World Bank Approves $1.5 Billion Budget Support for Ethiopia Amid Debt Restructuring

The World Bank has approved $1.5 billion in budget support for Ethiopia, marking the first time such financing has been given. This coincides with Ethiopia's $3.4 billion IMF program aimed at restructuring its debt. The approval is part of a larger $10.7 billion financial package, contingent on economic reforms.

The World Bank's board has given the green light for $1.5 billion in budget support to Ethiopia, marking a historic first for the lender.

This decision arrives just as the east African nation secured a four-year, $3.4 billion program from the International Monetary Fund. Hours before the IMF agreement, Ethiopia's central bank floated its birr currency, setting the stage for debt restructuring to proceed.

The funds from the World Bank include a $1 billion grant and a $500 million low-interest credit line. Ethiopia must implement significant economic reforms, including liberalizing its foreign currency market, to receive these funds.

Ethiopian officials disclosed that this financing is part of a broader $10.7 billion package by the IMF, World Bank, and other creditors. While moving towards a market-based exchange rate has been praised by partners, some analysts caution that this could increase inflation and living costs, especially for the country's poorest residents.

(With inputs from agencies.)