IMF EThiopia Covid Response

IMF Country Report No.
20/150
THE FEDERAL DEMOCRATIC

REPUBLIC OF ETHIOPIA
REQUESTS FOR PURCHASING UNDER THE RAPID FINANCING
May 2020 INSTRUMENT, DEBT RELIEF UNDER THE CATASTROPHE
CONTAINMENT AND RELIEF TRUST, REPHASING OF ACCESS
UNDER THE THREE-YEAR ARRANGEMENTS UNDER THE
EXTENDED CREDIT FACILITY AND THE EXTENDED FUND
FACILITY, AND REDUCTION OF ACCESS UNDER THE EXTENDED
FUND FACILITY ARRANGEMENT—PRESS RELEASE; STAFF
REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR
THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA
In the context of the Requests for Purchasing under the Rapid Financing Instrument (RFI), Debt
Relief under the Catastrophe Containment and Relief Trust (CCRT), the following documents
have been released and are included in this package:
• A Press Release including a statement by the Chair of the Executive Board.
• The Staff Report prepared by a staff team of the IMF for the Executive Board’s
consideration on April 30, 2020, following discussions that ended on April 22, 2020, with
the officials of The Federal Democratic Republic of Ethiopia on economic developments
and policies underpinning the IMF arrangements under the RFI and CCRT. Based on
information available at the time of these discussions, the Staff Report was completed on
April 24, 2020.
• A Debt Sustainability Analysis prepared by the Staffs of the IMF and the World Bank.
• A Statement by the Executive Director for The Federal Democratic Republic of Ethiopia.
The documents listed below have been or will be separately released:
Letter of Intent sent to the IMF by the authorities of The Federal Democratic Republic of
Ethiopia*
* Also included in Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and
premature disclosure of the authorities’ policy intentions in published staff reports and other
documents.
Copies of this report are available to the public from
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International Monetary Fund

Washington, D.C.
© 2020 International Monetary Fund
PR 20/199
IMF Executive Board Approves US$411 Million in Emergency

Assistance to Ethiopia to Address the COVID-19 Pandemic
FOR IMMEDIATE RELEASE
 Ethiopia is facing a pronounced economic slowdown and an urgent balance of payments

need owing to the COVID-19 pandemic.
 To address this urgent need, the IMF approved US$411 million emergency assistance for
Ethiopia under the Rapid Financing Instrument. The country will also benefit from IMF
debt service relief under the Catastrophe Containment and Relief Trust.
 The authorities have taken swift and decisive action to contain the impact of COVID-19 by
strengthening the health system, adopting a state of emergency to limit the spread of the
virus, and implementing measures to support the economy.
Washington, DC – April 30, 2020. The Executive Board of the International Monetary Fund
(IMF) approved today a purchase under the Rapid Financing Instrument (RFI) equivalent to
SDR 300.7 million (about US$411 million, 100 percent of quota) to help Ethiopia meet the
urgent balance of payment needs stemming from the COVID-19 pandemic. The Executive
Board also approved a rephasing of disbursements under the Extended Credit Facility (ECF)
and Extended Financing Facility (EFF) arrangements that have been supporting Ethiopia’s
economic reform program since December 2019, and a reduction in access under the EFF
arrangement, to maximize financial support under the RFI.
In addition, Ethiopia will benefit from the IMF Executive Board decision of April 13, 2020 to
provide debt service relief to the poorest and most vulnerable countries that are eligible for
grant assistance under the Catastrophe Containment and Relief Trust (CCRT). As a result, the
Board today approved Ethiopia’s request for relief under the CCRT on debt service falling due
to the IMF until October 13, 2020 of about US$12 million. This relief could be extended up to
April 13, 2022, subject to the availability of resources under the CCRT.
The COVID-19 pandemic has created severe health risks and weighed heavily on the
Ethiopian economy. If the pandemic is not contained, it will put severe pressure on the health
system with devasting social consequences. On the economic front, a fall in demand for
exports, combined with domestic containment measures will slow growth and weaken external
and fiscal accounts.
The authorities have taken strong actions to contain the health impact by implementing a
mandatory 14-day quarantine for travelers entering the country, improving testing and
containment capacity, strengthening epidemic response coordination and adopting a state of
emergency to limit movement and gatherings and facilitate social distancing. Implementation
2
of expenditures to strengthen the health system and address food security challenges are
welcome and will help contain the spread of the virus and support the poor and most
vulnerable.
The IMF continues to monitor Ethiopia’s situation closely and stands ready to provide policy
advice and financial support as needed.
Following the Executive Board’s discussion on Ethiopia, Mr. Tao Zhang, Deputy Managing
Director and Chair, issued the following statement:
“Ethiopia showed good progress under the extended arrangements with the Fund, which aim
to address external vulnerabilities and transition to a private sector-led growth model. The
authorities remain committed to the reform program. However, the COVID-19 pandemic has
had a significant adverse impact on the economy and created urgent fiscal and balance of
payments needs. The authorities have moved decisively to contain the spread of the virus and
manage the economic fallout from the global downturn and the needed health-related
measures.
“A temporary widening of the budget deficit is appropriate. The immediate priority is to

increase spending on health care and provide emergency assistance, including food
assistance. The authorities are committed to full transparency on the spending for the
emergency response and aim to conduct an ex-post audit of crisis-related spending once the
crisis abates. Fiscal consolidation will need to resume after the crisis, with a focus on
strengthening debt sustainability and domestic revenue mobilization.
“The National Bank of Ethiopia (NBE) has appropriately provided liquidity to banks to maintain
financial stability. Once the crisis abates, monetary policy will need to be tightened
significantly to achieve the single-digit inflation objective. Strong efforts are needed to address
the real overvaluation of the exchange rate, allowing the exchange rate to act as a shock
absorber.
“Fund emergency support under the Rapid Financing Instrument and debt relief under the
Catastrophe Containment and Relief Trust would help address balance of payments
pressures and create fiscal space for essential pandemic-related expenditures. Participation in
the G20 debt relief initiative could provide additional resources to respond to the pandemic.”
More information
IMF Lending Tracker (emergency financing request approved by the IMF Executive Board)
https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker
IMF Executive Board calendar
https://www.imf.org/external/NP/SEC/bc/eng/index.aspx
REQUESTS FOR PURCHASE UNDER THE RAPID FINANCING
April 24, 2020 INSTRUMENT, DEBT RELIEF UNDER THE CATASTROPHE
FACILITY, AND REDUCTION OF ACCESS UNDER THE
EXTENDED FUND FACILITY ARRANGEMENT
EXECUTIVE SUMMARY
Context: Ethiopia is facing a pronounced economic slowdown and an urgent balance of
payments need owing to the COVID-19 pandemic. The economy was growing robustly prior
to the pandemic, and progress under the ECF-EFF arrangements was encouraging. The shock
is expected to significantly reduce growth this fiscal year and next. It has already materially
weakened external accounts as services exports, remittances, and foreign direct investment
declined. The authorities are taking measures to combat the spread of the virus, mitigate its
fallout, and support vulnerable groups. The fiscal deficit will have to expand temporarily to
accommodate the additional spending.
Request for IMF support: The authorities have requested financial assistance under the
Rapid Financing Instrument to address the urgent balance of payments need they are facing
to cope with the immediate impact of the pandemic. They intend to use the proceeds of that
financing, in the amount of SDR 300.7 million (100 percent of quota), for budget support. To
comply with the normal access limits, they have requested rephasing of disbursements/
purchases under the ECF-EFF arrangements, reductions in the second and third EFF
purchases, and the resulting reduction in overall access under the EFF arrangement (by SDR
150.35 million; 50 percent of quota). The authorities have also requested grant assistance
under the Catastrophe Containment (CC) window of the Catastrophe Containment and Relief
Trust (CCRT). Staff supports these requests to help Ethiopia meet the urgent balance of
payments needs stemming from the COVID-19 shock. The authorities are pursuing
appropriate macroeconomic policies to combat the crisis while remaining committed to their
objectives under the ECF-EFF arrangements. The authorities are also seeking additional
financing from multilateral and bilateral donors.
Policy Discussions: Staff supports the authorities’ plan to accommodate COVID-related

fiscal measures, and to resume the fiscal adjustment when the crisis subsides. To contain the
upward pressure on public debt, the authorities should consider further tightening the
spending envelope for state-owned enterprises not directly engaged in the COVID-19
emergency response. Providing adequate liquidity to commercial banks is appropriate in the
face of the shock, but structural weaknesses in the balance sheet of the systemically
important bank should be dealt with through a comprehensive solution that addresses debt
sustainability challenges in the state-owned enterprises borrowing from it. The authorities
should also closely monitor inflation developments to ensure that the single-digit inflation
objective can be achieved as planned. Stepping up the pace of exchange rate depreciation
would act as a shock absorber. While the authorities should be appropriately focused on
addressing the fallout from the crisis in the near term, efforts should be made to continue
implementing the reforms agreed under the ECF-EFF arrangements.
2 INTERNATIONAL MONETARY FUND

Approved By An IMF team consisting of S. Jain-Chandra (head), M. Coelho,

Zeine Zeidane (AFR) N. Raman, C. Saborowski (all AFR), M. Adams and I. Yamamoto
and Seán Nolan (SPR) (MCM), S. Gupta (SPR), J. Leichter (Resident Representative), and
Z. Abiy Hailu (local economist) held discussions with the Ethiopian
authorities by videoconferences between April 6−10 and on April 22.
The discussions were led on the authorities’ side by Finance Minister
Ahmed Shide, Governor Yinager Dessie, and other senior officials.
Mr. Mahlinza (Executive Director) and Mr. Abdullahi (OED)
participated in the discussions.
CONTENTS
CONTEXT _________________________________________________________________________________________ 4
OUTLOOK AND RISKS AMID COVID-19 ________________________________________________________ 5
ECONOMIC POLICIES TO COMBAT THE COVID CRISIS ________________________________________ 6
A. Fiscal Policy ______________________________________________________________________________________6
B. Monetary, Exchange Rate, and Financial Sector Policies _________________________________________9
MODALITIES OF SUPPORT _____________________________________________________________________ 10
STAFF APPRAISAL ______________________________________________________________________________ 12
BOX
1. Economic Policy Response to COVID-19 ________________________________________________________7
TABLES
1. Selected Economic and Financial Indicators, 2017/18–2024/25 _______________________________ 14
2a. General Government Operations, 2017/18–2024/25 _________________________________________ 15
2b. General Government Operations, 2017/18–2024/25 _________________________________________ 16
3. Monetary Survey and Central Bank Accounts, 2017/18–2024/25 ______________________________ 17
4a. Balance of Payments, 2017/18–2024/25 (Millions of U.S dollars) _____________________________ 18
4b. Balance of Payments, 2017/18–2024/25 (Percent of GDP) ___________________________________ 19
5. Debt Service to the Fund Eligible for Debt Relief, May 2020–April 2022 _______________________ 20
6. Financial Stability Indicators, 2012/13–2018/19 _______________________________________________ 21
7. Gross External Financing Needs _______________________________________________________________ 22
8a. Approved Schedule of Disbursements/Purchases Under the ECF and EFF Arrangements ____ 23
8b. Proposed Revised Schedule of Disbursements/Purchases Under the ECF and EFF
Arrangements __________________________________________________________________________________ 24
9. Capacity to Repay to the Fund, 2019/20–2034/35 _____________________________________________ 25
APPENDIX
I. Letter of Intent _________________________________________________________________________________ 26
INTERNATIONAL MONETARY FUND 3

CONTEXT
1. Before the COVID-19 pandemic, the ECF-EFF arrangements had gotten off to a
promising start. The authorities met all but one performance criterion for the first review of the
ECF-EFF arrangements and are on track toward meeting most structural benchmarks. 1 Moreover, a
pick-up in the pace of depreciation has contributed to narrowing the spread between the official
and parallel exchange rates from 35 percent in mid-November to 27.5 percent as of April 22; the
fiscal deficit in the first half of the fiscal year was narrower than programmed amid strong revenues;
SOE debt has continued to edge down as a share of GDP as of December 2019; the newly-
established T-bill auctions are progressing well; and the NBE has kept monetary conditions tight,
though inflation remains close to recent peaks on the back of rising food prices.
2. A decisive policy response has slowed the pandemic, but the virus is spreading, and
national elections had to be postponed. At the outset of the global pandemic, the authorities
enforced temperature screening at ports of entry and strengthened epidemic response
coordination, including by designating isolation and treatment centers and training rapid response
teams. When the first case of COVID-19 was identified in Ethiopia on March 12, and the virus started
to spread, the authorities closed schools, banned large gatherings, and announced social distancing.
In addition, travelers entering Ethiopia became subject to a mandatory 14-day quarantine. As of
April 23, 116 cases had been identified—including some without known contacts with foreigners—
and three people have died. The authorities indicated that a new timeline for the elections—
previously scheduled for August 29—will be announced once the pandemic subsides.
3. The authorities have requested emergency financing to help deal with the unfolding
crisis. They have requested a purchase under the Rapid Financing Instrument (RFI)—to meet urgent
balance of payments needs arising from both the external shock and the needed fiscal policy
response to the crisis—as well as debt relief under the Catastrophe Containment (CC) window of the
Catastrophe Containment and Relief Trust (CCRT). Given their request for RFI financing, and to
remain within the GRA normal access limits, the authorities have requested rephasing of future
disbursements/purchases under the ECF-EFF arrangements and reducing the second and third EFF
purchases, as well as the overall access (by a total of SDR 150.35 million; 50 percent of quota), under
the EFF arrangement. In this context, they reaffirmed their commitment to the objectives under the
ECF-EFF arrangements. To further free up resources for the COVID-19 response, they also intend to
request debt service relief from official bilateral creditors under the G20 initiative.
1 The authorities did not meet the continuous performance criterion on the non-accumulation of new external
arrears, with a total breach of US$210 million. The breach was due to coordination problems between the National
Bank of Ethiopia (NBE) and some state-owned enterprises (SOEs). It also reflected a delay of a Federal government
payment of US$8.7 million on suspicion of fraudulent electronic communication ahead of the scheduled date. The
authorities have since cleared all these arrears and have taken corrective actions on monitoring and effecting SOEs’
external debt service. The authorities met the end-March structural benchmarks (SBs) to enact excise tax legislation
and to submit a supplementary 2019/20 budget to parliament and are on track to prepare the FX reform roadmap
by end-April (a draft of which has been shared with staff). The authorities have not met the end-February SB on
publishing a consolidated financial performance report for PEHAA supervised SOEs but are committed to
completing the action by the time of the first review.

OUTLOOK AND RISKS AMID COVID-19

4. The impact of the pandemic on economic activity is projected to be large but
temporary. It was initially felt through weakening demand for hospitality services and air transport,
with Ethiopian Airlines suspending passenger flight routes and reporting sharp losses. Exports of
flowers and manufacturing goods—as well as commodities—such as coffee and oil seeds—were hit
hard by falling global demand and/or declining prices. Nevertheless, given Ethiopia’s limited trade
integration and exposure to short-term financial flows, the bulk of the impact on activity is expected
to result from domestic containment measures as well as lower remittances and foreign direct
investment. While the largely rural and subsistence-based agricultural sector will be less affected,
secondary and tertiary activities—especially tourism and hospitality services—are expected to be hit
across the board. Given the late spread of the pandemic to Ethiopia, the shock would materialize
mostly in Q2 and Q3 of 2020—spreading the negative impact on GDP across two fiscal years. Staff
revised growth projections from 6.2 and 6.1 percent to 3.2 and 3.7 percent in 2019/20 and 2020/21,
respectively, despite significant policy support. The recovery would start gradually in Q4 2020, with
real GDP remaining below pre-shock projections throughout the medium-term.
5. External accounts are expected to Text Table 1. Ethiopia: Additional Balance of

weaken materially. The current account is Payments Needs Relative to Program Approval
projected to strengthen modestly this fiscal (In millions of U.S. dollars)
year amid a significant decline in imports of 2019/20 2020/21
goods and services on the back of weak External financing requirement -702 -195
domestic demand and lower project inflows. Of which: Current account deficit, excl. official transfers -702 -195
Of which: exports -2,379 -1,606
Falling remittances and the concurrent imports -5,120 -5,199
decline in exports—led by air travel—would private transfers -2,108 -3,484
External financing sources -2,369 -926

less than offset the import contraction amid Of which: Foreign direct investment, excl. privatization -2,265 -871
a substantial strengthening in the terms of Financing gap (+ = need for financing) 1,667 731
trade (including from higher coffee prices Expected financing
and lower global oil prices). However, the Official transfers 317 -121
Residual gap 1,350 851

overall balance of payments is projected to Privatization proceeds -579 579
weaken, on the back of a large drop in Debt service reprofiling 63 0
First phase of reprofiling 1/ 63 0
foreign direct investment, including due to Second phase of reprofiling 0 0
privatization delays, in part due to the Lower reserve accumulation

IMF
949
323
45
-97
pandemic. As a result, an additional ECF-EFF -104 -104
RFI 415 0
financing gap of US$1.7 billion has emerged Exceptional financing (CCR Trust debt relief) 11 7
for 2019/20 (Text Table 1). In 2020/21, both Prospective donor financing 595 325
Identified donor financing 2/ -220 325
exports and imports are expected to grow Expected donor financing 815 0
on the back of an incipient recovery, Source: IMF staff estimates.

1/ Reflects a correction in staff's baseline on the timing of principal repayment on one of
resulting in a deterioration in the trade the underlying debt.
balance, but an improved services balance 2/ In 2019/20, reflects a move from below the line to above the line in the Balance of Payments.
and stronger remittances will mitigate the impact on the current account. Privatization revenues will
help contain the additional financing gap, which is projected to reach US$731 million.

