of Ethiopia as its tight structural liquidity conditions are exacerbated by COVID-19 shocks.
- Inflation and policy stance:
  - Acknowledgement of difficulty in predicting COVID-19 effects on inflation trajectory.
  - Commitment to stand ready to adjust policy stance as needed to achieve the single-digit inflation objective as anticipated at ECF-EFF approval.
- Continued commitments under ECF-EFF program:
  - Gradually end financial repression through increased T-bill issuances.
  - Cease new DBE financing from the NBE and gradually reduce direct NBE advances to the government.
  - Work toward a market-clearing exchange rate by steadily reducing overvaluation, strengthening reserve accumulation, and implementing an FX roadmap to be finalized in April.
  - Continue working toward solutions for SOE debts where companies cannot service debts themselves and strengthen bank balance sheets.
  - Strengthen governance: publish consolidated financial performance report covering all SOEs supervised by PEHAA; carry out Public Investment Management Assessment in cooperation with the IMF.
  - In safeguards assessment context, follow up on IMF staff recommendations and provide IMF staff access to the central bank’s most recently completed external audit reports and authorize external auditors to hold discussions with Fund staff.

### External accounts, balance of payments, and financing strategy
- Near-term external accounts outlook:
  - Projected drop in import demand and strengthening in terms of trade expected to more than offset weaker export demand and remittances in current account this fiscal year.
  - Large decline in foreign direct investment expected; overall balance of payments set to weaken relative to projections at ECF-EFF approval, creating a sizable financing gap.
  - Intention to fill gap by reducing reserve accumulation and seeking assistance from development partners.
- Financing strategy components:
  - Fund financing (RFI and CCRT), concessional financing from donors, and reserves draw down.
  - World Bank approved US$82.6 million for a COVID-19 project and is exploring additional support modalities.
  - Under ECF-EFF, continuous performance criteria apply to contracting/guaranteeing concessional and non-concessional external debt (non-zero limit for concessional, zero limit for non-concessional).

### Debt Sustainability Analysis (DSA) — key findings and macroeconomic projections
- Risk ratings:
  - Risk of external debt distress: High
  - Risk of overall debt distress: High
  - Granularity in the risk rating: Sustainable
  - Application of judgement: None
- DSA summary statements:
  - Ethiopia’s public and publicly guaranteed debt is deemed sustainable, but downside risks and liquidity pressures have increased due to high uncertainty from COVID-19.
  - Debt vulnerabilities stem from rising debt servicing needs, an overvalued exchange rate, and a small export base.
  - Under the baseline, two external debt indicators breach their thresholds; Ethiopia assessed at “high” risk of debt distress.
  - Authorities committed to additional reprofiling to aim for a “moderate” external debt distress rating, subject to credible assurances.
  - Larger or more persistent COVID-19 impacts could threaten debt sustainability.
  - Recommendations: steadfast FX reforms, monitoring of contingent liabilities, continued improvement in debt management and reporting.
- Macroeconomic outlook revisions and projections:
  - Near-term growth revised down because of COVID-19 domestic and external impacts:
    - Real GDP growth revised to 3.2 percent in 2019/20
    - Real GDP growth revised to 3.7 percent in 2020/21
    - Real GDP growth projected to converge to 8 percent over the medium term
  - Exports, particularly services exports, will contract significantly in 2019/20.
  - Inflation expected to remain elevated in 2020/21 and moderate to the central bank’s single-digit objective by late 2021.
  - Fiscal deficit projected to temporarily widen in 2019/20 and 2020/21 due to revenue impacts and increased COVID-19 spending needs.
- DSA baseline and assumptions:
  - Baseline includes first phase of debt reprofiling generating savings of about US$1.65 billion over 2019/20–2022/23.
  - Authorities intend to request G20 debt service relief (not included in baseline pending formal request).
  - Second phase of reprofiling to be included in DSA once specific and credible assurances are received.

### Selected DSA numeric indicators and projections (as presented)
- Growth and macro assumptions (selected):
  - Real GDP growth (percent): 3.2 (2019/20), 3.7 (2020/21), medium-term 8.0 (convergence)
  - Inflation: expected to moderate to single-digit by late 2021 (central bank objective)
- Financing and aid:
  - World Bank COVID-19 project: US$82.6 million
  - Identified cashflow relief from first reprofiling phase: US$1.65 billion until FY 2022/23
- IMF requests and access adjustments:
  - RFI purchase request: SDR300.7 million (100 percent of quota)
  - Reduction of access under EFF arrangement: SDR 150.35 million (50 percent of quota)
  - CCRT grant request: cover IMF debt service from approval to April 13, 2022

*The Federal Democratic Republic of Ethiopia; International Monetary Fund (staff report / Debt Sustainability Analysis), April 24, 2020.*

### 1.    On behalf of our Ethiopian authorities we thank management and staff for their

### 1.    On behalf of our Ethiopian authorities we thank management and staff for their timely response to the request for purchases under the Rapid Financing Instrument (RFI).

