{
  "title": "Press Release: IMF Approves New Three-Year ESAF Loan for Ethiopia",
  "publication": "IMF News, October 11, 1996",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9651",
  "canonical": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9651",
  "overlayPath": "/en/news/articles/2015/09/14/01/49/pr9651/index.md",
  "summary": "96/51 The Federal Democratic Republic of Ethiopia and the IMF Press Releases IMF Press center The IMF Press Center is a password-protected site for working journalists.",
  "publishDate": "1996-10-11",
  "sections": [
    {
      "heading": "Loan approval and financing details",
      "content": "- The IMF approved a new three-year loan under the enhanced structural adjustment facility (ESAF) for Ethiopia totaling the equivalent of SDR 88.5 million (about US$127 million).\n- The first annual ESAF loan is equivalent to SDR 29.5 million (about US$42 million) and will be disbursed in two equal installments, the first of which is available immediately.\n- ESAF lending terms: interest rate of 0.5 percent; repayable over 10 years with a 5 1/2-year grace period."
    },
    {
      "heading": "Recent economic performance (background)",
      "content": "- Ethiopia implemented an IMF-supported program in mid-1992 under the structural adjustment facility (SAF) to stabilize the economy and transition to a market-based system.\n- 1995/96 outcomes cited:\n  - Real GDP growth: 7.7 percent.\n  - Inflation (period average): 1.2 percent.\n  - Foreign exchange position: equivalent of eight months of imports.\n  - External current account deficit widened to 9.6 percent of GDP from 5.3 percent in 1994/95, due partly to lower world market coffee prices and strong import growth."
    },
    {
      "heading": "Medium-term strategy and 1996/97 program objectives",
      "content": "- Main macroeconomic objectives for 1996-99 supported by the ESAF loan:\n  - Achieve 6 percent growth in real GDP.\n  - Limit the rate of inflation to 2 percent.\n  - Contain the external current account deficit at about 9.2 percent of GDP.\n  - Maintain gross official foreign reserves at the equivalent of 7.5 months of imports.\n- 1996/97 program targets:\n  - Real GDP growth: 6 percent.\n  - Inflation rate: 1.2 percent.\n  - External current account deficit: about 10.5 percent of GDP.\n  - Gross official foreign reserves: equivalent of eight months of imports.\n- Policy stance and measures:\n  - Sustain growth with price stability through increased domestic savings and investment and further liberalization of exchange and trade systems.\n  - Rigorous fiscal policy: broaden tax base, strengthen tax administration, restrain expenditures, phase out fertilizer subsidies, compress the wage bill.\n  - Tight monetary targets to be supported by a move toward market-determined interest rates, including more aggressive government sales of treasury bills to the nonbank public.\n  - External measures: initial reduction in the export proceeds surrender requirement; introduction of foreign exchange bureaus within the banking system; near- and medium-term moves to lower tariff rates."
    },
    {
      "heading": "Structural reform policies",
      "content": "- Measures underway or planned:\n  - Easing restrictions on foreign investment.\n  - Adopting more realistic prices for commodities still subject to controls.\n  - Increasing market-based allocation of land.\n  - Accelerating privatization of public enterprises; remaining state enterprises to operate on a strictly commercial basis.\n  - Revisions of the investment code to permit private domestic investment in the telephone system and allow joint ventures between foreign and domestic partners in selected activities (large-scale engineering and metallurgical industries, pharmaceutical and fertilizer production).\n  - Accelerating public auctioning of urban land leases to support private investment.\n  - Agricultural sector reforms: overhaul of extension and research services, liberalization of input marketing, privatization of state farms."
    },
    {
      "heading": "Addressing social needs",
      "content": "- Public investment priorities to emphasize roads, energy, water supply, primary education, and basic health care.\n- Budget shares for primary education and basic health services to be increased; health care financing to be improved.\n- Measures to enhance the status of women: revise laws and regulations to guarantee equal access to resources, property, and business activities.\n- Population policy: promote education with a view to reducing the fertility rate."
    },
    {
      "heading": "Challenges and external financing",
      "content": "- Ethiopia will require strong adjustment efforts in coming years.\n- To achieve debt sustainability, Ethiopia will need to rely on exceptional financing and foreign direct investment.\n- The program aims to maintain gross official foreign reserves at a level to provide a cushion for servicing external debt and to withstand unforeseen terms of trade shocks or droughts."
