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IMF projects an image that the market based exchange regime is resolving Ethiopia’s “acute shortage of foreign exchange”
borkena
Toronto – The International Monetary Fund (IMF) on Friday announced “IMF staff and the Ethiopian authorities have reached staff-level agreement on economic policies to conclude the first review of the four-year US$ 3.4 billion” Extended Credit Facility arrangement.
The Executive Board has to review and approve it before the fund is released ( apparently in installments) to Abiy Ahmed’s administration which has been undertaking military campaigns in the Amhara and Oromia regions of Ethiopia to do away with rebel groups operating in the region.
The staff level agreement came following IMF staff came following more than a week long IMF staff visit to the Ethiopian capital Addis Ababa where they held a meeting with government officials “to discuss progress on reforms and the authorities’ policy priorities in the context of the first review of Ethiopia’s economic program supported by the IMF’s Extended Credit Facility (ECF)”
In July this year, his government introduced another round devaluation of Ethiopian currency ( this time over 100 percent) and a market-based currency exchange rate regime in what appears to be a response to the IMF and World Bank conditions attached to promises of credit arrangement. Before the introduction of currency devaluation $US 1 was exchanging for 56 to 57 Ethiopian Birr. It is now exchanging up to 130 Ethiopian Birr.
The IMF reflects a positive assessment of the latest post currency devaluation of the Ethiopian economy. In an update it published on September 27, it said “Ethiopia’s economic reform program, including the transition to a market-determined exchange rate, is advancing well. Exchange rate movements following the adoption of a floating exchange rate regime on July 29, 2024, have largely closed the gap between formal and parallel markets, with little disruption to the broader economy. The new exchange rate regime is alleviating the acute shortage of foreign exchange that previously existed, lifting a significant impediment to economic activity.”
There have been confirmed reports from local Ethiopian news sources that the cost of living crisis in the country worsened after the introduction of the latest currency devaluation which Abiy Ahmed’s government packaged as “Home Grown Economic Reform.” The IMF projected it that way too.
There have been mounting criticisms from Ethiopian economists that the introduction of currency devaluation was ill-advised and will only worsen Ethiopia’s economic problem.
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The situation in the old country is getting weirder and weirder. In one part of the country, there is a bloody conflict that disrupted the economy of the area and the area next to it has a booming economy. For example, in western part Oromia and in parts of Wellega, the economy has been in shambles for more than 4 years now. But in several areas nearby the economy is still functioning very well. The same scenarios exist in the Amhara region also. If you look at the regional level you can hear a pin drop and the economy is booming red hot in Somalia region while next door in Oromia things are not so rosy. What a strange country!!! The situation in the old country is getting weirder and weirder. In one part of the country, there is a bloody conflict that disrupted the economy of the area and the area next to it has a booming economy. For example, in western part Oromia and in parts of Wellega, the economy has been in shambles for more than 4 years now. But in several areas nearby the economy is still functioning very well. The same scenarios exist in the Amhara region also. If you look at the regional level you can hear a pin drop and the economy is booming red hot in Somalia region while next door in Oromia things are not so rosy. What a strange country!!!