6. The shock could also worsen bank asset quality and intensify liquidity shortages. Asset
quality at the Commercial Bank of Ethiopia (CBE) remains a concern amid large SOE exposures.
While deposit funding in the banking system remains stable to date, both private and public banks
are now facing increasing calls from borrowers to delay loan payments, especially in sectors directly
affected by the pandemic. This could translate into weakening asset quality and intensified liquidity
pressures going forward.
7. Risks are tilted to the downside. A prolonged COVID-19 outbreak in Ethiopia, including
protracted containment measures and uncertainty about the intensity and duration of the pandemic,
could further deteriorate the outlook, impair balance sheets, threaten debt sustainability, and slow
the recovery. 2 Widespread social discontent and political instability related to the crisis fallout could
complicate the adjustment. Ethiopia is also affected by the worst locust infestation to hit East Africa
in decades, though the impact so far seems to be mainly in pastoral regions that are not major
food-producing areas. Should it intensify and spread to major crop-producing regions, food
shortages could deepen and reignite inflation. Moreover, political instability in the run-up to the
elections could delay the implementation of reforms.
ECONOMIC POLICIES TO COMBAT THE COVID CRISIS

Key policy objectives in the near term include (i) providing the health sector with sufficient resources to
combat the pandemic, (ii) augmenting the spending envelope, and allowing for a temporarily wider
fiscal deficit, to support the economy and protect the most vulnerable during the downturn; (iii)
accelerating the pace of exchange rate depreciation to support activity; (iv) addressing tight liquidity
conditions in commercial banks to prepare for a potential deterioration in asset quality; and (v)
progressing with key commitments under the ECF-EFF arrangements.
A. Fiscal Policy
8. The authorities are loosening the fiscal stance temporarily to combat the pandemic
and support the most vulnerable. The initial response included a health sector support package—
including to fund medical supplies, facilities, and to cut trade taxes for medical goods—amounting
to 5 billion birr (US$154 million; 0.15 percent of GDP) in spending (Box 1). The package is expected
to be funded by reallocating budgetary funds away from uncommitted investment projects. On April
3, the authorities announced that additional spending needs during the remainder of the fiscal year
would total $1.64 billion (1.6 percent of GDP). They indicated that the bulk of the outlays would be
channeled toward emergency food distribution (0.6 percent of GDP) and health sector support
(0.4 percent of GDP). 3 With tax revenues declining due to the downturn, and despite higher-than-
expected grants, the 2019/20 general government deficit would increase by 1½ percent of GDP to
2 The April 2020 World Economic Outlook sees severe risks of a worse global economic outcome. It estimates that,
under alternative outbreak scenarios, global GDP could be 3–8 percent below the baseline over 2020–21, recovering
gradually thereafter but remaining below the baseline throughout the medium term (up to 5 percent in 2024).
3 The authorities are considering implementing additional measures to protect jobs and support micro, small and
medium enterprises if the crisis continues to deepen, and conditional on the availability of financing.

4 percent of GDP. To partially offset the impact of the wider deficit on public sector debt, the
authorities should consider making space by constraining spending of SOEs that are not engaged in
implementing emergency response measures to the pandemic.
Box 1. Economic Policy Response to COVID-19
The authorities have established an inter-ministerial task force chaired by the Prime Minister to coordinate
preventative and response measures to mitigate the impact of COVID-19. They announced an initial package
to bolster healthcare spending in early March, followed by a set of measures aimed at stabilizing the economy
at end-March. The authorities have also published an estimate for the total cost of the pandemic for the
remainder of the fiscal year.
Initial healthcare measures. The authorities announced a 300-million-birr package to bolster healthcare
spending (funding for health facilities, trade tax cuts for medical imports) in early March. On March 23, the
package was augmented to 5 billion birr (US$154 million or 0.15 percent of GDP), to be funded largely
through reallocations within the budget.
Initial stabilization measures. The authorities announced a set of measures to counter the economic
impact of COVID-19 on March 27. It includes:
• Tax exemptions and preferential access to currency for importers of materials and equipment to be used
in the prevention and containment of COVID-19.
• NBE liquidity support of 15 billion birr (US$457 million or 0.45 percent of GDP) to private banks by
redeeming NBE bills (associated with the abolished “27 percent rule”) to facilitate debt restructuring.
• Increased mobile banking transfer limits at the Commercial Bank of Ethiopia to limit in-person
transactions.
• Intensified enforcement action against businesses found to be illegally increasing consumer prices.
Spending measures for the remainder of 2019/20. On April 3, the authorities announced that the multi-
sector emergency response plan to be implemented over the next three months will require
US$1.64 billion in funding (about 1.6 percent of GDP). The funds are expected to be allocated as follows:
• US$635 million (0.6 percent of GDP) for emergency food distribution to 15 million individuals vulnerable
to food insecurity and not currently covered by the rural and urban PSNPs.
• US$430 million (0.4 percent of GDP) for health sector response under a worst-case scenario of
community spread with over 100,000 Covid-19 cases of infection in the country, primarily in urban areas.
• US$282 million (0.3 percent of GDP) for provision of emergency shelter and non-food items.
• The remainder (US$293 million, 0.3 percent of GDP) would be allocated to agricultural sector support,
nutrition, the protection of vulnerable groups, additional education outlays, logistics, refugee support
and site management support.
9. Staff supports relaxing the fiscal stance to address the pandemic. Tax revenues are
projected to drop by nearly ¾ percent of GDP relative to 2018/19 due to the severity of the shock.
This is expected to more than offset the revenue overperformance in the first half of the fiscal year.
While staff expects grant receipts to come in ¾ percent of GDP higher than previously anticipated,
higher spending and lower tax revenues are projected to result in a fiscal financing gap of
1.4 percent of GDP, to be financed through budget support under the RFI (0.4 percent of GDP) as
well as unidentified financing from donors and domestic banks (1 percent of GDP). Staff emphasized
the need to continue reassessing spending needs and to prepare for potential SOE-related

contingent liabilities. Staff welcomed the authorities’ commitment to a transparent and accountable
delivery of these policy measures, including through an independent and robust ex-post audit of
how emergency relief funds are spent.
10. Fiscal consolidation is expected to resume in 2021/22. The authorities remain committed
to introducing measures to raise tax
revenues for 2020/21 by 1 percentage Text Table 2. Ethiopia: Additional Fiscal Needs in
2019/20 and 2020/211
point of GDP. In the event that the
(In percent of GDP)
pandemic renders this difficult, staff would
support delaying implementation until the 2019/20 2020/21
Program IMF Staff Program IMF Staff
crisis abates and then introducing them in a Proj. Proj.
supplementary budget law. Spending Total revenue and grants 12.5 12.3 13.8 13.1
Revenue 11.7 10.7 13.0 12.2
needs to counter the pandemic are Tax revenue 10.1 9.3 11.5 10.7
Nontax revenue
expected to amount to 0.9 percent of GDP.
1.5 1.5 1.5 1.5
Grants 0.9 1.6 0.8 0.9
With slightly higher grants than previously Program grants 0.3 1.0 0.3 0.4
projected (0.1 percent of GDP), the deficit

Of which: Unidentified Covid-19 grant financing 0.0 0.4 0.0 0.0
Project grants 0.6 0.6 0.6 0.6
would increase to 3½ percent of GDP,

Total expenditure and net lending (cash basis) 15.0 16.3 16.0 16.7
1¼ percent of GDP higher than anticipated Recurrent expenditure 2
8.6 10.0 8.8 9.8
3
at the approval of the ECF-EFF

Poverty-reducing expenditure 4.5 5.9 4.7 5.5
Of which: Covid-19 response current costs 0.0 1.5 0.0 0.9
arrangements in December. The deficit is Interest payments 0.5 0.5 0.6 0.7
Capital expenditure 6.5 6.3 7.2 6.8
projected to return to its previously Central treasury 5.0 5.0 5.8 5.4
External project grants 0.6 0.6 0.6 0.6
projected path by 2021/22. External project loans 0.9 0.7 0.8 0.8
Of which: Covid-19 response capital costs 0.0 0.1 0.0 0.1
11. Public debt is projected to

Overall balance
Including grants -2.5 -4.0 -2.2 -3.5
remain sustainable although downside Excluding grants -3.4 -5.6 -3.0 -4.5
Financing 2.5 4.0 2.2 3.5

risks and liquidity pressures have
Net external financing 1.2 1.9 1.0 1.0
increased. The authorities aim to Gross borrowing 4
1.4 2.1 1.3 1.3
Project loans 0.9 0.7 0.8 0.8
strengthen Ethiopia’s debt position to help Budget Support 0.5 1.3 0.5 0.5
improve the external debt distress rating to

Of which: Unidentified Covid-19 foreign loan financing 0.0 0.4 0.0 0.0
IMF RFI 0.0 0.4 0.0 0.0
“moderate” over the course of the ECF-EFF Amortization

Domestic (net)
-0.2
0.8
-0.2
2.1
-0.3
0.7
-0.3
1.5
arrangements. However, downside risks Of which: Unidentified domestic financing
5
0.0 0.3 0.0 0.0
Net acquisition of financial assets 0.5 0.0 0.5 1.1
have increased. The authorities have made 6
Total unidentified financing needed for Covid-19 response 0.0 1.0 0.0 0.0
progress on the first phase of reprofiling Memorandum items :
but have yet to finalize it (it is included in Poverty-reducing expenditure 9.1 10.6 9.2 10.1
Primary fiscal balance, including grants -2.0 -3.5 -1.6 -2.8
the baseline scenario). Progress on the Sources: Ethiopian authorities and IMF staff estimates and projections.
second phase is uncertain, but staff
1
Government financial statistics are reported by the authorities based on GFSM 1986.
2
Excluding special programs (demobilization and reconstruction).
emphasized the need to get specific and 3
Poverty-reducing spending is defined to include total spending on health, education, agriculture, roads, and
credible assurances ahead of the first food security.

4
Includes prospective donor financing to close the financing gap.
review, taking into account the implications 5
Reflects privatization receipts net of financial investments or recapitalization on SOEs.
6
Including grants and excluding requested IMF RFI.
of the COVID-19 shock for the needed
relief. The joint World Bank–IMF Debt Sustainability Analysis (DSA) shows that debt is sustainable.
However, liquidity pressures to service external debt have increased, the room to absorb shocks is
now smaller than at program approval due to lower export projections, and a large or more

persistent impact of the COVID-19 shock than presently assumed could further worsen the outlook.
On the domestic front, public debt remains vulnerable to contingent liability shocks, including those
stemming from public banks. Despite severe losses due to COVID-19, Ethiopian Airlines intends to
continue servicing its debt and does not have plans to seek government support.
B. Monetary, Exchange Rate, and Financial Sector Policies
12. Staff agrees with the need to ensure adequate commercial bank liquidity buffers. The
NBE injected 15 billion birr (0.45 percent of GDP) into private banks in March by redeeming NBE bills
(Box 1). The measure aimed at addressing tight liquidity conditions that had arisen prior to COVID-
19 and aids banks in repaying some of the 1-month loans previously provided through the
Individual Bank Lending Facility—introduced in February—for the same purpose. The NBE is also
planning to extend 16 billion birr (0.5 percent of GDP) in liquidity to the CBE. Staff supported the
decision to build adequate liquidity buffers but emphasized the need to ensure that NBE lending to
the CBE reflects the terms available to private banks and avoids implicit solvency support. Structural
weaknesses in CBE’s balance sheet should be dealt with through a comprehensive solution that
addresses debt sustainability challenges at its SOE borrowers.
13. Staff urged the authorities to closely monitor the impact of COVID-19 on financial
stability. The authorities are encouraging banks to reschedule loan repayments, currently on a case-
by-case basis, but have not changed loan classification rules. Staff recommended close monitoring
of liquidity positions, loan-to-deposit ratios, and asset quality. In particular, there is an urgent need
to step up monitoring of deposits and bank liquidity, as well as frequent supervisory review and
reassessment of banks’ loan portfolios during the crisis. Staff also emphasized the need to consider
policy options to deal with potential further bank liquidity shortages, such as strengthening the
framework for emergency lending and adjusting reserve requirements.
14. Continued vigilance is needed to ensure that the single-digit inflation objective will be
achieved as planned. While it is difficult to predict how the COVID-19 shock will affect the inflation
trajectory, staff and the authorities agreed that it will be important to adjust the policy stance as
needed to ensure that the single-digit inflation objective can be achieved once the crisis abates. The
planned liquidity injections (discussed above) aim at achieving financial stability objectives but will
also expand reserve money beyond the levels projected at the time of the ECF-EFF approval.
Consequently, and also in view of the upward revision of the near-term inflation path—reflecting
higher-than-expected inflation outturns in recent months—a significant tightening of policy will be
needed when conditions normalize to bring inflation down to the authorities’ single-digit objective
as anticipated at ECF-EFF approval. In the meantime, first-round effects from the crisis should be
accommodated.
15. Staff urged the authorities to increase the pace of exchange rate depreciation.
Increasing the pace of depreciation would help reduce real overvaluation and act as a shock
absorber during the crisis. The authorities underscored continued commitment to closing the gap

with the parallel rate to eventually move to a market-clearing exchange rate but signaled a need to
continue moving with caution.
16. The authorities remain committed to the objectives of the ECF-EFF arrangements.
While much of the focus in the near term will be on responding to the fallout of the crisis, the
authorities underscored that they will continue to further the reform agenda. They highlighted their
commitment to gradually ending financial repression by increasing T-bill issuances, ceasing new
NBE financing to the Development Bank of Ethiopia (DBE) in June, and gradually reducing direct NBE
advances to the government. They also remain committed to implementing the FX roadmap to be
finalized by end-April to lay the groundwork for an eventual move to a market-clearing exchange
rate. Dealing comprehensively with debt sustainability challenges in the SOEs to strengthen bank
balance sheets will also be key. Finally, the authorities remain committed to strengthening
governance under the ECF-EFF arrangements. 4
MODALITIES OF SUPPORT
17. The authorities request a purchase under the RFI equivalent to 100 percent of quota,
provided that the Executive Board approves the request for a rephasing of access under the
ECF-EFF arrangements and a reduction of access under the EFF arrangement. Current and
prospective access under Ethiopia’s existing ECF arrangement does not leave any space for
borrowing under the Rapid Credit Facility (RCF), given the hard cap on cumulative exceptional
access to PRGT resources. Given their urgent needs, the authorities are therefore requesting a
purchase under the RFI regular window in the amount of 100 percent of quota (SDR 300.7 million,
about US$ 415 million). They have also requested that access be made available entirely as budget
support. The urgent balance of payments difficulties that led the authorities to request access under
the RFI were caused primarily by the COVID-19 shock. The purchase would provide support to
address these needs and would help avoid a sharper drop in international reserves.
18. Given their request for the RFI purchase, and to remain within the normal General
Resources Account (GRA) access limits, the authorities request a rephasing of access under
the ECF-EFF arrangements and a reduction of access under the EFF arrangement (by SDR
150.35 million; 50 percent of quota). Under the applicable policies on annual access limits for
financing via the GRA, Ethiopia’s access in the first 12 months since the approval of the ECF-EFF
arrangements is limited to 145 percent of quota (including prospective purchases). With 90 percent
of quota in EFF access already approved or available in this period, an additional 100 percent of
quota in RFI access can only be accommodated through a reduction of access for the second and
4 The safeguards assessment is underway. The authorities are planning to undertake a Public Investment
Management Assessment in consultation with the IMF. Good progress has been made toward enhancing SOE
governance and transparency. While they have not met the February structural benchmark, as mentioned above, the
authorities have provided staff with individual financial statements for the majority of the companies and remain
committed to completing the consolidated report by the time of the first review of the ECF-EFF arrangements. The
authorities have also provided staff with a previously unavailable time series of SOE debt broken down by company
and type (external, CBE, and other domestic).

third disbursements under the EFF arrangement, and the resulting reduction in overall access. The
requested reduction in access would bring total access to GRA resources under the EFF arrangement
to 250 percent of quota. The authorities are also requesting rephasing of future
disbursements/purchases (the third and subsequent ECF-EFF disbursements), given delays in the
first review discussions resulting from COVID-19 and to comply with limits on annual access to the
GRA, which will allow to accommodate the RFI purchase within the normal GRA annual access limit.
19. The authorities also request debt relief under the CCRT. Ethiopia is PRGT eligible and
meets the income threshold with GNI per capita of US$790 in 2018, below the threshold of
US$1,175. Ethiopia has eligible debt service of SDR 8.56 million falling due during the initial period
of debt service relief until October 13, 2020 (Table 5). Its eligible debt service falling due amounts to
SDR 14 million between the CCRT request approval date and April 13, 2022 (the maximum potential
period of debt service relief, subject to availability of resources and decisions of the Executive
Board).
20. Ethiopia’s capacity to repay the Fund is assessed to be adequate. Considering the
proposed access under the RFI and the modified access under the ECF-EFF arrangements, debt
service to the Fund will peak at 0.3 percent of GDP, 2.9 percent of exports, and 1.7 percent of
revenues in 2027/28. These ratios are broadly unchanged compared to those at the time of ECF-EFF
approval and compare favorably with other high access programs in recent years. However, the
outstanding Fund credit to gross reserves ratio would now peak at 41.3 percent in 2021/22,
compared to 32.7 percent at the time of the approval of the ECF-EFF arrangements. The authorities
will establish a memorandum of understanding between the central bank and the ministry of
finance, that clarifies responsibilities for timely servicing of the financial obligations to the IMF.
21. An updated safeguards assessment of the NBE is underway. Initial findings suggest that
amendments to the NBE Law are needed to address governance and autonomy weaknesses,
strengthen oversight, and to improve financial reporting and external audit arrangements.
Moreover, fiscal dominance has weakened the financial position of the central bank, the preparation
of annual financial statements is significantly delayed, and the external auditor has an unusually long
tenure, which raises concerns about their independence as well as about audit quality (in light of
unmodified (clean) audit opinions despite shortcomings in the financial reporting practices in past
years). The framework for emergency liquidity support to banks is also underdeveloped. Staff has
recommended to the authorities to take steps to address these shortcomings.