    },
    {
      "heading": "IMF membership, quota, and outstanding use of credit",
      "content": "- Ethiopia joined the IMF on December 27, 1945.\n- Ethiopia's quota is SDR 98.3 million (about US$141 million).\n- Ethiopia's outstanding use of IMF credit currently totals SDR 49.42 million (about US$71 million)."
    },
    {
      "heading": "Key economic indicators (selected)",
      "content": "- Real GDP (percent change): 1994/95 = 4.9; 1995/96 = 7.7; 1996/97 = 6.0; 1997/98 = 6.0; 1998/99 = 6.0.\n- Consumer prices (period average): 1994/95 = 13.4; 1995/96 = 1.2; 1996/97 = 1.2; 1997/98 = 3.0; 1998/99 = 2.2.\n- Overall fiscal balance, excluding grants (percent of GDP, deficit-): 1994/95 = -8.8; 1995/96 = -8.1; 1996/97 = -7.7; 1997/98 = -6.7; 1998/99 = -5.6.\n- External current account balance, excluding grants (percent of GDP, deficit): 1994/95 = -5.3; 1995/96 = -9.6; 1996/97 = -10.5; 1997/98 = -9.1; 1998/99 = -8.2.\n- International reserves (months of imports): 1994/95 = 6.8; 1995/96 = 8.7; 1996/97 = 7.9; 1997/98 = 7.6; 1998/99 = 7.0.\n- Sources for indicators: Ethiopian authorities; and IMF staff estimates.\n-  Estimate.\n-  Program."
    }
  ],
  "bullets": [
    "The IMF approved a new three-year loan under the enhanced structural adjustment facility (ESAF) for Ethiopia totaling the equivalent of SDR 88.5 million (about US$127 million).",
    "The first annual ESAF loan is equivalent to SDR 29.5 million (about US$42 million) and will be disbursed in two equal installments, the first of which is available immediately.",
    "ESAF lending terms: interest rate of 0.5 percent; repayable over 10 years with a 5 1/2-year grace period.",
    "Ethiopia implemented an IMF-supported program in mid-1992 under the structural adjustment facility (SAF) to stabilize the economy and transition to a market-based system.",
    "1995/96 outcomes cited:",
    "Main macroeconomic objectives for 1996-99 supported by the ESAF loan:",
    "1996/97 program targets:",
    "Policy stance and measures:",
    "Measures underway or planned:",
    "Public investment priorities to emphasize roads, energy, water supply, primary education, and basic health care.",
    "Budget shares for primary education and basic health services to be increased; health care financing to be improved.",
    "Measures to enhance the status of women: revise laws and regulations to guarantee equal access to resources, property, and business activities.",
    "Population policy: promote education with a view to reducing the fertility rate.",
    "Ethiopia will require strong adjustment efforts in coming years.",
    "To achieve debt sustainability, Ethiopia will need to rely on exceptional financing and foreign direct investment.",
    "The program aims to maintain gross official foreign reserves at a level to provide a cushion for servicing external debt and to withstand unforeseen terms of trade shocks or droughts.",
    "Ethiopia joined the IMF on December 27, 1945.",
    "Ethiopia's quota is SDR 98.3 million (about US$141 million).",
    "Ethiopia's outstanding use of IMF credit currently totals SDR 49.42 million (about US$71 million).",
    "Real GDP (percent change): 1994/95 = 4.9; 1995/96* = 7.7; 1996/97** = 6.0; 1997/98** = 6.0; 1998/99** = 6.0.",
    "Consumer prices (period average): 1994/95 = 13.4; 1995/96* = 1.2; 1996/97** = 1.2; 1997/98** = 3.0; 1998/99** = 2.2.",
    "Overall fiscal balance, excluding grants (percent of GDP, deficit-): 1994/95 = -8.8; 1995/96* = -8.1; 1996/97** = -7.7; 1997/98** = -6.7; 1998/99** = -5.6.",
    "External current account balance, excluding grants (percent of GDP, deficit): 1994/95 = -5.3; 1995/96* = -9.6; 1996/97** = -10.5; 1997/98** = -9.1; 1998/99** = -8.2.",
    "International reserves (months of imports): 1994/95 = 6.8; 1995/96* = 8.7; 1996/97** = 7.9; 1997/98** = 7.6; 1998/99** = 7.0.",
    "Sources for indicators: Ethiopian authorities; and IMF staff estimates.",
    "* Estimate.",
    "** Program."
  ],
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