IMF Raises Ethiopia's Reserves Target

NAIROBI (Reuters) – The International Monetary Fund (IMF) has increased Ethiopia's net international reserves target to facilitate payments of upcoming hard currency bills.

The East African nation secured a $3.4 billion, four-year financing program from the IMF in July after implementing a series of reforms, including floating its birr currency. Ethiopia is also pursuing a renewed effort to put its debt restructuring on track.

> “An increase in near-term target is warranted by Ethiopia's vulnerabilities and heightened uncertainty around outlook,” the IMF said in a report published late on Monday.

Lower-than-expected sales of hard currency by the central bank through auctions and higher gold exports contributed to an over-performance of the net international reserves target for August, according to the IMF.

The net international reserves stood at $1.3 billion in mid-August, more than double the target of $630 million. The IMF raised the end-June 2025 target by $300 million to $400 million to help create a buffer for the country to settle maturing letters of credit for fuel imports issued before reforms began.

The float of the birr currency resulted in the convergence of the official and black market rates, the IMF noted, but market activities have picked up at a slower pace than expected, leading to persistent unmet demand for dollars.

Ethiopia plans to reach a deal with bilateral creditors by year-end, followed by a deal with its Eurobond investors “as soon as feasible” after that, the Fund stated.

Bondholders have rejected the proposed reduction in the principal amount, known as a haircut, indicated at 18% in a recent investor presentation, arguing that the government is overlooking Ethiopia's liquidity issue, not an insolvency issue.

> “The authorities are making good faith efforts to agree terms with Eurobond holders,” the IMF concluded.