STAFF APPRAISAL
22. Ethiopia faces a pronounced economic slowdown and an urgent balance of payments
need as a result of the pandemic. COVID-19 is affecting Ethiopia through both global spillovers
and domestic containment measures. Economic growth projections have been revised down
substantially for this fiscal year and next.
23. Staff welcomes the swift policy response to contain the virus and limit the human and
economic fallout. Beyond strengthening the health system’s ability to respond to the pandemic,
the authorities have moved decisively to contain the virus and have announced a set of measures to
limit the pandemic’s impact on the economy and to support vulnerable households.
24. Staff supports expanding the fiscal deficit on a temporary basis, within the framework
of a continued commitment to strengthen debt sustainability. The increase in the spending
envelope is appropriately targeted toward dealing with the fallout of the crisis, and the authorities
highlighted that these needs are temporary. The authorities should continue their efforts to finalize
the first phase of debt relief, and secure credible assurances for the second phase, ahead of the first
review of the ECF-EFF arrangements.
25. Strengthening bank liquidity will help prepare for the expected slowdown. Targeted
liquidity provision to ensure adequate bank liquidity buffers is needed in the face of the crisis.
Structural weaknesses in the systemically important bank’s balance sheet should be dealt with
through a comprehensive solution that addresses debt sustainability challenges in its state-owned
enterprise borrowers.
26. The authorities should continue to gear monetary policy toward achieving the single-
digit inflation objective. While it is difficult to predict how the COVID-19 shock will affect the
inflation trajectory, it will be important to adjust the policy stance as needed to ensure that the
single-digit inflation objective can be achieved.
27. Staff also welcomes the authorities’ continued commitment to the objectives of the
ECF-EFF arrangements. Discussions on the first review of the arrangement have been delayed amid
the heightened uncertainty. While a shift toward proactively dealing with the fallout of the crisis is
needed in the near term, the authorities should continue working toward their commitments under
the ECF-EFF arrangements and implement the reform agenda as conditions permit.
28. Staff supports the following requests from the authorities:
• Request for a purchase under the Rapid Financing Instrument in the amount of SDR 300.7
million (100 percent of quota), provided that the Executive Board approves the request for a
rephasing of the ECF-EFF arrangements. Staff support is based on the severity of the impact
of the pandemic, the authorities’ existing and prospective policies to address this external
shock, the urgent balance of payments need, and the authorities’ policy commitments to the
objectives of the ECF-EFF arrangements. Staff also supports the authorities’ request to use

this financing as budget support as the additional financing need results primarily from
outlays on healthcare and social protection to face the COVID-19 shock.
• Rephasing of access under the ECF-EFF arrangements and reduction of access under the EFF
arrangement (by SDR 150.35 million; 50 percent of quota). The rephasing of access under the
ECF-EFF arrangements, and the reduction of access under the EFF arrangement, would allow
for an RFI purchase up to the maximum limit to deal with Ethiopia’s urgent balance of
payments needs while remaining within the normal GRA access limits.
• Request for debt relief under the CCRT. Ethiopia is eligible for the debt relief and staff
assesses that Ethiopia faces exceptional balance of payments needs stemming from the
impact of COVID-19 and is pursuing appropriate macroeconomic policies to address the
disaster.

Table 1. Ethiopia: Selected Economic and Financial Indicators, 2017/18–2024/25
GDP Poverty indicators in 2015/16 (national definitions)

Nominal GDP (2018, billions of U.S. dollars) 84.3 Poverty headcount ratio (percent of population) 23.5
GNI per capita, Atlas method (2018, current US$) 790 Food poverty (percent of population) 24.8
Population characteristics Income distribution, 2015

Total (2018, million) 94.1 Income shared by highest 10 percent of population 28.5
Urban population (2015) 19.5 Income shared by lowest 20 percent of population 7.3
Life expectancy at birth (2017, years) 65.9 GINI index 35.0
Economic Indicators
2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Act. Prel. Prog. Rev. Prog. Rev. Prog. Rev. IMF Staff IMF Staff IMF Staff
proj. proj. proj. Proj. Proj. Proj.
(Annual percentage change)

National income and prices
GDP at constant prices (at factor cost) 7.7 9.0 6.2 3.2 6.1 3.7 7.0 8.7 8.0 8.0 8.0
GDP deflator 12.4 13.2 19.4 20.8 12.3 17.2 8.8 8.4 8.0 8.0 8.0
Consumer prices (period average) 1 14.5 12.6 19.4 20.1 11.1 15.5 8.1 8.4 8.0 8.0 8.0
Consumer prices (end period) 1 16.8 15.3 18.1 22.0 9.4 10.7 8.0 8.0 8.0 8.0 8.0
External sector
Exports of goods and services (U.S. dollars, f.o.b.) 13.1 7.9 12.8 -18.5 12.7 30.0 14.0 23.2 12.5 12.1 11.7
Imports of goods and services (U.S. dollars, c.i.f.) 0.2 4.1 11.3 -14.3 9.4 11.7 8.5 11.9 7.6 7.1 6.8
Terms of trade (goods, deterioration – ) -6.8 -2.7 4.1 7.4 5.6 9.8 3.2 -0.8 0.3 0.5 0.2
Nominal effective exchange rate (end of period) -16.3 -1.8 … … … … … … … … …
Real effective exchange rate (end of period) -5.1 6.4 … … … … … … … … …
(Annual percentage change, unless otherwise indicated)

Money and credit
Change in net foreign assets 3.5 -63.2 83.9 -15.7 222.1 492.5 95.2 102.7 63.7 37.6 22.0
Change in net domestic assets (including other items net) 31.0 24.4 16.9 27.7 13.9 7.1 14.4 11.2 12.0 15.1 20.0
Broad money 29.2 19.7 18.0 27.0 19.2 12.4 19.9 16.5 17.2 18.3 20.3
Base money 19.1 15.3 12.5 25.0 13.0 10.0 13.0 10.5 10.5 11.0 11.0
Velocity (GDP/broad money) 2.97 3.04 3.24 2.98 3.28 3.26 3.23 3.33 3.34 3.30 3.20
(Percent of GDP, unless otherwise indicated)

Financial balances2
Gross domestic savings 24.1 22.3 25.2 22.0 25.0 20.4 26.7 19.8 21.6 25.3 28.5
Public savings 1.3 1.7 2.6 0.2 3.6 2.0 4.7 3.9 4.5 4.7 4.8
Private savings 22.8 20.6 22.6 21.8 21.4 18.4 22.0 15.9 17.1 20.6 23.7
Gross domestic investment 34.2 35.2 34.3 32.2 36.3 30.9 38.1 30.9 32.4 35.2 37.6
Public investment 11.6 11.2 10.0 9.9 10.3 9.5 10.3 9.0 8.9 8.8 7.1
Private investment 22.5 24.0 24.3 22.3 26.0 21.5 27.8 22.0 23.5 26.5 30.5
Resource gap -10.1 -12.9 -9.1 -10.2 -11.4 -10.5 -11.4 -11.1 -10.9 -10.0 -9.2
External current account balance, including official transfers -6.2 -5.1 -5.5 -4.6 -4.6 -4.5 -4.6 -4.6 -4.3 -3.6 -3.1
Government finances
Revenue 12.3 11.5 11.7 10.7 13.0 12.2 14.2 13.4 14.0 14.4 14.4
Tax revenue 10.7 10.0 10.1 9.3 11.5 10.7 12.7 12.0 12.6 13.0 13.0
Nontax revenue 1.6 1.6 1.5 1.5 1.5 1.5 1.5 1.5 1.4 1.4 1.4
External grants 0.8 1.2 0.9 1.6 0.8 0.9 0.6 0.9 0.9 0.7 0.8
Expenditure and net lending 16.1 15.3 15.0 16.3 16.0 16.7 16.8 16.2 16.9 17.1 17.1
Fiscal balance, excluding grants (cash basis) -3.8 -3.8 -3.4 -5.6 -3.0 -4.5 -2.6 -2.8 -2.8 -2.6 -2.7
Fiscal balance, including grants (cash basis) -3.0 -2.5 -2.5 -4.0 -2.2 -3.5 -1.9 -1.9 -1.9 -1.9 -1.9
Total financing (including residuals) 3.0 2.5 2.5 4.0 2.2 3.5 1.9 1.9 1.9 1.9 1.9
External financing 1.3 1.3 1.2 1.9 1.0 1.0 1.7 0.9 1.0 0.3 -0.4
Domestic financing (incl. privatization) 2.7 1.3 1.3 2.1 1.2 2.5 0.3 1.0 1.0 1.6 2.3
Public debt 3 60.8 56.9 53.4 56.7 52.7 55.8 52.0 54.1 48.9 44.6 40.2
Domestic debt 29.2 28.6 25.4 27.1 22.6 24.5 19.1 21.3 18.7 17.7 16.9
External debt (including to the IMF) 31.6 28.3 28.0 29.5 30.1 31.3 32.8 32.8 30.2 26.9 23.3
Overall balance of payments (in millions of U.S. dollars) -202 58 -346 -2,275 22 -250 -547 -420 -121 1,157 840
Gross official reserves (in millions of U.S. dollars) 2,847 3,415 4,031 3,082 5,661 4,668 7,441 6,380 8,004 9,151 9,964
(months of imports of goods and nonfactor services of following year) 1.7 2.4 2.0 1.9 2.6 2.6 3.2 3.3 3.9 4.2 4.2
GDP at current market prices (billions of birr) 2,200 2,696 3,391 3,352 4,094 4,130 4,828 4,913 5,761 6,744 7,855
Sources: Ethiopian authorities and IMF staff estimates and projections.
1
For 2015/16 and earlier, based on December 2011 base; for all subsequent data and projections, the base is December 2016.
2
Based on data from Central Statistical Agency (CSA), except for the current account balance, which is based on BOP data from National Bank of Ethiopia (NBE).
3
Public and publicly-guaranteed external debt, which includes long-term foreign liabilities of the NBE and external debt of Ethio-Telecom.

Table 2a. Ethiopia: General Government Operations, 2017/18–2024/251

(Millions of birr)
2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Act. Prel. Program Rev. Program Rev. Program Rev. IMF Staff IMF Staff IMF Staff
Proj. Proj. Proj. Proj. Proj. Proj.
Total revenue and grants 287,562 344,937 425,265 413,334 566,159 542,416 718,448 702,951 860,187 1,022,460 1,195,407
Revenue 269,648 311,318 395,067 360,110 532,115 503,564 687,367 659,886 808,274 974,381 1,131,556
Tax revenue 235,229 268,458 343,513 310,056 470,475 442,500 615,392 587,957 724,753 877,560 1,019,900
Direct taxes 97,646 115,858 147,438 129,644 179,569 165,756 213,356 212,889 256,988 309,640 368,283
Indirect taxes 137,583 152,600 196,075 180,411 290,906 276,744 402,036 375,068 467,765 567,920 651,617
Domestic indirect taxes 67,172 77,774 97,802 87,065 159,045 138,116 235,824 207,526 273,944 356,776 421,408
Import duties and taxes 70,411 74,826 98,273 93,347 131,861 138,628 166,212 167,541 193,821 211,144 230,210
Nontax revenue 34,419 42,860 51,554 50,054 61,640 61,064 71,975 71,930 83,521 96,821 111,656
Grants 17,914 33,619 30,198 53,224 34,044 38,852 31,081 43,065 51,913 48,079 63,851
Program grants 3,746 17,646 11,056 33,981 10,710 15,570 3,062 14,921 18,911 9,442 18,852
Of which: Unidentified Covid-19 grant financing 0 0 0 11,734 0 0 0 0 0 0 0
Project grants 14,168 15,973 19,142 19,243 23,334 23,282 28,019 28,144 33,002 38,637 45,000
Total expenditure and net lending (cash basis) 354,209 413,105 509,794 547,403 655,898 687,877 812,562 797,871 971,492 1,152,768 1,346,580
Recurrent expenditure 2 210,474 238,156 290,093 335,939 360,239 405,106 430,210 448,807 539,668 661,642 809,914
Defense spending 12,814 15,605 15,605 15,605 19,602 19,772 23,115 23,520 27,580 39,034 45,462
Poverty-reducing expenditure 3 104,070 120,140 152,103 197,949 190,517 227,270 230,805 235,403 282,424 338,793 394,587
Of which: Covid-19 response current costs 0 0 0 48,600 0 35,103 0 0 0 0 0
Interest payments 11,571 13,526 17,408 17,408 23,355 28,719 29,307 38,590 57,976 82,816 135,763
Domestic interest and charges 6,181 7,436 9,351 9,351 13,239 18,625 16,501 25,727 43,040 66,469 117,922
External interest payments 4 5,390 6,090 8,057 8,057 10,116 10,094 12,806 12,863 14,936 16,347 17,841
Other recurrent expenditure 82,019 88,885 104,977 104,977 126,766 129,345 146,984 151,293 171,687 201,000 234,102
Capital expenditure 143,735 174,949 219,701 211,464 295,659 282,771 382,352 349,064 431,824 491,126 536,666
Central treasury 108,673 142,739 169,468 167,221 238,288 224,900 290,118 280,426 348,555 413,560 443,404
External project grants 14,168 15,973 19,142 19,243 23,334 23,282 28,019 28,144 33,002 38,637 45,000
External project loans 20,895 16,237 31,091 25,000 34,037 34,589 64,215 40,493 50,267 38,930 48,262
Of which: Covid-19 response capital costs 0 0 0 4,190 0 5,163 0 0 0 0 0
Overall balance
Including grants -66,647 -68,168 -84,529 -134,070 -89,739 -145,461 -94,113 -94,919 -111,304 -130,308 -151,173
Excluding grants -84,561 -101,787 -114,727 -187,294 -123,783 -184,313 -125,195 -137,984 -163,218 -178,387 -215,024
Financing 87,930 71,726 84,529 134,070 89,739 145,461 94,113 94,919 111,304 130,308 151,173
Net external financing 28,135 35,401 40,936 62,699 40,158 40,634 81,805 44,771 55,825 23,150 -29,489
Gross borrowing 5 32,450 40,973 48,285 70,048 52,860 53,716 99,727 62,886 78,064 60,458 74,952
Project loans 20,895 16,237 31,091 25,000 34,037 34,589 64,215 40,493 50,267 38,930 48,262
Budget Support 11,555 24,736 17,194 45,048 18,823 19,128 35,512 22,393 27,798 21,528 26,690
Of which: Unidentified Covid-19 foreign loan financing 0 0 0 11,734 0 0 0 0 0 0 0
IMF RFI 0 0 0 13,000 0 0 0 0 0 0 0
Amortization -4,315 -5,572 -7,349 -7,349 -12,701 -13,082 -17,922 -18,115 -22,240 -37,308 -104,441
Domestic (net) 50,447 36,325 25,571 71,370 28,204 60,880 -7,645 30,106 55,480 107,158 180,662
Of which: Unidentified domestic financing 0 0 0 8,853 0 0 0 0 0 0 0
Net acquisition of financial assets 6 9,349 0 18,021 0 21,376 43,948 19,953 20,042 0 0 0
7
Total unidentified financing needed for Covid-19 response 0 0 0 32,320 0 0 0 0 0 0 0
Memorandum items :
Total poverty-reducing expenditure 210,898 245,490 309,528 354,233 377,947 417,147 448,914 459,015 543,258 643,160 749,564
Primary fiscal balance, including grants -55,076 -54,642 -67,121 -116,662 -66,384 -116,742 -64,807 -56,329 -53,329 -47,492 -15,410

1
2
3
Poverty-reducing spending is defined to include total spending on health, education, agriculture, roads, and food security.
4
External interest and amortization are presented after HIPC debt relief from the World Bank and the African Development Bank.
5
6
7

