IMF raises Ethiopia's international reserves target after first review
NAIROBI, Nov 5 (Reuters) -The International Monetary Fund has raised Ethiopia's net international reserves target to facilitate payments of upcoming hard currency bills, the Fund said.
The East African nation secured a $3.4 billion, four-year financing program from the IMF in July after carrying out a series of reforms including floating its birr currency ETB=. It is also in the midst of a fresh push to put its debt restructuring back 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 volumes of hard currency sales by the central bank through auctions and higher gold exports contributed to an over-performance of the net international reserves target for August, the IMF said.
The net international reserves stood at $1.3 billion in mid-August, more than double the target of $630 million, the Fund said.
It 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 started.
The flotation of the birr currency ETB= resulted in the convergence of the official and the black market rates, the IMF said, but market activities had 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, the Fund said, followed by a deal with its Eurobond investors "as soon as is feasible" after that.
Bondholders have rejected the size of the proposed reduction in the principal amount, known as a haircut, indicated at 18% in a recent investor presentation, saying the government was ignoring the fact that Ethiopia faces a liquidity issue, not an insolvency one.
"The authorities are making good faith efforts to agree terms with Eurobond holders," the IMF said.
Reporting by Duncan Miriri
Editing by Bernadette Baum
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