July 30 – The World Bank said on Tuesday its board of directors has approved a $1 billion loan to Ethiopia as the Horn of Africa nation seeks to move forward with a long-running debt restructuring.
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Africa’s second-most populous country after Nigeria secured a four-year, $3.4 billion program from the International Monetary Fund on Monday, hours after the country’s central bank allowed its birr to float, paving the way for debt reforms to be carried out.
The World Bank’s International Development Association will also provide Ethiopia with a concessional loan of $500 million, the international lender said in a statement.
“IDA will commit about $6 billion in new lending over the next three years and support economic reforms through rapidly disbursed budget support,” the World Bank said. The funds are part of a $10.7 billion lending package from the IMF, World Bank and other creditors, Ethiopian officials said.
Ethiopia sought to restructure its sovereign debt in 2021 under the G20 Common Framework initiative to provide relief to developing countries, but progress was delayed by a civil war in the northern region of Tigray that ended the following year.
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Ethiopia’s winding debt restructuring journey has seen new signs of momentum after Chad and Zambia completed debt reviews under the Common Framework. Ghana is in the final stages of restructuring its debt under the initiative.
Ethiopia’s development partners have welcomed the move to a market-based foreign exchange rate, but some analysts say the move could raise inflation and the cost of living, hurting the country’s poorest residents in particular.
The country also faces many other challenges, including the effects of climate change and the post-war reconstruction of the Tigray region.
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