Table 2b. Ethiopia: General Government Operations, 2017/18–2024/251

(Percent of GDP)
2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Act. Prel. Program Rev. Program Rev. Program Rev. IMF Staff IMF Staff IMF Staff
Total revenue and grants 13.1 12.8 12.5 12.3 13.8 13.1 14.9 14.3 14.9 15.2 15.2
Revenue 12.3 11.5 11.7 10.7 13.0 12.2 14.2 13.4 14.0 14.4 14.4
Tax revenue 10.7 10.0 10.1 9.3 11.5 10.7 12.7 12.0 12.6 13.0 13.0
Direct taxes 4.4 4.3 4.3 3.9 4.4 4.0 4.4 4.3 4.5 4.6 4.7
Indirect taxes 6.3 5.7 5.8 5.4 7.1 6.7 8.3 7.6 8.1 8.4 8.3
Domestic indirect taxes 3.1 2.9 2.9 2.6 3.9 3.3 4.9 4.2 4.8 5.3 5.4
Import duties and taxes 3.2 2.8 2.9 2.8 3.2 3.4 3.4 3.4 3.4 3.1 2.9
Nontax revenue 1.6 1.6 1.5 1.5 1.5 1.5 1.5 1.5 1.4 1.4 1.4
Grants 0.8 1.2 0.9 1.6 0.8 0.9 0.6 0.9 0.9 0.7 0.8
Program grants 0.2 0.7 0.3 1.0 0.3 0.4 0.1 0.3 0.3 0.1 0.2
Of which: Unidentified Covid-19 grant financing 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Project grants 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6
Total expenditure and net lending (cash basis) 16.1 15.3 15.0 16.3 16.0 16.7 16.8 16.2 16.9 17.1 17.1
Recurrent expenditure 2 9.6 8.8 8.6 10.0 8.8 9.8 8.9 9.1 9.4 9.8 10.3
Defense spending 0.6 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.6
Poverty-reducing expenditure 3 4.7 4.5 4.5 5.9 4.7 5.5 4.8 4.8 4.9 5.0 5.0
Of which: Covid-19 response current costs 0.0 0.0 0.0 1.5 0.0 0.9 0.0 0.0 0.0 0.0 0.0
Interest payments 0.5 0.5 0.5 0.5 0.6 0.7 0.6 0.8 1.0 1.2 1.7
Domestic interest and charges 0.3 0.3 0.3 0.3 0.3 0.5 0.3 0.5 0.7 1.0 1.5
External interest payments 4 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.2 0.2
Other recurrent expenditure 3.7 3.3 3.1 3.1 3.1 3.1 3.0 3.1 3.0 3.0 3.0
Capital expenditure 6.5 6.5 6.5 6.3 7.2 6.8 7.9 7.1 7.5 7.3 6.8
Central treasury 4.9 5.3 5.0 5.0 5.8 5.4 6.0 5.7 6.1 6.1 5.6
External project grants 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6
External project loans 0.9 0.6 0.9 0.7 0.8 0.8 1.3 0.8 0.9 0.6 0.6
Of which: Covid-19 response capital costs 0.0 0.0 0.0 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.0
Overall balance
Including grants -3.0 -2.5 -2.5 -4.0 -2.2 -3.5 -1.9 -1.9 -1.9 -1.9 -1.9
Excluding grants -3.8 -3.8 -3.4 -5.6 -3.0 -4.5 -2.6 -2.8 -2.8 -2.6 -2.7
Financing 4.0 2.7 2.5 4.0 2.2 3.5 1.9 1.9 1.9 1.9 1.9
Net external financing 1.3 1.3 1.2 1.9 1.0 1.0 1.7 0.9 1.0 0.3 -0.4
Gross borrowing 5 1.5 1.5 1.4 2.1 1.3 1.3 2.1 1.3 1.4 0.9 1.0
Project loans 0.9 0.6 0.9 0.7 0.8 0.8 1.3 0.8 0.9 0.6 0.6
Budget Support 0.5 0.9 0.5 1.3 0.5 0.5 0.7 0.5 0.5 0.3 0.3
Of which: Unidentified Covid-19 foreign loan financing 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0
IMF RFI 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amortization -0.2 -0.2 -0.2 -0.2 -0.3 -0.3 -0.4 -0.4 -0.4 -0.6 -1.3
Domestic (net) 2.3 1.3 0.8 2.1 0.7 1.5 -0.2 0.6 1.0 1.6 2.3
Of which: Unidentified domestic financing 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net acquisition of financial assets 6 0.4 0.0 0.5 0.0 0.5 1.1 0.4 0.4 0.0 0.0 0.0
7
Total unidentified financing needed for Covid-19 response 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Float/unidentified financing -1.0 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Memorandum items :
Poverty-reducing expenditure 9.6 9.1 9.1 10.6 9.2 10.1 9.3 9.3 9.4 9.5 9.5
Primary fiscal balance, including grants -2.5 -2.0 -2.0 -3.5 -1.6 -2.8 -1.3 -1.1 -0.9 -0.7 -0.2
Sources: Ethiopian authorities and IMF staff estimates and projections. The Ethiopian fiscal year ends July 7.
1
2
3
Poverty-reducing spending is defined to include total spending on health, education, agriculture, roads, and food security.
4
External interest and amortization are presented after HIPC debt relief from the World Bank and the African Development Bank.
5
6
7

Table 3. Ethiopia: Monetary Survey and Central Bank Accounts, 2017/18–2024/25
2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Act. Act. Program Rev. Program Rev. Program Rev. IMF Staff IMF Staff IMF Staff
(Millions of birr, unless otherwise indicated)

Monetary survey
Net foreign assets 39,376 14,505 26,681 12,227 85,945 72,445 167,722 146,830 240,350 330,709 403,383
Central bank 28,759 3,968 14,246 -418 70,575 56,613 149,215 128,123 220,712 310,080 381,707
Commercial banks 10,617 10,537 12,434 12,645 15,370 15,832 18,507 18,707 19,638 20,629 21,676
Net domestic assets 701,241 872,152 1,019,875 1,113,674 1,161,424 1,192,627 1,328,350 1,326,533 1,486,206 1,711,034 2,053,331
Domestic credit 784,622 978,092 1,125,451 1,166,079 1,292,249 1,275,602 1,463,230 1,410,407 1,583,744 1,874,315 2,248,152
Claims on government (net) 1 102,003 124,191 131,814 165,581 146,358 196,462 142,535 211,515 239,255 292,834 347,818
Claims on nongovernment 682,619 853,901 993,636 1,000,499 1,145,891 1,079,140 1,320,695 1,198,893 1,344,489 1,581,481 1,900,334
Public enterprises 441,297 528,780 608,941 605,430 667,266 660,369 703,893 689,461 703,614 728,745 765,534
Private sector 241,322 325,121 384,695 395,069 478,625 418,771 616,802 509,432 640,875 852,736 1,134,800
Broad money 740,617 886,657 1,046,556 1,125,901 1,247,369 1,265,072 1,496,072 1,473,363 1,726,557 2,041,743 2,456,714
Money 281,155 308,505 354,932 384,923 417,417 429,166 492,390 491,803 566,010 658,647 786,916
Currency outside banks 86,417 92,017 95,956 107,466 106,643 116,163 118,457 126,113 135,819 148,556 171,089
Demand deposits 194,737 216,488 258,977 277,458 310,774 313,003 373,933 365,691 430,191 510,091 615,827
Quasi money 459,462 578,152 691,623 740,978 829,953 835,906 1,003,682 981,559 1,160,547 1,383,096 1,669,797
Savings deposits 382,564 487,544 582,281 623,833 697,601 702,605 842,468 823,898 972,801 1,157,761 1,397,752
Time deposits 76,899 90,608 109,342 117,145 132,352 133,301 161,215 157,661 187,746 225,335 272,045
Central bank
Net foreign assets 28,759 3,968 14,246 -418 70,575 56,613 149,215 128,123 220,712 310,080 381,707
Foreign assets 77,617 98,727 137,531 106,941 238,731 202,743 377,846 327,448 431,252 517,916 592,579
Foreign liabilities 48,858 94,759 123,285 107,359 168,157 146,130 228,631 199,325 210,540 207,836 210,872
Net domestic assets 145,416 196,782 211,597 251,372 184,700 219,405 139,279 176,877 116,168 63,858 33,364
Domestic credit 187,500 224,314 249,764 259,764 260,206 270,206 260,206 270,206 270,206 270,206 270,206
Government (net) 140,207 172,171 191,622 201,622 202,063 212,063 202,063 212,063 212,063 212,063 212,063
Other items (net) -42,083 -27,533 -38,168 -8,393 -75,505 -50,800 -120,926 -93,328 -154,037 -206,348 -236,842
Reserve money 174,175 200,749 225,843 250,954 255,275 276,019 288,494 305,001 336,881 373,937 415,071
Currency outside banks 86,417 92,017 95,956 107,466 106,643 116,163 118,457 126,113 135,819 148,556 171,089
Commercial bank reserves 87,758 108,732 129,887 143,488 148,632 159,856 170,038 178,888 201,062 225,381 243,982
Cash in vault 26,494 29,783 31,681 34,998 31,794 34,195 31,272 32,900 36,978 41,450 44,871
Reserve deposit 61,264 78,949 98,206 108,490 116,838 125,661 138,766 145,988 164,084 183,931 199,111

Monetary survey
Net foreign assets 3.5 -63.2 83.9 -15.7 222.1 492.5 95.2 102.7 63.7 37.6 22.0
Net domestic assets 31.0 24.4 16.9 27.7 13.9 7.1 14.4 11.2 12.0 15.1 20.0
Domestic credit 29.9 24.7 15.1 19.2 14.8 9.4 13.2 10.6 12.3 18.3 19.9
Claims on government (net) 1 19.4 21.8 6.1 33.3 11.0 18.7 -2.6 7.7 13.1 22.4 18.8
Claims on nongovernment 31.7 25.1 16.4 17.2 15.3 7.9 15.3 11.1 12.1 17.6 20.2
Public enterprises 37.3 19.8 15.2 14.5 9.6 9.1 5.5 4.4 2.1 3.6 5.0
Private sector 22.5 34.7 18.3 21.5 24.4 6.0 28.9 21.6 25.8 33.1 33.1
Broad money 29.2 19.7 18.0 27.0 19.2 12.4 19.9 16.5 17.2 18.3 20.3
Money 29.7 9.7 15.0 24.8 17.6 11.5 18.0 14.6 15.1 16.4 19.5
Quasi money 28.8 25.8 19.6 28.2 20.0 12.8 20.9 17.4 18.2 19.2 20.7
Memorandum items:
Base money growth 19.1 15.3 12.5 25.0 13.0 10.0 13.0 10.5 10.5 11.0 11.0
Nominal GDP growth 20.0 22.5 25.8 24.3 20.8 23.2 17.9 19.0 17.3 17.1 16.5
Excess reserve deposit (billions of birr) 22,654 40,813 46,693 53,585 55,819 64,232 65,901 74,643 80,564 85,288 80,846
Percent of deposits 3.5 5.1 4.9 5.3 4.9 5.6 4.8 5.5 5.1 4.5 3.5
Money multiplier (broad money/reserve money) 4.25 4.42 4.63 4.49 4.89 4.58 5.19 4.83 5.13 5.46 5.92
Velocity (GDP/broad money) 2.97 3.04 3.24 2.98 3.28 3.26 3.23 3.33 3.34 3.30 3.20
Currency-deposit ratio 0.132 0.116 0.101 0.106 0.093 0.101 0.086 0.094 0.085 0.078 0.075
Birr per U.S. dollar (end of period) 27.3 28.9 … … … … … … … … …
Nominal GDP (millions of birr) 2,200,121 2,696,223 3,390,554 3,351,742 4,094,284 4,129,760 4,827,955 4,912,625 5,760,650 6,744,198 7,854,872
Sources: NBE and IMF staff estimates and projections.

1
Claims on the general government by the banking system less deposits of the general government with the banking system.

Table 4a. Ethiopia: Balance of Payments, 2017/18–2024/25

(Millions of U.S. dollars)
2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

(Millions of U.S. dollars, unless otherwise indicated)
Current account balance (excl. prospective grant financing) -5,231 -4,934 -5,962 -4,944 -4,810 -4,736 -4,742 -4,761 -4,703 -4,416 -4,144
Excl. other official transfers -6483 -7021 -7336 -6634 -6088 -5893 -5903 -5928 -5978 -5886 -5773
Trade balance -12,417 -12,445 -13,460 -10,912 -14,848 -11,148 -15,876 -11,716 -12,222 -12,691 -13,205
Exports of goods 2,836 2,667 2,937 2,452 3,240 2,817 3,653 3,093 3,392 3,713 4,051
Coffee 839 764 860 855 1,008 1,003 1,124 1,114 1,186 1,254 1,340
Oil seeds 424 388 388 295 412 303 427 314 329 344 360
Gold 100 28 33 24 52 30 83 42 63 96 97
Other 1,473 1,487 1,656 1,279 1,768 1,482 2,018 1,623 1,813 2,019 2,254
Imports of goods -15,253 -15,112 -16,397 -13,364 -18,088 -13,965 -19,529 -14,808 -15,614 -16,404 -17,256
Services (net) 237 39 -234 -42 155 48 471 204 334 506 816
Exports 4,220 4,949 5,647 3,753 6,432 5,249 7,376 6,844 7,790 8,820 9,952
Imports -3,982 -4,910 -5,882 -3,795 -6,277 -5,201 -6,905 -6,640 -7,457 -8,314 -9,136
Income (net) -377 -590 -672 -603 -674 -588 -672 -608 -620 -624 -580
Private transfers (net) 6,075 5,975 7,030 4,922 9,279 5,795 10,174 6,191 6,531 6,923 7,195
Official transfers (net) 1,252 2,087 1,374 1,690 1,278 1,157 1,161 1,168 1,274 1,469 1,629
Capital account balance 5,808 6,178 5,617 2,668 4,832 4,485 4,195 4,340 4,583 5,574 4,834
Foreign direct investment (net, incl. privatization) 3,723 3,015 4,665 1,821 4,495 4,203 4,127 4,259 4,709 5,665 6,091
Other investment (net) 2,084 3,162 952 847 338 283 68 81 -126 -91 -1,256
Federal government 1,655 1,344 1,118 1,514 1,074 1,024 1,061 874 771 585 -465
Disbursements 1,821 1,537 1,331 1,728 1,375 1,325 1,414 1,227 1,184 1,244 1,291
Amortization -165 -193 -213 -213 -301 -301 -353 -353 -413 -659 -1,756
Other public sector 1 324 1,431 -166 -667 -736 -741 -993 -793 -898 -677 -792
Disbursements 1,689 2,767 1,078 577 776 771 444 644 530 632 614
Amortization -1,365 -1,336 -1,244 -1,244 -1,512 -1,512 -1,437 -1,437 -1,428 -1,308 -1,405
SOEs (incl EAL) -990 -1,211 -994 -994 -1,087 -1,087 -962 -962 -953 -1,083 -1,305
NBE -375 -125 -250 -250 -425 -425 -475 -475 -475 -225 -100
Private sector borrowing (net) 251 264 0 0 0 0 0 0 0 0 0
Other (net) -145 122 0 0 0 0 0 0 0 0 0
Errors and omissions -778 -1,185 0 0 0 0 0 0 0 0 0
Overall balance -202 58 -346 -2,275 22 -250 -547 -420 -121 1,157 840
Excl. residual financing gap 2 … … -1,919 -4,250 -2,137 -3,216 -3,298 -2,976 -1,865 980 796
Financing 202 -58 -30 815 -831 -890 -790 -718 -1,125 -1,157 -840
Central bank (net; increase –) -17 -83 -30 815 -831 -890 -790 -718 -1,125 -1,157 -840
Reserves (increase –) 350 -568 -617 332 -1,630 -1,585 -1,780 -1,712 -1,624 -1,147 -813
Of which: Prospective donor financing … … -220 -815 -175 -500 -700 -500 -700 0 0
Of which: grants … … … -408 … -250 … -250 -250 0 0
Debt service reprofiling … … -156 -218 -634 -634 -637 -637 -546 -178 -43
first phase of reprofiling -156 -218 -479 -479 -514 -514 -437 -114 16
second phase of reprofiling 0 0 -155 -155 -124 -124 -108 -64 -60
Exceptional financing (IMF CCR Trust debt relief) … … … -11 … -7 … -1 0 0 0
Liabilities (increase +) -367 485 586 482 799 695 990 994 499 -10 -26
IMF credit (net) -52 -52 586 482 799 695 990 994 499 -10 -26
IMF (Rapid Financing Instrument) … … … 415 … … … … … … …
Commercial banks (net; increase –) 219 25 0 0 0 0 0 0 0 0 0

Memorandum items :
Exports of goods -2.5 -6.0 10.2 -8.0 10.3 14.9 12.7 9.8 9.7 9.5 9.1
Imports of goods -3.5 -0.9 8.5 -11.6 10.3 4.5 8.0 6.0 5.4 5.1 5.2
Services exports 26.7 17.3 14.2 -24.2 13.9 39.8 14.7 30.4 13.8 13.2 12.8
Services imports 17.4 23.3 20.0 -22.7 6.7 37.0 10.0 27.7 12.3 11.5 9.9
Private transfers 10.7 -1.6 17.7 -17.6 32.0 17.7 9.7 6.8 5.5 6.0 3.9
Exports of goods and services (percent of GDP) 8.4 7.9 7.9 5.8 9.2 7.6 10.8 9.6 10.2 10.3 10.3
Imports of goods and services (percent of GDP) -22.8 -20.8 -20.5 -16.0 -23.3 -18.1 -25.8 -20.7 -21.1 -20.2 -19.5
Trade balance (percent of GDP) -14.7 -12.9 -12.4 -10.2 -14.2 -10.5 -15.5 -11.3 -11.2 -10.4 -9.8
Private transfers (net, percent of GDP) 7.2 6.2 6.5 4.6 8.9 5.5 9.9 6.0 6.0 5.7 5.3
Gross official reserves (millions U.S. dollars) 2,847 3,415 4,031 3,082 5,661 4,668 7,441 6,380 8,004 9,151 9,964
(Months of following year's imports of goods and services) 1.7 2.4 2.0 1.9 2.6 2.6 3.2 3.3 3.9 4.2 4.2
(Months of imports – authorities' definition)3 2.3 3.1 2.4 2.5 3.1 3.4 3.8 4.3 5.1 5.4 5.5

1
Includes net borrowing by state-owned enterprises and NBE time deposits.
2
In 2023/24 and 2024/25, savings from debt reprofiling are shown in the residual financing gap for completeness.
3
The NBE definition for import coverage excludes food-aid and franco-valuta imports.