### Emergency financing and official requests
- Authorities request emergency financing under the RFI in the amount of SDR300.7 million (100 percent of quota) to be disbursed as budget support to help cope with the immediate impact of the pandemic.
- Authorities request a rephasing of disbursements under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF).
- Authorities request a reduction in the overall access under the EFF arrangement by SDR 150.35 million (50 percent of quota).
- Authorities request grant assistance under the Catastrophe Containment and Relief Trust (CCRT) to cover debt service falling due to the IMF until April 13, 2022.
- Authorities express concern that a permanent reduction of the approved purchases under the EFF arrangement will reduce funds available to implement planned reforms once the crisis is over; they would have preferred a temporary reduction in access for the current year and an overall increase reflecting additionality of the RFI resources.
- To ensure responsible and transparent use of COVID related resources, authorities will make available information on how emergency relief funds are used and undertake an ex-post audit of crisis-mitigation expenditures.

### Program performance (ECF-EFF program)
- The ECF-EFF program remains on track.
- All performance criteria for the first review were met, except one on non-accumulation of new external arrears; appropriate remedial measures have since been implemented to avoid recurrence of the breach.
- All end-March structural benchmarks were met except the benchmark on publishing a consolidated financial performance report for the Public Enterprise Holding and Administration Agency (PEHAA) supervised SOEs; this will be completed by the time of the first review.

### The impact of the COVID-19 pandemic
- Preliminary estimates suggest that economic growth will be 3 percentage points lower in 2019/20 than initially projected.
- Depending on the intensity and duration of the pandemic in 2020/21, growth will be lower than projected by 2.4 percentage points.
- Main vulnerability channels include trade, remittances, and FDI inflows.
- Secondary and tertiary sectors, including tourism and hospitality services, are expected to be severely affected.
- The overall balance of payments is expected to weaken in 2019/20, resulting in an additional financing gap equivalent to $1.7 billion.
- Slower economic activity is expected to dampen revenue collection, and increased COVID-19 related healthcare spending is projected to widen the fiscal deficit by 1.5 percent of GDP in 2019/20 and 1.25 percent in 2020/21, respectively.

### Response to the COVID-19 pandemic (containment and economic measures)
- Public health and containment:
  - Authorities closed schools, universities, and religious institutions, and banned sporting events and large gatherings.
  - Intensified screening and strengthened health sector capacity.
  - An inter-ministerial task force chaired by the Prime Minister was formed to coordinate the response and mount a public awareness campaign on preventive measures.
- Fiscal measures:
  - A $154 million (0.15 percent of GDP) package was initially announced to strengthen capacity of the health care system and purchase equipment.
  - A further $1.64 billion package was established to support vulnerable households and further strengthen the health care system, including an allocation for emergency food assistance under the rural urban Productive Safety Net Program (PSNP).
- Monetary and financial measures:
  - The National Bank of Ethiopia (NBE) injected 15 billion birr (0.45 percent of GDP) into private commercial banks to provide liquidity support.
  - The NBE plans to inject an additional 16 billion birr ($487.4 million) into the state-owned Commercial Bank of Ethiopia (CBE).
  - NBE is closely monitoring inflation dynamics and stands ready to make appropriate monetary policy adjustments to achieve single digit inflation once the crisis is over.
- Exchange rate and external sector:
  - Authorities have made significant progress in narrowing the spread between the official and parallel market rates through a gradual depreciation of the birr.
  - A foreign exchange roadmap was approved on April 28, 2020, to guide plans for moving towards a market clearing exchange rate.

### Post-pandemic policy measures and reform priorities
- Fiscal consolidation:
  - Authorities are committed to resume fiscal consolidation through introduction of new tax measures and improved tax administration to increase revenues.
- Debt management:
  - Authorities will take steps to strengthen the debt position to help improve the external debt distress rating to moderate over the course of the program.
  - Progress has been made on the first phase of the restructuring and authorities will continue to engage key creditors to secure credible assurances ahead of the first review.
  - Authorities plan to request debt service relief from official bilateral creditors under the G20 debt service relief initiative.
- State-owned enterprise (SOE) reforms:
  - Priority on improving efficiency and governance and privatization of large SOEs in the telecommunications and sugar sector.
  - Commit to publish consolidated financial performance report and carry out Public Investment Management Assessment (PIMA) in consultation with staff.
  - Privatization efforts will continue and pick up speed once the crisis is over.
- Central bank safeguards:
  - Authorities committed to completing the on-going Safeguards assessment and implementing its recommendations.
  - Authorities will cooperate with the IMF by sharing the NBE’s most recent external audit reports and provide access to external auditors.

### Conclusion and requested Board action
- Authorities remain committed to resume implementing prudent macroeconomic policies under the IMF supported homegrown economic reform plan once the pandemic is under control.
- Authorities request the Board approval of their financing request for emergency financing under the RFI and debt relief under the CCRT window.
- The emergency facility and debt relief are expected to assist close the identified financing gap and catalyze support from development partners.

*Source: 1ethea2020002 - 1.    On behalf of our Ethiopian authorities we thank management and staff for their*

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_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1ethea2020002.pdf_