Ethiopia will get $1 billion in funding approved by the World Bank

As the nation in the Horn of Africa attempts to move forward with a protracted debt restructuring, the World Bank said on Tuesday that its board had granted a $1 billion credit for Ethiopia.

The International Monetary Fund on Monday granted a four-year, $3.4 billion program to the second-most populous country in Africa, after Nigeria. The program came hours after the country’s central bank floated its birr currency, allowing the government to proceed with its debt restructure.

Ethiopia will also receive a $500 million concessional credit from the World Bank’s International Development Association (IDA), the global lender announced in a statement.

“IDA expects to provide around $6 billion in new commitments over the next three fiscal years and support economic reforms through fast-disbursing budget support” , according to the World Bank. According to Ethiopian officials, the investment is a component of a $10.7 billion financing package from the IMF, World Bank, and other creditors.

Under the G20 Common Framework initiative to provide aid to developing countries, Ethiopia attempted to restructure its sovereign debt in 2021; however, the civil war in Tigray’s northern region, which concluded the following year, hindered the country’s progress.

Ethiopia’s tortuous debt restructuring journey showed signs of new life after Zambia and Chad completed their debt overhauls under the Common Framework. Under the plan, Ghana is nearing the finish of its own debt restructuring.

The switch to a market-based foreign currency rate has been welcomed by Ethiopia’s development partners, but other observers fear it may increase inflation and living expenses, particularly for the country’s poorest citizens.

Other difficulties the nation faces include the effects of climate change and Tigray’s rehabilitation following the war.