Table 4b. Ethiopia: Balance of Payments, 2017/18–2024/25

(Percent of GDP)
2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

(Percent of GDP, unless otherwise indicated)
Current account balance (excl. prospective grant financing) -6.2 -5.1 -5.5 -4.6 -4.6 -4.5 -4.6 -4.6 -4.3 -3.6 -3.1
Excl. other official transfers -7.7 -7.3 -6.7 -6.2 -5.8 -5.6 -5.8 -5.7 -5.5 -4.8 -4.3
Trade balance -14.7 -12.9 -12.4 -10.2 -14.2 -10.5 -15.5 -11.3 -11.2 -10.4 -9.8
Exports of goods 3.4 2.8 2.7 2.3 3.1 2.7 3.6 3.0 3.1 3.0 3.0
Coffee 1.0 0.8 0.8 0.8 1.0 0.9 1.1 1.1 1.1 1.0 1.0
Oil seeds 0.5 0.4 0.4 0.3 0.4 0.3 0.4 0.3 0.3 0.3 0.3
Gold 0.1 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.1 0.1 0.1
Other 1.7 1.5 1.5 1.2 1.7 1.4 2.0 1.6 1.7 1.7 1.7
Imports of goods -18.1 -15.7 -15.1 -12.5 -17.3 -13.2 -19.1 -14.3 -14.3 -13.4 -12.7
Services (net) 0.3 0.0 -0.2 0.0 0.1 0.0 0.5 0.2 0.3 0.4 0.6
Exports 5.0 5.1 5.2 3.5 6.2 5.0 7.2 6.6 7.1 7.2 7.4
Imports -4.7 -5.1 -5.4 -3.5 -6.0 -4.9 -6.7 -6.4 -6.8 -6.8 -6.8
Income (net) -0.4 -0.6 -0.6 -0.6 -0.6 -0.6 -0.7 -0.6 -0.6 -0.5 -0.4
Private transfers (net) 7.2 6.2 6.5 4.6 8.9 5.5 9.9 6.0 6.0 5.7 5.3
Official transfers (net) 1.5 2.2 1.3 1.6 1.2 1.1 1.1 1.1 1.2 1.2 1.2
Capital account balance 6.9 6.4 5.2 2.5 4.6 4.2 4.1 4.2 4.2 4.6 3.6
Foreign direct investment (net, incl. privatization) 4.4 3.1 4.3 1.7 4.3 4.0 4.0 4.1 4.3 4.6 4.5
Other investment (net) 2.5 3.3 0.9 0.8 0.3 0.3 0.1 0.1 -0.1 -0.1 -0.9
Federal government 2.0 1.4 1.0 1.4 1.0 1.0 1.0 0.8 0.7 0.5 -0.3
Disbursements 2.2 1.6 1.2 1.6 1.3 1.3 1.4 1.2 1.1 1.0 1.0
Amortization -0.2 -0.2 -0.2 -0.2 -0.3 -0.3 -0.3 -0.3 -0.4 -0.5 -1.3
1
Other public sector 0.4 1.5 -0.2 -0.6 -0.7 -0.7 -1.0 -0.8 -0.8 -0.6 -0.6
Disbursements 1.8 2.6 1.0 0.5 0.8 0.7 0.4 0.6 0.4 0.5 0.4
Amortization -1.4 -1.2 -1.2 -1.2 -1.5 -1.5 -1.3 -1.3 -1.2 -1.0 -0.9
SOEs (incl EAL) -1.0 -1.1 -1.0 -0.9 -1.1 -1.0 -0.8 -0.9 -0.8 -0.8 -0.9
NBE -0.4 -0.1 -0.2 -0.2 -0.4 -0.4 -0.4 -0.4 -0.4 -0.2 -0.1
Private sector borrowing (net) 0.3 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other (net) -0.2 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Errors and omissions -0.9 -1.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Overall balance -0.2 0.1 -0.3 -2.1 0.0 -0.2 -0.5 -0.4 -0.1 0.9 0.6
Excl. residual financing gap 2 … … -1.8 -4.0 -2.0 -3.0 -3.2 -2.9 -1.7 0.8 0.6
Financing 0.2 -0.1 0.0 0.8 -0.8 -0.8 -0.8 -0.7 -1.0 -0.9 -0.6
Central bank (net; increase –) 0.0 -0.1 0.0 0.8 -0.8 -0.8 -0.8 -0.7 -1.0 -0.9 -0.6
Reserves (increase –) 0.4 -0.6 -0.6 0.3 -1.6 -1.5 -1.7 -1.7 -1.5 -0.9 -0.6
Of which: Prospective donor financing … … -0.2 -0.8 -0.2 -0.5 -0.7 -0.5 -0.6 0.0 0.0
Of which: grants … … … -0.4 … -0.2 … -0.2 -0.2 0.0 0.0
Debt service reprofiling … … -0.1 -0.2 -0.6 -0.6 -0.6 -0.6 -0.5 -0.1 0.0
first phase of reprofiling … … -0.1 -0.2 -0.5 -0.5 -0.5 -0.5 -0.4 -0.1 0.0
second phase of reprofiling … … 0.0 0.0 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 0.0
Exceptional financing (IMF CCR Trust debt relief) … … … 0.0 … 0.0 … 0.0 0.0 0.0 0.0
Liabilities (increase +) -0.4 0.5 0.5 0.5 0.8 0.7 1.0 1.0 0.5 0.0 0.0
IMF credit (net) -0.1 -0.1 0.5 0.5 0.8 0.7 1.0 1.0 0.5 0.0 0.0
IMF (Rapid Financing Instrument) … … … 0.4 … … … … … … …
Commercial banks (net; increase –) 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Gross official reserves 3.4 3.6 3.7 2.9 5.4 4.4 7.3 6.2 7.3 7.5 7.4

1
Includes net borrowing by state-owned enterprises and NBE time deposits
2
In 2023/24 and 2024/25, savings from debt reprofiling are shown in the residual financing gap for completeness.

Table 5. Ethiopia: Debt Service to the Fund Eligible for Debt Relief, May 2020–April 2022
(In SDR)
Cumulative
Original Eligible for Debt relief as
debt Relief as
Category disbursement Due date Total amount CCRT debt percent of
percent of
date relief 1/ quota 1/
quota 1/
GRA charges 24-Dec-19 1-May-20 295,792 295,792 0.10 0.10

PRGT repayment (ESF-HAC) 22-Nov-10 22-May-20 4,011,000 4,011,000 1.33 1.43
PRGT repayment (ESF-HAC) 25-Jun-10 25-Jun-20 4,011,000 4,011,000 1.33 2.77
GRA charges 24-Dec-19 1-Aug-20 239,002 239,002 0.08 2.85
GRA charges 24-Dec-19 1-Nov-20 239,002 239,002 0.08 2.93
PRGT repayment (ESF-HAC) 22-Nov-10 20-Nov-20 4,011,000 4,011,000 1.33 4.26
GRA charges 24-Dec-19 1-Feb-21 239,223 239,223 0.08 4.34
GRA charges 24-Dec-19 1-May-21 231,842 231,842 0.08 4.42
GRA charges 24-Dec-19 1-Aug-21 239,658 239,658 0.08 4.50
GRA charges 24-Dec-19 1-Nov-21 239,658 239,658 0.08 4.58
GRA charges 24-Dec-19 1-Feb-22 239,658 239,658 0.08 4.65
Source: IMF, Finance Department.

1/ Effective from the date of approval by the Executive Board of Ethiopia's request for debt relief under the CCR Trust. The first tranche
is applicable to eligible debt service up to October 13, 2020. The second tranche is contingent on adequate financing for the Trust.

Table 6. Ethiopia: Financial Stability Indicators, 2012/13–2018/19
Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19
Capital adequacy
Capital to Risk-Weighted Assets 13.4 17.9 17.4 16.4 14.7 21.8 22.3 19.2
Regulatory Capital Tier I to Risk-Weighted Assets 13.4 17.9 17.4 16.4 14.7 21.8 22.3 19.2
Capital to Assets 6.7 7.2 7.0 6.6 6.5 8.8 8.3 7.8
Asset quality
NPLs to Total Loans 1.4 2.5 2.0 2.1 2.9 2.6 3.0 2.3
NPLs Net of Provisions to Capital -5.6 -0.5 -2.3 -1.1 2.9 2.1 0.8 n.a.
Earning and profitability

Return on Assets 3.9 3.2 3.1 3.1 2.7 1.9 1.7 1.9
Return on Equity1 55.7 48.0 44.9 47.4 43.0 29.7 20.2 23.8
Gross Interest Income to Total Income 2 56.8 64.9 62.8 67.9 73.9 74.9 84.2 79.6
Interest Margin to Gross Income 39.1 45.1 42.3 46.1 49.9 48.4 34.4 n.a.
Non-interest Expenses to Gross Income 3 22.9 26.9 32.7 32.1 33.1 34.2 36.2 n.a.
Personnel Expenses to Non-interest Expenses 42.2 43.3 43.7 47.4 48.2 51.3 55.4 n.a.
Liquidity
Liquid Assets to Total Assets 20.6 23.2 16.2 11.7 11.9 12.5 12.4 14.5
Liquid Assets to Short-term liabilities 26.7 30.1 20.8 14.8 15.6 17.7 16.5 16.9
Total Loans and Bonds to Total Deposits 4 94.0 93.9 100.6 105.0 107.2 106.5 101.0 108.2
Sources: National Bank of Ethiopia, provided to IMF staff during the mission.
1
The average capital used to calculate the ROE execludes retained earning and profit & loss.
2
Total income comprises gross interest income and gross non-interest income.
3
Gross income comprises net interest income and total non-interest income.
4
Customer deposit includes time, current and saving deposits.

Table 7. Ethiopia: Gross External Financing Needs

(Millions of U.S. dollars)
2019/20 2020/21 2021/22 2022/23 2023/24

Program Rev. Program Rev. Program Rev. IMF Staff IMF Staff
Proj. Proj. Proj. Proj. Proj.
External financing requirement 9,442 7,791 9,537 9,297 9,473 9,431 9,442 9,217
Current account deficit, excl. official transfers 7,336 6,634 6,088 5,893 5,903 5,928 5,978 5,886
Federal government amortization 213 213 301 301 353 353 413 659
Other public sector amortization 1/ 1,244 1,244 1,512 1,512 1,437 1,437 1,428 1,308
Repayments to Fund 32 32 6 6 0 0 0 217
Change in gross reserves (+ = increase) 617 -332 1,630 1,585 1,780 1,712 1,624 1,147
Change in commercial bank reserves (+ = increase) 0 0 0 0 0 0 0 0
External financing sources 6,495 4,126 6,099 5,174 5,562 5,708 6,423 7,541
Foreign direct investment, excl. privatization 4,086 1,821 3,949 3,078 3,704 3,836 4,709 5,665
External loans to Federal government 1,331 1,728 1,375 1,325 1,414 1,227 1,184 1,244
Other public sector external borrowing 1,078 577 776 771 444 644 530 632
Other (net) 0 0 0 0 0 0 0 0
Financing gap (+ = need for financing) 2,947 3,665 3,437 4,123 3,911 3,723 3,019 1,676
Expected financing
Official transfers 1,374 1,690 1,278 1,157 1,161 1,168 1,274 1,469
Residual gap 1,573 1,975 2,159 2,966 2,750 2,556 1,745 207
IMF 619 942 804 707 990 995 499 0
ECF-EFF arrangements 619 515 804 700 990 994 499 0
RFI (budget support) … 415 … 0 … 0 0 0
Exceptional financing (CCR Trust debt relief) 2/ … 11 … 7 … 1 0 0
Privatization proceeds 579 0 546 1,125 423 423 0 0
Debt service reprofiling 3/ 4/ 156 218 634 634 637 637 546 178
First phase of reprofiling 156 218 479 479 514 514 437 114
Second phase of reprofiling 0 0 155 155 124 124 108 64
Prospective donor financing 220 815 175 500 700 500 700 0
Identified 220 0 175 500 … 0 0 0
Budget support 5/ … 0 … 500 … 0 0 0
Expected/unidentifed … 815 … 0 … 500 700 0
Source: IMF staff estimates.

1/ Includes guaranteed and non-guaranteed SOE loans and long-term debt of National Bank of Ethiopia (NBE).
2/ Currently available on debt service to the Fund falling due until October 13, 2020. Subsequent relief is contingent on availability of financing for the Trust.
3/ Represents reprofiling that could yield moderate risk of external debt distress rating during the ECF-EFF arrangements. Includes data corrections for
the first phase. Specific and credible commitments for the second phase of debt reprofiling are expected by the first review of the arrangements.
4/ In 2023/24, saving from debt reprofiling, reflected above the line in the balance of payments (BoP), is shown for completeness of information.
5/ In 2019/20, the previously identified donor support has been moved above the line following its approval in April 2020. In 2020/21, reflects staff
expectation on financing from the World Bank Development Policy Operation (previously included above the line in BoP).

Table 8a. Ethiopia: Approved Schedule of Disbursements/Purchases

Under the ECF and EFF Arrangements
Amount (millions of SDR) Percent of quota 1/

Date of availability Condition for disbursement Percent share
Total ECF EFF Total ECF EFF
of total
December 20, 2019 Executive Board approval of the ECF/EFF 223.85 10.6 133.64 90.21 74.44 44.44 30.00
arrangements
April 15, 2020 Observance of continuous performance criteria (PCs) and PCs 223.85 10.6 133.64 90.21 74.44 44.44 30.00
for end-December 2019 and completion of the first review
October 15, 2020 Observance of continuous PCs and PCs for end-June 2020 223.85 10.6 133.64 90.21 74.44 44.44 30.00
and completion of the second review
April 15, 2021 Observance of continuous PCs and PCs for end-December 2020 358.33 17.0 200.47 157.87 119.17 66.67 52.50
and completion of the third review
and completion of the fourth review
April 15, 2022 Observance of continuous PCs and PCs for end-December 2021 358.33 17.0 200.47 157.87 119.17 66.67 52.50
and completion of the fifth review
and completion of the sixth review
Total 2,104.90 100.00 1,202.80 902.10 700.00 400.00 300.00
Source: IMF staff caculations.

1/ Ethiopia's quota is SDR 300.7 million.

Table 8b. Ethiopia: Proposed Revised Schedule of Disbursements/Purchases

Under the ECF and EFF Arrangements
Amount (millions of SDR) Percent of quota 1/

Date of availability Condition for disbursement Percent share
Total ECF EFF Total ECF EFF
of total
December 20, 2019 Executive Board approval of the ECF/EFF 223.854 11.5 133.644 90.210 74.44 44.44 30.00
arrangements
April 15, 2020 Observance of continuous performance criteria (PCs) and PCs 148.679 7.6 133.644 15.035 49.44 44.44 5.00
for end-December 2019 and completion of the first review
November 15, 2020 Observance of continuous PCs and PCs for end-June 2020 148.679 7.6 133.644 15.035 49.44 44.44 5.00
and completion of the second review
May 15, 2021 Observance of continuous PCs and PCs for end-December 2020 358.335 18.3 200.467 157.868 119.17 66.67 52.50
and completion of the third review
and completion of the fourth review
May 15, 2022 Observance of continuous PCs and PCs for end-December 2021 358.335 18.3 200.467 157.868 119.17 66.67 52.50
and completion of the fifth review
and completion of the sixth review
Total 1,954.550 100.00 1,202.800 751.750 650.00 400.00 250.00
Source: IMF staff caculations.

1/ Ethiopia's quota is SDR 300.7 million.

Table 9. Ethiopia: Capacity to Repay to the Fund, 2019/20–2034/35 1/
2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 2031/32 2032/33 2033/34 2034/35
Fund obligations based on existing credit

(In millions of SDR)
Principal 23.4 4.0 0.0 0.0 7.5 15.0 41.8 41.8 55.1 28.4 34.3 0.0 0.0 0.0 0.0 0.0
Charges and interest 0.3 1.0 1.0 1.0 1.0 0.9 0.7 0.5 0.4 0.2 0.1 0.0 0.0 0.0 0.0 0.0
Fund obligations based on existing and prospective credit 2/

(In millions of SDR) 23.7 8.4 9.2 18.6 177.1 183.8 138.0 261.5 364.6 356.6 361.2 281.9 166.6 33.3 0.0 0.0
Principal 23.4 4.0 0.0 0.0 157.9 169.1 126.3 252.5 359.2 352.5 358.3 280.2 166.0 33.2 0.0 0.0
ECF 23.4 4.0 0.0 0.0 0.0 0.0 66.8 140.3 233.9 227.2 240.6 173.7 100.2 20.1 0.0 0.0
EFF 0.0 0.0 0.0 0.0 7.5 18.8 59.5 112.1 125.3 125.3 117.8 106.5 65.8 13.2 0.0 0.0
RFI 0.0 0.0 0.0 0.0 150.4 150.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Charges and interest 0.3 4.4 9.2 18.6 19.2 14.6 11.7 9.0 5.5 4.1 2.8 1.6 0.6 0.1 0.0 0.0
Total obligations based on existing and prospective credit 2/

