By Staff Reporter
December 11, 2019 (Ezega.com) -- The World Bank (WB) and International Monetary Fund (IMF) have decided to provide a total of $6 billion to support the recently introduced homegrown economic reform in Ethiopia, a senior official disclosed.
Briefing journalists on Wednesday, Ethiopian State Minister of Finance Dr. Eyob Tekalegn said the global financial institutions have agreed to provide $6 billion to Ethiopia in the next three months, which represents 60 percent of the total $10 billion needed to execute the economic reform.
“The government has been engaged in resource mobilization from donors and international financial organizations for the implementation of the economic reform. We have reached consensus on technical issues with the WB and IMF who have already decided to release the stated money after approval by their respective boards,” Eyob has said
According to the state minister, the money would be secured in a form of assistance and loan but did not mention the percentages.
In August this year, the Ethiopian government introduced a home-grown economic reform to address the nation’s macroeconomic imbalance being reflected through record-high debt burden, a critical shortage of foreign currency and rising inflation.
With the new economic reform, the government intends to stabilize the country’s financial crisis, strengthen public financial sectors and focus on key and potential sectors such as agriculture, manufacturing, and mining as important pillars to ensure viable economic growth.
As part of an effort to modernize the agriculture sector, the state minister pointed out that tractors and combiners are being imported duty-free as more emphasis is given to agro-processing and leather products.
According to the minister, the Ministry of Finance and the National Bank of Ethiopia would play their part to oversee the additional $6 billion would not cause inflation but go to capital budget.
The National Bank of Ethiopia (NBE) two weeks ago lifted a long-running mandatory bond purchase policy which had been a burden on private banks,
The removed financial rule used to force private banks to purchase a bond accounting to 27 % of every loan they give to borrowers.
According to the state minister, the lifting of the rule has enabled private banks to lend money at lower interest rates. This, he said, would encourage more businessmen to engage in the economy.
Four months ago, the Executive Secretary of the United Nations Economic Commission for Africa (ECA), Vera Songwe, said Ethiopia’s plan to grow from GDP per capita of 865 to 2219 is “very ambitious,” but doable, citing the success stories of China, Laos, and Vietnam.
She said, “If Ethiopia continues to accumulate debt the way it is doing now, the nation will likely fall into debt distress in the next two years and will not be a credit-worthy country.”
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