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Ethiopia to save $4.9 bln from debt restructuring— Minister

Published

5 months ago

August 3, 2024

According to State Finance Minister, Eyob Tekalign, Ethiopia will receive relief of $4.9 billion from its debt obligations after it completes a long-postponed restructuring. He expressed his optimism in signing agreements with creditor nations within the next few months.

Following its recent default on debt, the East African nation, which now ranks as the third largest economy on the continent, aims to resume its debt restructuring efforts. This objective has been facilitated by its recent agreement to a new financing package with the International Monetary Fund.

“We will sign and finalise with each individual (creditor) country over the next few months,” Eyob told Reuters, referring to the estimated savings to Ethiopia as a result of the restructuring.

According to figures from the finance ministry, the total external debt of the country was $28.38 billion in March of this year.

In a televised speech on Thursday, Prime Minister Abiy Ahmed clarified the recent economic reforms and stated that the anticipated savings would encompass $200 million resulting from the restructuring of the $1 billion Eurobond.

Abiy justified the recent transition to a market-based foreign exchange rate, asserting that its purpose is to narrow the disparity between the official and black market values and that it does not constitute a currency depreciation.

The central bank has implemented a policy where the birr currency is now permitted to fluctuate without any restrictions, meeting an important requirement to obtain financial assistance from the International Monetary Fund (IMF).

Subsequently, the birr has depreciated by at least 31.5% versus the dollar, currently trading at 83.94 per greenback, according to the Commercial Bank of Ethiopia, the country’s largest lender. This has raised concerns among economic analysts and pundits about the possibility of a significant increase in inflation.

“There were two markets. One is 100 and the other is 50. So when the gap between the two became wide, it brought many dangers. So what we said, (the two) should be unified,” Abiy said, chiding banks for failing to unify the two rates swiftly.

“I believe your approach is not correct. The rate you are currently posting does not ensure unification,” he told bank executives who were present when he spoke.

Following Abiy’s remarks, banks adjusted the exchange rates for the birr, resulting in a decline. Some banks are now quoting the exchange rate at 90 birr per dollar, which is closer to the prevailing black market rate of 118 birr per dollar.

Although the removal of foreign exchange trading limitations enabled Ethiopia to secure the IMF deal and money from other creditors such as the World Bank, authorities have taken action due to concerns over the policy’s inflationary effects on low-income households.

Related Topics:Ethiopia Featured IMF World Bank

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IMF, Egypt reach agreement for fourth review of Egypt’s $1.2 billion loan request

Published

9 hours ago

December 26, 2024

Ifeoluwa Dada

Egypt and the International Monetary Fund (IMF) have reached a staff-level agreement over the fourth review of the Extended Fund Facility arrangement, which might lead to a $1.2 billion payout under the program.

In March, Egypt, struggling with rising inflation and cash shortages, consented to the $8 billion, 46-month facility. Its economic problems were made worse by a precipitous drop in Suez Canal revenue over the last year due to regional tensions.

Over the next two years, Egypt’s government has committed to raising its tax-to-revenue ratio by 2% of GDP, according to the IMF, emphasising removing exemptions rather than raising taxes.

According to a statement from the IMF, this would allow it to expand social expenditure to support vulnerable populations.

“While the authorities’ plans to streamline and simplify the tax system are commendable, further reforms will be needed to enhance domestic revenue mobilization efforts,” the statement said.

According to the IMF statement, Egypt had also committed to maintaining its commitment to a flexible currency rate and to taking more urgent action to guarantee that the private sector became the primary driver of development.

The IMF’s executive board still has to accept the fourth review’s staff-level agreement.

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Libya’s eastern govt accepts petrol subsidy elimination

Published

9 hours ago

December 26, 2024

Ifeoluwa Dada

In a recent statement, the eastern government of Libya claimed it had reached a consensus on a plan to eliminate gasoline subsidies and would draft a mechanism to carry out the accord.

Additional information on the idea was not released by the administration led by Osama Hamad, a challenger to the internationally acknowledged Tripoli-based government.

However, it is uncertain if Hamad’s government would be able to carry out the plan in the divided nation.

According to the Global Petrol Prices online tracker, a litre of gasoline costs just 0.150 Libyan dinars ($0.03) in OPEC member Libya, making it the second-cheapest in the world.

Following an uprising against former ruler Muammar Gaddafi in 2011, smuggling networks have thrived in the ensuing political unrest and armed fighting. In 2014, conflicting eastern and western governments separated the nation.

A World Bank analysis estimates that the annual value of fuel smuggling from Libya is at least $5 billion.

In a meeting with Mari Barrasi, the deputy governor of the Central Bank of Libya (CBL), located in Tripoli, and four members of the bank’s board of directors, Hamad in Benghazi supported the idea of removing subsidies.

The CBL’s Benghazi branch offices served as the venue for the conference.

The eastern parliament appointed Hamad in 2023 to succeed Abdulhamid Dbeibah, who had been put in position in 2021 under a U.N.-backed procedure that the parliament said had lost its legitimacy.

Dbeibah, who is located in Tripoli, stated in January that he will conduct a public poll on the topic of eliminating gasoline subsidies, but he hasn’t done anything about it since.

According to CBL figures, gasoline subsidies cost 12.8 billion Libyan dinars between January and November of this year. 4.8 Libyan dinars to $1 is the official exchange rate.