In millions of SDRs 23.7 8.4 9.2 18.6 177.1 183.8 138.0 261.5 364.6 356.6 361.2 281.9 166.6 33.3 0.0 0.0
In millions of U.S. dollars 32.7 11.5 12.8 25.9 247.2 257.2 193.9 367.4 512.3 501.0 507.4 396.0 234.1 46.7 0.0 0.0
In percent of general government revenue 0.3 0.1 0.1 0.2 1.4 1.3 0.9 1.5 2.0 1.7 1.6 1.1 0.6 0.1 0.0 0.0
In percent of exports of goods and services 0.5 0.1 0.1 0.2 2.0 1.8 1.3 2.3 2.9 2.7 2.5 1.9 1.0 0.2 0.0 0.0
In percent of total external debt service 1.6 0.6 0.7 1.3 10.0 6.8 7.1 13.3 16.5 15.0 15.2 16.7 10.3 2.5 0.0 0.0
In percent of GDP 0.0 0.0 0.0 0.0 0.2 0.2 0.1 0.2 0.3 0.3 0.2 0.2 0.1 0.0 0.0 0.0
In percent of quota 7.9 2.8 3.1 6.2 58.9 61.1 45.9 87.0 121.3 118.6 120.1 93.7 55.4 11.1 0.0 0.0
Outstanding Fund credit (end of period) 0.0 3.4 8.3 17.7 18.3 13.8 11.0 8.5 5.1 3.9 2.8 1.6 0.6 0.1 0.0 0.0
In millions of SDRs 677.2 1,180.2 1,896.9 2,255.3 2,097.4 1,928.2 1,801.9 1,549.4 1,190.3 837.8 479.5 199.2 33.2 0.0 0.0 0.0
In millions of U.S. dollars 935.8 1,630.1 2,632.0 3,140.0 2,928.1 2,699.1 2,531.6 2,176.9 1,672.3 1,177.0 673.6 279.9 46.6 0.0 0.0 0.0
In percent of general government revenue 9.0 14.1 20.5 20.9 17.0 14.2 12.1 9.4 6.5 4.2 2.2 0.8 0.1 0.0 0.0 0.0
In percent of exports of goods and services 15.1 20.2 26.5 28.1 23.4 19.3 16.8 13.4 9.6 6.3 3.4 1.3 0.2 0.0 0.0 0.0
In percent of total external debt 3.0 4.9 7.6 8.8 8.2 7.9 7.4 6.4 5.0 3.5 2.0 0.8 0.1 0.0 0.0 0.0
In percent of gross international reserves 30.4 34.9 41.3 39.2 32.0 27.1 21.8 16.6 11.8 7.9 4.2 1.6 0.3 0.0 0.0 0.0
In percent of GDP 0.9 1.5 2.5 2.9 2.4 2.0 1.7 1.3 0.9 0.6 0.3 0.1 0.0 0.0 0.0 0.0

In percent of quota 225.2 392.5 630.8 750.0 697.5 641.3 599.2 515.3 395.8 278.6 159.4 66.2 11.0 0.0 0.0 0.0
ECF 90.2 200.0 333.3 400.0 400.0 400.0 377.8 331.1 253.3 177.8 97.8 40.0 6.7 0.0 0.0 0.0
EFF 35.0 92.5 197.5 250.0 247.5 241.3 221.5 184.2 142.5 100.8 61.7 26.3 4.4 0.0 0.0 0.0
RFI 100.0 100.0 100.0 100.0 50.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
INTERNATIONAL MONETARY FUND
Net use of Fund credit (millions of SDR) 649.8 503.0 716.7 358.3 -157.9 -169.1 -126.3 -252.5 -359.2 -352.5 -358.3 -280.2 -166.0 -33.2 0.0 0.0
Disbursements 673.2 507.0 716.7 358.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Repayments and repurchases 23.4 4.0 0.0 0.0 157.9 169.1 126.3 252.5 359.2 352.5 358.3 280.2 166.0 33.2 0.0 0.0
Debt relief under the CCRT 3/ 8.3 5.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Memorandum items:
General government revenue (billions of birr) 360.1 503.6 659.9 808.3 974.4 1,131.6 1,308.8 1,520.9 1,767.9 2,040.5 2,350.6 2,709.0 3,111.1 3,571.3 4,081.3 4,658.7
Exports of goods and services (billions of U.S. dollars) 6.2 8.1 9.9 11.2 12.5 14.0 15.1 16.2 17.5 18.7 20.0 21.4 22.8 24.4 26.0 27.5
Gross international reserves (billions of U.S. dollars) 3.1 4.7 6.4 8.0 9.2 10.0 11.6 13.1 14.2 14.9 16.1 17.2 18.1 18.8 19.9 21.3
In months of prospective imports 1.9 2.6 3.3 3.9 4.2 4.2 4.6 4.8 4.9 4.8 4.8 4.8 4.7 4.6 4.6 4.7
Nominal GDP (billions of U.S. dollars) 107.1 105.7 103.7 109.5 122.1 135.3 148.8 163.9 180.5 197.3 215.3 234.9 255.3 277.3 300.9 325.9
SDR per U.S. dollar (period average) 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7
Quota (millions of SDR) 300.7 300.7 300.7 300.7 300.7 300.7 300.7 300.7 300.7 300.7 300.7 300.7 300.7 300.7 300.7 300.7
Source: IMF staff estimates.

1/ Year ending in June.
2/ Including the proposed disbursements under the new ECF/EFF.
3/ On March 26, 2020, the Executive Board approved changes to the Catastrophe Containtment and Relief Trust (CCRT) to enable Fund to provide relief on eligible debt service for its poorest and most vulnerable members for a
period of up to two years from April 14, 2020 or the date of a country's request for relief under this trust, whichever is later. The relief will be provided in two tranches. The first tranche is applicable to eligible debt service up to
October 13, 2020. The second tranche is contingent on availablility of funding for the trust. Staff's macroframework includes the amounts expected, but not yet guaranteed, under the second tranche.
25
Appendix I. Letter of Intent
April 24, 2020

Ms. Kristalina Georgieva
Managing Director
International Monetary Fund
700 19th St, NW
Washington, DC 20431
USA
Dear Managing Director:
Before the COVID-19 pandemic hit Ethiopia, our economy was healthy, and we had made good
progress under the ECF-EFF arrangements with the IMF. When the shock materialized, the impact
was felt well before our country’s first case was confirmed on March 13: export industries, including
air travel, were under pressure, and demand for tourism and hospitality services plummeted. Our
preliminary estimates suggest that projected growth rates could decline by around 3 percentage
points during 2019/20. The impact for 2020/21 could be of a similar order of magnitude but would
depend on how the pandemic evolves and corrective measures taken. While the impact on our
largely rural and subsistence based agricultural sector should be limited, secondary and tertiary
activities—especially tourism and hospitality services—are likely to be hit across the board. The risks
to these projections are slanted heavily to the downside.
It is difficult at this stage to fully and accurately assess the impact of the pandemic on the budget.
However, expenditures to directly fight COVID-19 in Ethiopia, as well as to support the economy and
provide for affected households, are currently expected to entail additional spending of around
1.6 percent of GDP. These costs could rise if the crisis deepens. Specific measures include emergency
food distribution ($635 million, 0.6 percent of GDP), health sector support ($430 million, 0.4 percent
of GDP) and emergency shelter and non-food items ($282 million, 0.3 percent of GDP), with the
remainder allocated to agricultural sector support, nutrition, the protection of vulnerable groups,
additional education outlays, logistics, refugee support, and site management support.
The policies we are undertaking to address the crisis will make it necessary to delay our ambitious
multi-year fiscal consolidation plan for the general government. We project that the fiscal deficit will
rise by some 1.5 percent of GDP in 2019/20 and by 1.3 percent of GDP in 2020/21 relative to IMF
staff projections at the time of ECF-EFF approval in December. We would like to highlight, however,
that we see the spending increases as strictly temporary and remain committed to the multi-year
fiscal adjustment plan under the ECF-EFF arrangements. In this context, and to partially offset the
impact of the general government deficit increase on overall public sector debt, we have further
constrained spending plans for SOEs that are not engaged in implementing emergency response
measures to the pandemic for this year and next.
We commit to a transparent and accountable delivery of policy measures to respond to COVID-19

health and economic challenges and to effectively mitigate corruption concerns. Targeted measures

will include (i) publishing all public contracts related to the COVID-19 response, using open and
competitive bidding and strictly limiting the use of emergency non-competitive processes to the
extent possible; (ii) publishing online eligibility criteria and budgeted limits for the various relief
measures as soon as they are adopted; (iii) channeling donor funding through the budget with full
transparency on its utilization; (iv) frequent monitoring of spending on crisis mitigation measures at
the end of each month for the duration of the crisis; and (v) making information on how emergency
relief funds are spent available to internal auditors and, as soon as practicable, to independent
auditors to conduct ex-post audits over COVID-19 related spending and revenue collection.
We also remain committed to strengthening debt sustainability. The first phase of reprofiling we
committed to under the ECF-EFF arrangements is expected to be finalized in April. The total
cashflow relief under this phase is projected to amount to US$1.65 billion until FY 2022/23. Under
the current global context, progress on the second phase is uncertain, but we continue to work
toward getting specific and credible financing assurances ahead of the first review.
The National Bank of Ethiopia (NBE) has already undertaken important steps to maintain financial
stability during the crisis. This includes redeeming NBE bills held by private banks and providing
access to its standing liquidity facility to ensure that adequate liquidity buffers are being maintained.
The NBE will also provide additional liquidity to the Commercial Bank of Ethiopia as the bank’s
already tight structural liquidity conditions are being exacerbated by the COVID-19 economic
shocks. While it is difficult to predict how the COVID-19 shock will affect the inflation trajectory, we
will stand ready to adjust our policy stance as needed to ensure that the single-digit inflation
objective can be achieved as anticipated at ECF-EFF approval.
We also remain committed to the policies under the ECF-EFF arrangements with the IMF and plan to
continue implementing the reforms as conditions permit. This will include gradually ending financial
repression through increased T-bill issuances, ceasing new DBE financing from the NBE and
gradually reducing direct NBE advances to the government. It also implies continuing to work
toward a market clearing exchange rate by steadily reducing overvaluation, strengthening reserve
accumulation and implementing the FX roadmap to be finalized in April. In addition, we will
continue working toward a solution for SOE debts, where these companies are not able to service
their debts themselves, and to strengthen bank balance sheets. Finally, we remain committed to
reforms to strengthen governance under the ECF-EFF arrangements, including through publishing
the consolidated financial performance report covering all state-owned enterprises supervised by
the Public Enterprise Holding and Administration Agency (PEHAA), and by carrying out a Public
Investment Management Assessment in cooperation with the IMF. In the context of the ongoing
safeguards assessment, we remain committed to following up on IMF staff’s recommendations. We
will also provide IMF staff with access to the central bank’s most recently completed external audit
reports and authorize its external auditors to hold discussions with Fund staff.
We also commit not to introduce or intensify exchange and trade restrictions and other measures or
policies that would compound these difficulties. We have engaged in discussions with some foreign
investors regarding potential FX convertibility guarantees that could catalyze foreign investment and
reduce FX shortages in the short-term. We underscore that this decision does not undermine in any

way our commitment to moving decisively to achieving a market-clearing exchange rate. We also
commit to introducing the necessary safeguards in these contracts, in consultation with IMF staff, to
avoid contingent claims on foreign exchange during the ECF-EFF arrangements as well as any risk
that such contracts could constitute exchange restrictions or intensifications thereof.
Our external accounts are expected to weaken as a result of COVID-19. The projected drop in import
demand, and the strengthening in our terms of trade, are expected to more than offset weaker
export demand and remittances in our current account this fiscal year. However, paired with the
expected large decline in foreign direct investment, the overall balance of payments is set to weaken
relative to projections at the time of ECF-EFF approval, thus opening up a sizable financing gap. We
intend to fill this gap by reducing reserve accumulation and seeking assistance from our
development partners.
Against this backdrop and given the urgent balance of payments financing need facing our country
due to the pandemic, we request emergency financing from the IMF under the Rapid Financing
Instrument (RFI) of SDR300.7 million, equivalent to 100 percent of our quota. We request that the
funds be disbursed entirely as budget support. In view of this, a memorandum of understanding will
be established between the government and the NBE on their respective responsibilities for
servicing financial obligations to the IMF. The purchase will help fill our expected fiscal financing gap
and strengthen international reserves. IMF involvement in Ethiopia’s response to this emergency will
also likely act as a catalyst for additional financing from other development partners. We also
request a rephasing of access under our ECF-EFF arrangements and a reduction of access under the
EFF arrangement (by SDR 150.35 million, or 50 percent of quota) to accommodate delays in the
completion of the forthcoming review and to comply with the applicable annual access limit policies.
In addition, we request grant assistance under the Catastrophe Containment (CC) window of the
Catastrophe Containment and Relief Trust (CCRT) to cover our debt service to the IMF falling due
from the date of approval of the grant assistance to April 13, 2022. This debt relief will free up
budgetary resources to address public health needs and support economic activity in key sectors
and will also help contain the exceptional balance of payments need resulting from the pandemic.
To further free up resources for our COVID-19 response, we intend to request debt service relief
from official bilateral creditors under the recently announced G20 debt service relief initiative.
We authorize the IMF to publish this Letter and the staff report for the request for the purchase
under the RFI and grant assistance under the Catastrophe Containment (CC) window of the
Catastrophe Containment and Relief Trust (CCRT).
Sincerely yours,
/s/ /s/
________________________ __________________________
H. E. Mr. Ahmed Shide H. E. Dr. Yinager Dessie
Minister of Finance Governor, National Bank of Ethiopia
The Federal Democratic Republic of Ethiopia The Federal Democratic Republic of Ethiopia

REQUESTS FOR PURCHASE UNDER THE RAPID FINANCING
April 24, 2020 INSTRUMENT, DEBT RELIEF UNDER THE CATASTROPHE
FACILITY, AND REDUCTION OF ACCESS UNDER THE
EXTENDED FUND FACILITY ARRANGEMENT—DEBT
SUSTAINABILITY ANALYSIS
Approved By Prepared by the staffs of the International

Zeine Zeidane (AFR), Seán Nolan Monetary Fund (IMF) and the International
(SPR), and Marcello Estevão (IDA) Development Association (IDA)
Ethiopia: Joint Bank––Fund Debt Sustainability Analysis1

Risk of external debt distress High
Risk of overall debt distress High
Granularity in the risk rating Sustainable
Application of judgement None
Macroeconomic projection Near-term growth projections were revised
downward on account of the domestic and
external impact of COVID-19. Exports, in
particular services exports, will contract
significantly in 2019/20.
Financing strategy Urgent balance of payments needs will be covered
by Fund financing, donor support, debt relief, and
reserves draw down. The World Bank recently
approved US$82.6 million for a COVID-19 project
and is exploring modalities for additional support.
Realism tools flagged Growth, exports, fiscal adjustments, and financing
needs have downside risks.
Mechanical risk rating under the external DSA High
Mechanical risk rating under the public DSA High
1
This Debt Sustainability Analysis (DSA) was conducted using the Joint Bank-Fund Debt Sustainability Framework for
Low-Income Countries (LIC-DSF) that was approved in 2017.
Ethiopia’s public and publicly guaranteed debt is deemed sustainable, but downside risks and liquidity
pressures have increased due to high uncertainty surrounding the intensity and duration of the COVID-
19 outbreak and its implications for the economic outlook.1, 1 Ethiopia’s debt vulnerabilities stem from
rising debt servicing needs, an overvalued exchange rate, and a small export base. The authorities have
taken steps to reduce vulnerability by controlling external borrowing, debt service reprofiling, and
committing to move toward market-based exchange rate and FX market liberalization, both of which
should improve FX availability and boost private sector activity and exports. Under the baseline, two
external debt indicators breach their thresholds. As a result, Ethiopia continues to be assessed at “high”
risk of debt distress. The authorities have committed to undertaking additional reprofiling by the first
review under the ECF-EFF arrangements to reduce external debt servicing needs relative to exports, with
an aim of achieving a “moderate” risk of external debt distress rating. However, against the backdrop of
the pandemic, the capacity to absorb shocks has declined indicating liquidity pressures. As such, a larger
or more persistent impact of the COVID-19 shock than presently assumed could threaten debt
sustainability. Steadfast implementation of FX reforms would reduce these pressures over the medium
term and safeguard Ethiopia's capacity to repay the Fund. Monitoring of contingent liabilities, the main
vulnerability of overall public debt, and continued improvement in debt management and reporting are
recommended.
Macroeconomic Outlook. In the context of a rapidly changing global situation due to COVID-19,
the near-term macroeconomic outlook has been revised since the 2019 Article IV DSA. Growth is
revised down to 3.2 percent and to 3.7 percent in 2019/20 and 2020/21, respectively, because of the
expectation that the COVID-19 outbreak, including the related global slowdown, will have a
significant impact on economic activity. The authorities have already put in place social distancing
and other containments measures. Real GDP growth will converge to 8 percent over the medium
term. Against this challenging global backdrop, exports and remittances are projected to contract
significantly, but weak domestic demand and a decline in foreign direct investment will also lead to a
contraction in imports. Improved terms of trade (e.g., higher coffee and lower oil prices) will also help
the trade balance. Exports of services, the main source of Ethiopia’s export earnings, are expected to
be severely impacted by travel restrictions, but a concomitant reduction in services imports will
cushion the impact on the services balance. Thus, the current account deficit is projected to modestly
improve relative to a year ago. In 2020/21, exports are expected to recover on the back of a global
recovery. Over the DSA projection horizon, staff has revised down export growth given changes in
global assumptions, but significant downside risks remain. Inflation is expected to remain elevated in
1
Public debt data includes Ethiopian Airlines, but this information is excluded from the DSA. Ethio-Telecom is
included, in line with the December 2019 DSA, although the authorities view it as meeting the criteria for
exclusion.
1 As reported earlier, Ethiopia owes arrears to Libya, Bulgaria, Russia, and former Yugoslavia, totaling about
US$538 million, which are deemed away under the policy on arrears to official bilateral creditors, as the
underlying Paris Club agreement is adequately representative, and the authorities are making best efforts to
resolve the arrears. Furthermore, there are about US$8.2 million worth of external arrears (principal and
interest payments combined) to commercial creditors, all pre-dating the1990s, from former Czechoslovakia,
India, Italy, and former Yugoslavia. The authorities are continuing to make a good faith effort to reach a
collaborative agreement with these creditors.

