The International Monetary Fund warned Ethiopia that economic policies unveiled as part of a $3.4 billion loan agreement faced challenges that could complicate debt restructuring efforts.
The IMF, in a report, praised the government for implementing a series of changes including tax reforms, subsidy cuts, and liberalizing the foreign exchange market.
But the Washington-based lender said Addis Ababa faced mounting obstacles. “The outlook remains subject to downside risks given security challenges and declining donor support,” said IMF Deputy Managing Director Nigel Clarke.
Foreign aid to Ethiopia has dropped to under 4% of GDP from 12% a decade ago, with further cuts expected as international donors scale back. Ethiopia turned to the IMF after it defaulted in December 2023. It agreed terms in principle with official creditors this year and is seeking comparable debt relief from bondholders.