Ethiopian authorities seek to borrow 3.5 billion dollars from the IMF and a similar amount from the World Bank to meet its hard currency needs, according to a UN report.
Negotiations are underway with the two financial institutions to secure the loan, which observers expect to be conditioned on currency reforms, The World Food Programme said in a report on currency reform and food security.
“The issuance of this directive may be a step taken by the Ethiopian government to open up the economy to obtain loans from international financial institutions. This measure is considered as a way to ease to secure foreign exchange,” reads the report.
Ethiopia has been negotiating with the IMF and bilateral creditors in a bid to restructure its existing external debt stock as well as secure fresh disbursements.
One of the alternatives to boosting the forex reserve and achieving the target is devaluing the Birr or floating the forex regime.
“Devaluing the Birr may be part of the strategy to achieve these targets, and this may have implications on the food security of vulnerable people,” states the WFP document.
It notes that the IMF, WB, and other experts are in favor of devaluation.