2020/21 and will moderate to the central bank’s single-digit objective by late 2021. The fiscal deficit is
now projected to temporarily widen in 2019/20 and 2020/21 as the economic slowdown impacts
revenues, while spending needs increase to respond to the COVID-19 shock.
Financing Strategy. Urgent balance of payments needs have arisen due to the COVID-19 shock,
which are expected to be covered by Fund financing—which includes requests for assistance under
the Rapid Financing Instrument (100 percent of quota or SDR 300.7 million) and for debt relief under
the Catastrophe Containment and Relief Trust (included under exceptional financing in Table 1 and
under debt relief in Table 2)—concessional financing from donors, and lower reserves. Given delays
in the first review discussions under the ECF-EFF arrangements resulting from COVID-19 and to
comply with applicable normal access limits, the authorities have also requested the Fund to rephase
access under the ECF-EFF arrangements and to reduce the second and third EFF purchases, resulting
in a reduction of overall access by 50 percent of quota under the EFF arrangement. Under the ECF-
EFF arrangements, Ethiopia is subject to continuous performance criteria applicable to contracting or
guaranteeing of concessional (a non-zero limit) and non-concessional (a zero limit) external debt.
Financing needs will be revisited during the first review under the ECF-EFF arrangements. The World
Bank recently approved a COVID-19 project for US$82.6 million and is exploring modalities for
additional support.
Realism Tool. The realism tool indicates that the assumed fiscal adjustments could have downside
risks. One of the objectives of the ECF/EFF-supported program is to address vulnerabilities arising
from nonfinancial public sector balance sheets and there are implementation risks. However, the
authorities have demonstrated in recent years that they are aware of external debt vulnerabilities and
have reined in borrowing by public enterprises. On the growth projections, the realism tool implies
upside risks to staff projections in the near term, but these results reflect past high debt-financed
rates of growth that have now become unsustainable, and do not account for the COVID-19 shock.
Given the considerable uncertainty around the impact of COVID-19, staff believes there are downside
risks to growth in the near term.
DSA Baseline and Alternative Scenarios. The DSA baseline includes the first phase of debt
reprofiling under the ECF-EFF arrangements for which firm assurances were received at the time of
the approval of the arrangements in December 2019. This phase of reprofiling is expected to
generate savings of about US$1.65 billion over 2019/20–2022/23. The authorities intend to request
debt service relief under the G20 initiative, but these are not yet included in the DSA baseline,
pending a formal request and clarification on the underlying technical details. Similarly, the second
phase of debt reprofiling under the ECF-EFF arrangements will be included once specific and credible
assurances are received, expected by the first review of the ECF-EFF arrangements.

4
Table 1. Ethiopia: External Debt Sustainability Framework, Baseline Scenario, 2017–39

(In percent of GDP, unless otherwise indicated)
Actual Projections Average 8/

Historical Projections
2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2039
External debt (nominal) 1/ 30.6 34.3 31.1 32.2 34.4 35.8 33.1 29.7 26.0 16.1 10.9 27.3 26.2 Definition of external/domestic debt Residency-based
of which: public and publicly guaranteed (PPG) 28.2 31.6 28.3 29.5 31.3 32.6 29.9 26.7 23.1 14.3 10.1 24.7 23.6
Is there a material difference between the
No
two criteria?
Change in external debt -0.8 3.7 -3.2 1.1 2.2 1.4 -2.7 -3.4 -3.8 -1.3 -0.3
Identified net debt-creating flows -0.5 0.9 -2.2 1.6 -0.9 -2.8 -3.0 -3.4 -3.6 -1.2 -0.4 0.1 -2.0
Non-interest current account deficit 7.3 5.6 4.4 3.7 4.0 4.1 3.9 3.1 2.7 2.8 3.3 5.9 3.3
Deficit in balance of goods and services -31.1 -31.2 -28.7 -21.8 -25.8 -30.3 -31.3 -30.5 -29.8 -26.7 -22.2 -38.7 -28.1
Exports 7.6 8.4 7.9 5.8 7.6 9.6 10.2 10.3 10.3 9.3 7.6
Debt Accumulation
Imports -23.5 -22.8 -20.8 -16.0 -18.1 -20.7 -21.1 -20.2 -19.5 -17.4 -14.5
3.0 60
Net current transfers (negative = inflow) -8.5 -8.7 -8.4 -6.6 -6.8 -7.3 -7.4 -6.9 -6.5 -5.0 -3.6 -10.9 -6.3
of which: official -1.7 -1.5 -2.2 -2.0 -1.3 -1.4 -1.4 -1.2 -1.2 -0.9 -0.8 2.5
Other current account flows (negative = net inflow) 46.9 45.5 41.6 32.0 36.6 41.7 42.6 40.5 39.1 34.5 29.0 55.5 37.6 50
2.0
Net FDI (negative = inflow) -5.1 -4.4 -3.1 -1.7 -4.0 -4.1 -4.3 -4.6 -4.5 -3.6 -3.3 -3.5 -3.9
Endogenous debt dynamics 2/ -2.7 -0.4 -3.5 -0.3 -0.9 -2.8 -2.6 -1.9 -1.8 -0.4 -0.4 1.5 40
Contribution from nominal interest rate 0.7 0.6 0.7 0.6 0.3 0.2 0.1 0.5 0.4 0.6 0.1
Contribution from real GDP growth -2.9 -2.3 -2.7 -0.9 -1.2 -3.0 -2.7 -2.4 -2.1 -1.0 -0.5 1.0
30
Contribution from price and exchange rate changes -0.5 1.4 -1.5 … … … … … … … … 0.5
Residual 3/ -0.3 2.8 -0.9 -0.5 3.1 4.2 0.2 0.0 -0.2 -0.1 0.1 1.6 0.6
of which: exceptional financing -0.1 -0.1 -0.1 1.4 1.6 1.9 1.5 0.1 0.0 -0.2 0.0 0.0 20
-0.5
Sustainability indicators 10
PV of PPG external debt-to-GDP ratio ... ... 19.4 18.6 19.8 21.4 21.1 18.8 15.9 8.6 5.9 -1.0
PV of PPG external debt-to-exports ratio ... ... 244.9 320.7 259.8 223.3 206.4 182.7 153.7 93.1 77.9 -1.5 0
PPG debt service-to-exports ratio 20.3 18.5 24.5 26.3 20.3 15.7 14.0 15.9 23.0 14.0 4.9 2020 2022 2024 2026 2028 2030
PPG debt service-to-revenue ratio 11.0 12.6 16.8 14.2 12.7 11.2 10.2 11.3 16.5 8.9 2.5
Gross external financing need (Million of U.S. dollars) 3366.7 2638.9 3442.3 4107.3 2015.7 1961.4 1587.6 651.2 1311.3 1574.3 2247.2 Debt Accumulation
Grant-equivalent financing (% of GDP)
Key macroeconomic assumptions
Grant element of new borrowing (% right scale)
Real GDP growth (in percent) 10.2 7.7 9.0 3.2 3.7 8.7 8.0 8.0 8.0 6.0 5.0 9.6 6.6
GDP deflator in US dollar terms (change in percent) 1.7 -4.3 4.7 7.9 -4.8 -9.7 -2.2 3.2 2.7 2.9 2.9 2.1 1.0
Effective interest rate (percent) 4/ 2.4 1.9 2.3 2.0 0.8 0.6 0.4 1.6 1.4 3.8 1.0 1.7 1.6 External debt (nominal) 1/
Growth of exports of G&S (US dollar terms, in percent) 2.9 13.1 7.9 -18.5 30.0 23.2 12.5 12.1 11.7 6.9 5.4 8.9 9.8 of which: Private
Growth of imports of G&S (US dollar terms, in percent) -4.8 0.2 4.1 -14.3 11.7 11.9 7.6 7.1 6.8 7.0 6.0 8.6 6.1 40
Grant element of new public sector borrowing (in percent) ... ... ... 39.8 38.4 37.9 42.9 50.8 53.0 52.3 50.2 ... 47.8
Government revenues (excluding grants, in percent of GDP) 14.1 12.3 11.5 10.7 12.2 13.4 14.0 14.4 14.4 14.7 15.3 35
13.7 13.8
Aid flows (in Million of US dollars) 5/ 556.8 686.4 1198.8 3528.8 2398.2 2224.2 2457.3 2045.0 2552.4 2898.8 4812.2
30
Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 2.8 1.9 1.9 1.8 1.3 1.4 1.0 0.8 ... 1.5
Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 60.6 54.8 53.1 59.8 70.4 72.9 69.7 67.3 ... 66.0 25
Nominal GDP (Million of US dollars) 81,788 84,298 96,140 107,120 105,716 103,685 109,513 122,089 135,345 215,299 446,414
Nominal dollar GDP growth 12.1 3.1 14.0 11.4 -1.3 -1.9 5.6 11.5 10.9 9.1 8.1 11.9 7.7 20
15
Memorandum items:
PV of external debt 7/ ... ... 22.2 21.3 22.9 24.7 24.3 21.8 18.8 10.4 6.8 10
In percent of exports ... ... 280.4 367.6 300.1 257.5 237.6 212.4 181.7 112.1 89.0
5
Total external debt service-to-exports ratio 24.9 22.7 28.7 32.0 24.8 19.4 17.7 19.8 26.8 16.7 6.7
PV of PPG external debt (in Million of US dollars) 18651.7 19901.9 20956.1 22193.6 23083.0 22896.0 21523.4 18615.3 26541.1 0
(PVt-PVt-1)/GDPt-1 (in percent) 1.3 1.0 1.2 0.9 -0.2 -1.1 -0.5 0.3 2020 2022 2024 2026 2028 2030
Non-interest current account deficit that stabilizes debt ratio 8.1 2.0 7.6 2.6 1.8 2.7 6.7 6.5 6.5 4.0 3.6
Sources: Country authorities; and staff estimates and projections.
1/ Includes both public and private sector external debt. Presented on fiscal year basis (e.g., 2020 referes to fiscal year ending in June 2020).
2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the
local currency, and α= share of local currency-denominated external debt in total external debt.
3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.
4/ Current-year interest payments divided by previous period debt stock.
5/ Defined as grants, concessional loans, and debt relief.
6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).
7/ Assumes that PV of private sector debt is equivalent to its face value.
8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.
Table 2. Ethiopia: Public Sector Debt Sustainability Framework, Baseline Scenario, 2017–39
(In percent of GDP, unless otherwise indicated)
Actual Projections Average 6/
2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2039 Historical Projections
Public sector debt 1/ 56.5 60.8 56.9 56.6 55.7 53.7 48.5 44.2 40.0 23.9 9.7 49.3 40.5
Definition of external/domestic Residency-
of which: external debt 28.2 31.6 28.3 29.5 31.3 32.6 29.9 26.7 23.1 14.3 10.1 24.7 23.6
debt based
of which: local-currency denominated
Change in public sector debt 2.1 4.3 -3.9 -0.4 -0.8 -2.1 -5.2 -4.3 -4.2 -2.1 -1.5
Is there a material difference
Identified debt-creating flows -1.5 0.2 -4.5 -3.7 -4.1 -4.3 -4.5 -3.6 -3.5 -1.6 -1.2 -3.7 -3.3 No
between the two criteria?
Primary deficit 4.5 4.0 3.3 4.1 2.9 0.3 -0.2 -0.4 -0.8 -1.0 -0.8 2.4 0.0
Revenue and grants 14.7 13.1 12.8 12.3 13.1 14.3 14.9 15.2 15.2 15.2 15.7 15.2 14.6
of which: grants 0.7 0.8 1.2 1.6 0.9 0.9 0.9 0.7 0.8 0.5 0.4 Public sector debt 1/
Primary (noninterest) expenditure 19.2 17.0 16.1 16.4 16.0 14.6 14.7 14.8 14.4 14.2 14.9 17.5 14.6
Automatic debt dynamics -5.4 -3.4 -7.8 -7.8 -5.9 -4.3 -4.3 -3.2 -2.7 -0.6 -0.4 of which: local-currency denominated
Contribution from interest rate/growth differential -16.9 -11.0 4.6 -7.8 -5.9 -4.3 -4.3 -3.2 -2.7 -0.6 -0.4
of which: foreign-currency denominated
of which: contribution from average real interest rate -11.9 -6.9 9.6 -6.0 -3.9 0.2 -0.3 0.4 0.6 0.9 0.1
of which: contribution from real GDP growth -5.0 -4.0 -5.0 -1.8 -2.0 -4.4 -4.0 -3.6 -3.3 -1.5 -0.5 60
Contribution from real exchange rate depreciation 11.5 7.6 -12.5 ... ... ... ... ... ... ... ...
50
Other identified debt-creating flows -0.6 -0.4 0.0 0.0 -1.1 -0.4 0.0 0.0 0.0 0.0 0.0 -0.2 -0.1
Privatization receipts (negative) -0.6 -0.4 0.0 0.0 -1.1 -0.4 0.0 0.0 0.0 0.0 0.0 40
Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30
Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other debt creating or reducing flow (liquid financial asset) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20
Residual 3.7 4.2 0.6 3.3 3.2 2.3 -0.6 -0.7 -0.7 -0.6 -0.3 6.4 0.3 10
Sustainability indicators 0
PV of public debt-to-GDP ratio 2/ ... ... 48.6 47.6 46.4 44.3 40.2 36.7 33.3 18.5 5.7 2020 2022 2024 2026 2028 2030

PV of public debt-to-revenue and grants ratio … … 380.0 386.4 353.5 309.4 269.0 242.3 218.7 121.4 36.4
Debt service-to-revenue and grants ratio 3/ 78.0 93.8 102.1 29.9 39.6 39.3 56.9 55.6 64.1 49.3 1.8
Gross financing need 4/ 15.4 15.8 16.4 7.8 7.0 5.5 8.3 8.0 8.9 6.5 -0.5 of which: held by residents
of which: held by non-residents

Key macroeconomic and fiscal assumptions
60
Real GDP growth (in percent) 10.2 7.7 9.0 3.2 3.7 8.7 8.0 8.0 8.0 6.0 5.0 9.6 6.6
Average nominal interest rate on external debt (in percent) 2.5 1.8 2.3 1.9 0.6 0.4 0.1 1.5 1.2 4.0 0.8 1.6 1.5 50
Average real interest rate on domestic debt (in percent) -2.4 -5.2 -6.7 -12.9 -11.0 -2.6 -1.3 0.9 2.0 3.3 4.6 -7.6 -1.0 40
Real exchange rate depreciation (in percent, + indicates depreciation) 78.7 36.9 -30.8 … ... ... ... ... ... ... ... 16.1 ...
30
Inflation rate (GDP deflator, in percent) 7.9 11.5 12.5 20.4 18.8 9.5 8.5 8.4 7.9 8.1 8.1 12.6 10.4
Growth of real primary spending (deflated by GDP deflator, in percent) 9.8 -4.6 3.1 5.3 1.0 -0.7 8.6 8.6 5.2 7.9 5.2 9.5 5.5 20
Primary deficit that stabilizes the debt-to-GDP ratio 5/ 2.3 -0.4 7.2 4.4 3.7 2.4 4.9 3.9 3.3 1.2 0.7 3.1 3.0 10
PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
0
2020 2022 2024 2026 2028 2030
1/ Coverage of debt: general government, SOEs (excl. Ethiopian airlines), and the central bank . Definition of external debt is Residency-based. Presented on fiscal year basis (e.g., 2020 referes to fiscal year ending in June 2020).
2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections.
3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt.
4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows.
5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question.
6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.
5
Figure 1. Ethiopia: Indicators of Public and Publicly Guaranteed External Debt, Baseline
Scenario, 2020–30
PV of debt-to GDP ratio PV of debt-to-exports ratio

45 450
40 400
35 350
30 300
25 250
20 200
15 150
10 100
5 Most extreme shock: One-time depreciation 50
Most extreme shock: Exports
0 0
2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030
Debt service-to-exports ratio Debt service-to-revenue ratio

45
30
40
35 25
30
20
25
20 15
15
10
10
5 5
Most extreme shock: Exports Most extreme shock: One-time depreciation
0
0
2020 2022 2024 2026 2028 2030
2020 2022 2024 2026 2028 2030
Baseline Historical scenario Most extreme shock 1/ Threshold
Borrowing assumptions on additional financing needs resulting from the

Customization of Default Settings stress tests*
Size Interactions Default User defined
Shares of marginal debt
No No External PPG MLT debt 100%

Tailored Stress Terms of marginal debt
Combined CL Yes Avg. nominal interest rate on new borrowing in USD 0.9% 0.9%
Natural disaster n.a. n.a. USD Discount rate 5.0% 5.0%
Commodity price n.a. n.a. Avg. maturity (incl. grace period) 33 33
Market financing No No Avg. grace period 5 5
Note: "Yes" indicates any change to the size or * Note: All the additional financing needs generated by the shocks under the
interactions of the default settings for the stress tests are assumed to be covered by PPG external MLT debt in the external
stress tests. "n.a." indicates that the stress test DSA. Default terms of marginal debt are based on baseline 10-year projections.
does not apply.

Figure 2. Ethiopia: Indicators of Public Debt, Baseline Scenario, 2020–30

(In percent)
PV of Debt-to-GDP Ratio
60
50
40
30
20
10
Most extreme shock: Combined contingent liabilities
0
2020 2022 2024 2026 2028 2030
PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio

450 80
400 70
350
60
300
50
250
40
200
30
150
20
100
50
Most extreme shock: Combined 10 Most extreme shock: Combined
contingent liabilities contingent liabilities
0 0
2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030
Baseline Most extreme shock 1/

TOTAL public debt benchmark Historical scenario
Borrowing assumptions on additional financing needs resulting from the Default User defined
stress tests*
Shares of marginal debt
External PPG medium and long-term 21% 34%
Domestic medium and long-term 14% 54%
Domestic short-term 65% 12%
Terms of marginal debt
External MLT debt
Avg. nominal interest rate on new borrowing in USD 0.9% 0.9%
Avg. maturity (incl. grace period) 33 33
Avg. grace period 5 5
Domestic MLT debt
Avg. real interest rate on new borrowing 3.5% 3.5%
Avg. maturity (incl. grace period) 10 10
Avg. grace period 3 3
Domestic short-term debt
Avg. real interest rate 1.0% 1.0%
* Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the
shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year
projections.
1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. The stress test with a
one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When
a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off
breach, only that stress test (with a one-off breach) would be presented.

Table 3. Ethiopia: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed
External Debt, Baseline Scenario, 2020–30
(In percent)
Projections 1/
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
PV of debt-to GDP ratio

Baseline 19 20 21 21 19 16 14 13 11 10 9
A. Alternative Scenarios
A1. Key variables at their historical averages in 2020-2030 2/ 19 19 19 19 19 18 19 18 18 18 18
0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A
B. Bound Tests
B1. Real GDP growth 19 20 22 22 19 17 15 13 12 10 9
B2. Primary balance 19 20 22 22 20 17 15 14 12 11 9
B3. Exports 19 21 25 24 22 19 17 15 13 12 10
B4. Other flows 3/ 19 22 25 25 23 19 18 16 14 12 11
B5. Depreciation 19 29 37 36 33 28 25 23 20 18 16
B6. Combination of B1-B5 19 22 26 25 23 19 18 16 14 12 11
C. Tailored Tests
C1. Combined contingent liabilities 19 21 23 23 21 18 16 15 13 12 11
C2. Natural disaster … … … … … … … … … … …
C3. Commodity price … … … … … … … … … … …
C4. Market Financing 19 22 24 24 21 18 16 14 12 11 10
Threshold 40 40 40 40 40 40 40 40 40 40 40
PV of debt-to-exports ratio
Baseline 321 260 223 206 183 154 140 128 116 104 93
0
B. Bound Tests
B1. Real GDP growth 321 260 223 206 183 154 140 128 116 104 93
B3. Exports 321 362 426 394 351 299 276 254 230 208 186
B4. Other flows 3/ 321 285 266 246 219 188 174 160 145 131 117
B5. Depreciation 321 260 267 247 220 189 174 161 146 132 119
C. Tailored Tests
Threshold 180 180 180 180 180 180 180 180 180 180 180

1/ A bold value indicates a breach of the threshold.
2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.
3/ Includes official and private transfers and FDI.

Table 3. Ethiopia: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed
External Debt, Baseline Scenario, 2020–30 (concluded)
(In percent)
Projections 1/
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Debt service-to-exports ratio
Baseline 26.3 20.3 15.7 14.0 15.9 23.0 14.2 13.0 13.7 13.9 14.0
0
B. Bound Tests
B1. Real GDP growth 26 20 16 14 16 23 14 13 14 14 14
B3. Exports 26 27 26 24 27 39 24 23 26 26 26
B4. Other flows 3/ 26 20 16 15 16 24 15 14 16 16 16
B5. Depreciation 26 20 16 15 16 24 15 14 16 16 16
C. Tailored Tests
Threshold 15 15 15 15 15 15 15 15 15 15 15
Debt service-to-revenue ratio

Baseline 14 13 11 10 11 17 10 9 9 9 9
0 14 12 9 8 10 15 9 8 8 8 8
B. Bound Tests
B1. Real GDP growth 14 13 12 11 12 17 10 9 9 9 9
B3. Exports 14 13 11 11 12 17 10 9 10 10 10
B4. Other flows 3/ 14 13 11 11 12 17 10 10 11 10 10
B5. Depreciation 14 18 16 15 17 24 15 13 15 15 15
C. Tailored Tests
Threshold 18 18 18 18 18 18 18 18 18 18 18

1/ A bold value indicates a breach of the threshold.
2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Table 4. Ethiopia: Sensitivity Analysis for Key Indicators of Public Debt, Baseline Scenario,
2020–30
(In percent)
Projections 1/
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
PV of Debt-to-GDP Ratio
Baseline 48 46 44 40 37 33 30 26 23 21 18
0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A
B. Bound Tests
B1. Real GDP growth 48 47 46 43 39 36 33 30 27 24 22
B3. Exports 48 48 48 43 40 36 32 29 26 23 20
B4. Other flows 3/ 48 49 49 44 41 37 33 30 26 23 21
B5. Depreciation 48 49 46 41 36 32 28 24 21 17 15
C. Tailored Tests
TOTAL public debt benchmark 55 55 55 55 55 55 55 55 55 55 55
PV of Debt-to-Revenue Ratio
Baseline 386 354 309 269 242 219 197 175 154 137 121
0 30 25 26 42 45 55 57 56 56 57 57
B. Bound Tests
B1. Real GDP growth 386 361 324 285 259 237 217 196 177 161 147
B3. Exports 386 362 333 290 261 236 214 191 168 150 133
B4. Other flows 3/ 386 370 340 297 268 243 219 196 173 154 137
B5. Depreciation 386 372 322 275 242 212 186 160 136 115 96
C. Tailored Tests
Debt Service-to-Revenue Ratio
Baseline 30 40 39 57 56 64 63 58 54 53 49
0 30 25 26 42 45 55 57 56 56 57 57
B. Bound Tests
B1. Real GDP growth 30 40 41 60 58 67 67 62 58 57 54
B3. Exports 30 40 39 57 56 64 63 59 55 54 50
B4. Other flows 3/ 30 40 40 57 56 64 64 59 56 54 50
B5. Depreciation 30 38 39 55 54 63 60 55 52 50 47
C. Tailored Tests

1/ A bold value indicates a breach of the benchmark.
2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP.

Figure 3. Ethiopia: Drivers of Debt Dynamics - Baseline Scenario, External Debt
Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/
(in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP)
Current DSA 30
80 Residual 20
DSA-2018 proj. Interquartile
70 DSA-2014 20 15 range (25-
Price and 75)
60 exchange
rate 10
50 10
Real GDP Change in
growth 5
PPG debt 3/
40
0 0
Nominal
30
interest
rate ‐5 Median
20 ‐10
Current
10 account + ‐10
FDI
0 ‐20 Contribution of
Change in ‐15 Distribution across LICs 2/
5‐year 5‐year unexpected
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
PPG debt
3/ historical projected changes
change change
Public debt
Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/
(in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP)
Residual 100
Current DSA
DSA-2018 proj. 40
Interquartil
DSA-2014 e range
80 Other debt 30
creating flows (25-75)
70 50 20
60 Real
Exchange 10
50 rate
depreciation
Change in
0
40 Real GDP debt
growth 0 ‐10
30
20 Real interest ‐20
rate
10 ‐30 Median
0 Primary deficit
‐50
‐40 Contribution of
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
5‐year 5‐year
unexpected Distribution across LICs 2/
historical projected
changes
change change
1/ Difference between anticipated and actual contributions on debt ratios.

2/ Distribution across LICs for which LIC DSAs were produced.
3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the
drivers of the external debt dynamics equation.

Figure 4. Ethiopia: Realism Tools, Baseline Scenario

Figure 5. Ethiopia: Market-Financing Risk Indicators, Baseline Scenario
GFN 1/ EMBI 2/
Benchmarks 14 570
Values 8 869
Breach of benchmark No Yes
Potential heightened
liquidity needs Moderate
1/ Maximum gross financing needs (GFN) over 3-year baseline projection horizon.
2/ EMBI spreads are as of April 20, 2020.
45 PV of debt-to GDP ratio PV of debt-to-exports ratio

350
40
300
35
30 250
25 200
20
150
15
10 100
5 50
0
0
2020 2022 2024 2026 2028 2030
2020 2022 2024 2026 2028 2030

30 20
18
25
16
14
20
12
15 10
8
10 6
4
5
2
0 0
2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030
Baseline Market financing Threshold

Figure 6. Ethiopia: Qualification of Moderate Category, Baseline Scenario, 2020–301/
PV of debt-to GDP ratio PV of debt-to-exports ratio

45 350
40
300
35
250
30 Threshold
25 200
(1-X)*Threshold
20 150
15
(1-Y)*&Threshold
100
10
5 50
0 0
2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030

30 20
18
25
16
14
20
12
15 10
8
10 6
4
5
2
0 0
2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030
Threshold
Substantial
Limited space Some space space
Baseline

1/ For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. For debt
service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent.

Statement by the Executive Director, Dumisani Hebert Mahlinza,
and the Advisor of the Executive Director, Mr. Abdulqafar Abdullahi
Requests for Purchasing Under the Rapid Financing Instrument, Debt Relief Under
the Catastrophe Containment and Relief Trust, Rephasing of Access Under the
Three-Year Arrangements Under the Extended Credit Facility and the Extended
Fund Facility, and Reduction of Access Under the Extended Fund Facility
Arrangement on The Federal Democratic Republic of Ethiopia
April 30, 2020
I. Introduction
1. On behalf of our Ethiopian authorities we thank management and staff for their
timely response to the request for purchases under the Rapid Financing Instrument (RFI).
2. The Ethiopian economy has been severely affected by the COVID-19 pandemic,
creating urgent balance of payments needs. Against this background, the authorities
request emergency financing under the RFI in the amount of SDR300.7 million
(100 percent of quota) to be disbursed as budget support to help cope with the immediate
impact of the pandemic. They also request a rephasing of disbursements under the
Extended Credit Facility (ECF) and Extended Fund Facility (EFF) and a reduction in the
overall access under the EFF arrangement by SDR 150.35 million (50 percent of quota).
In addition, they request grant assistance under the Catastrophe Containment and Relief
Trust (CCRT) to cover debt service falling due to the IMF until April 13, 2022.
3. While recognizing the need to remain within the normal access limits under the
GRA, the authorities are concerned that a permanent reduction of the approved
purchases under the EFF arrangement will reduce the funds available to implement their
planned reforms, once the crisis is over. In this regard, they would have preferred a
temporary reduction in access for the current year and an overall increase reflecting
additionality of the RFI resources.
4. To ensure the responsible and transparent use of COVID related resources, the
authorities will make available information on how emergency relief funds are used and
undertake an ex-post audit of crisis-mitigation expenditures.
II. Program Performance
5. Despite the challenges posed by the global pandemic, the ECF-EFF program
remains on track, with all performance criteria for the first review, met, except one on non-
accumulation of new external arrears. Appropriate remedial measures have since been
implemented to avoid recurrence of the breach. The authorities also met all end-March
structural benchmarks except the benchmark on publishing a consolidated financial
performance report for the Public Enterprise Holding and Administration Agency (PEHAA)
supervised SOEs and will be completed by the time of the first review.
III. The Impact of COVID-19 Pandemic
6. The global pandemic together with the domestic containment measures have
severely affected Ethiopia economic growth projections for 2019/20 and 2020/21.
Preliminary estimates suggest that economic growth will be 3 percentage points lower in
2019/20 than initially projected. Depending on the intensity and duration of the pandemic
in 2020/21, growth will be lower than projected by 2.4 percentage points. The main
vulnerability channels include trade, remittances, and FDI inflows. Specifically, secondary
and tertiary sectors, including tourism and hospitality services, are expected to be
severely affected. Consequently, the overall balance of payments is expected to weaken
in 2019/20, resulting in an additional financing gap equivalent to $1.7 billion. Further,
slower economic activity is expected to dampen revenue collection, and increased
COVID-19 related healthcare spending is projected to widen the fiscal deficit by
1.5 percent of GDP in 2019/20 and 1.25 percent in 2020/21, respectively.
IV. Response to the COVID-19 Pandemic
7. To contain the spread of the virus and support the economy, the authorities
responded quickly to implement restrictive measures including closing schools,
universities, and religious institutions, and banning sporting events and large gatherings.
They have also intensified screening and strengthened the capacity of the health sector to
respond to the crisis. In addition, an inter-ministerial task force chaired by the Prime
Minister was formed to coordinate the response to the pandemic including mounting a
public awareness campaign to educate the public on preventive measures.
8. On the fiscal front, the authorities have re-allocated resources to support

healthcare spending. In this respect, a $154 million (0.15 percent of GDP) package to
strengthen capacity of the health care system and purchase equipment to deal with the
looming health crisis was initially announced. In addition, a further $1.64 billion package
was established to support vulnerable households and to further strengthen the health
care system. This includes, an allocation for emergency food assistance under the rural
urban Productive Safety Net Program (PSNP).
9. The National Bank of Ethiopia (NBE) has taken swift action to provide liquidity
support to the banking sector by injecting 15 billion birr (0.45 percent of GDP) into private
commercial banks. In addition, the NBE plans to inject an additional 16 billion birr
($487.4 million) into the state-owned Commercial Bank of Ethiopia (CBE). At the same
time, the NBE is closely monitoring the inflation dynamics and stands ready to make
appropriate monetary policy adjustments to achieve single digit inflation once the crisis is
over.
10. The authorities have already made significant progress in narrowing the spread
between the official and parallel market rates, through a gradual depreciation of the birr.
Further, they approved a foreign exchange roadmap, on April 28, 2020, to guide plans for
moving towards a market clearing exchange rate.
V. Post-Pandemic Policy Measures
11. The Ethiopian authorities remain committed to diligently implement their

homegrown economic reform plan once the crisis abates. In this context, they are
committed to resume their fiscal consolidation path through the introduction of new tax
measures and improved tax administration to increase revenues. Furthermore, the
authorities will take all the necessary steps to strengthen the debt position to help improve
2
the external debt distress rating to moderate over the course of the program. To this end,
they have made progress on the first phase of the restructuring and will continue to
engage key creditors to secure credible assurances ahead of t first review. Further, the
authorities plan to request debt service relief from official bilateral creditors under the G20
debt service relief initiative.
12. The authorities will continue to prioritize reforms to state-owned enterprises

(SOEs). To this end, key elements of the authorities’ reform agenda include improving
efficiency and governance as well as privatization of large SOEs in the
telecommunications and sugar sector. The authorities will continue to build on the
progress already made in improving transparency and financial reporting of SOEs
activities by publishing consolidated financial performance report and carrying out Public
Investment Management Assessment (PIMA) in consultation with staff. Despite the
challenges presented by the pandemic, privatization efforts will continue and pick up
speed once the crisis is over.
13. Similarly, the authorities are committed to completing the on-going Safeguards
assessment and implementing its recommendations to address concerns raised by the
initial findings. To advance this work they will cooperate with the IMF by sharing the
NBE’s most recent external audit reports and provide access to external auditors.
VI. Conclusion
14. The Ethiopian authorities remain committed to resume implementing prudent

macroeconomic policies under the IMF supported homegrown economic reform plan once
the pandemic is under control. They would appreciate the Board approval of their
financing request for emergency financing under the RFI and debt relief under the CCRT
window. The emergency facility and debt relief would not only assist close the identified
financing gap but also catalyze support from development partners.

IMF EThiopia Covid Response

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IMF Country Report No.

THE FEDERAL DEMOCRATIC

International Monetary Fund

IMF Executive Board Approves US$411 Million in Emergency

 Ethiopia is facing a pronounced economic slowdown and an urgent balance of payments

“A temporary widening of the budget deficit is appropriate. The immediate priority is to

IMF Executive Board calendar

Policy Discussions: Staff supports the authorities’ plan to accommodate COVID-related

2 INTERNATIONAL MONETARY FUND

Approved By An IMF team consisting of S. Jain-Chandra (head), M. Coelho,

OUTLOOK AND RISKS AMID COVID-19 ________________________________________________________ 5

ECONOMIC POLICIES TO COMBAT THE COVID CRISIS ________________________________________ 6

A. Fiscal Policy ______________________________________________________________________________________6

B. Monetary, Exchange Rate, and Financial Sector Policies _________________________________________9

MODALITIES OF SUPPORT _____________________________________________________________________ 10

STAFF APPRAISAL ______________________________________________________________________________ 12

INTERNATIONAL MONETARY FUND 3

4 INTERNATIONAL MONETARY FUND

OUTLOOK AND RISKS AMID COVID-19

5. External accounts are expected to Text Table 1. Ethiopia: Additional Balance of

decline in exports—led by air travel—would private transfers -2,108 -3,484

External financing sources -2,369 -926

trade (including from higher coffee prices Expected financing

Residual gap 1,350 851

privatization delays, in part due to the Lower reserve accumulation

on the back of an incipient recovery, Source: IMF staff estimates.

INTERNATIONAL MONETARY FUND 5

ECONOMIC POLICIES TO COMBAT THE COVID CRISIS

6 INTERNATIONAL MONETARY FUND

Box 1. Economic Policy Response to COVID-19

INTERNATIONAL MONETARY FUND 7

projected (0.1 percent of GDP), the deficit

would increase to 3½ percent of GDP,

at the approval of the ECF-EFF

11. Public debt is projected to

Financing 2.5 4.0 2.2 3.5

improve the external debt distress rating to

“moderate” over the course of the ECF-EFF Amortization

credible assurances ahead of the first food security.

8 INTERNATIONAL MONETARY FUND

B. Monetary, Exchange Rate, and Financial Sector Policies

INTERNATIONAL MONETARY FUND 9

10 INTERNATIONAL MONETARY FUND

INTERNATIONAL MONETARY FUND 11

28. Staff supports the following requests from the authorities:

12 INTERNATIONAL MONETARY FUND

INTERNATIONAL MONETARY FUND 13

Table 1. Ethiopia: Selected Economic and Financial Indicators, 2017/18–2024/25

GDP Poverty indicators in 2015/16 (national definitions)

Population characteristics Income distribution, 2015

2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

(Annual percentage change)

(Annual percentage change, unless otherwise indicated)

(Percent of GDP, unless otherwise indicated)

14 INTERNATIONAL MONETARY FUND

Table 2a. Ethiopia: General Government Operations, 2017/18–2024/251

2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Sources: Ethiopian authorities and IMF staff estimates and projections.