Ethiopia and Senegal seek IMF and World Bank support as governments juggle debt, FX shortages and growth plans

Ethiopia and Senegal sought financial support from the International Monetary Fund and World Bank in July 2024 as both governments faced debt challenges, foreign exchange shortages, and growth constraints. According to the IMF, Ethiopia’s debt was unsustainable due to missed payments and weak debt-carrying capacity, prompting a $3.4 billion Extended Credit Facility to support reforms and reserve rebuilding.

The program aims to alleviate foreign exchange shortages and rebuild reserves, with the IMF projecting reserve adequacy to improve to about 3.5 months of import coverage by the end of the arrangement. Ethiopian authorities have set a goal to achieve a “moderate risk of debt distress” rating by the conclusion of the Extended Credit Facility.

The International Monetary Fund approved a $3.4 billion Extended Credit Facility for Ethiopia in July 2024 to support the country’s reform agenda amid a debt crisis, according to the IMF’s July 12 Country Report No. 24/253.

The IMF’s report assessed Ethiopia’s debt as unsustainable, citing protracted breaches of exports-related external debt indicators and missed payments, including a Eurobond interest payment default in December 2023. The Fund downgraded Ethiopia’s debt-carrying capacity to “weak” in October 2022, attributing the assessment in part to low foreign exchange reserves, which have been a fundamental driver of the country’s debt difficulties. IMF staff noted that international financial support is expected to ease foreign exchange shortages and stabilize the external position while reforms continue.

Ethiopia’s fiscal outlook includes a planned narrowing of the general government primary deficit from 1.1% of GDP in fiscal year 2023/24 to 0.7% of GDP by 2027/28, according to the IMF report. The program assumes fiscal adjustment alongside monetary and exchange rate reforms, with revenue mobilization playing a key role in anchoring debt sustainability while safeguarding humanitarian and pro-poor spending. The Extended Credit Facility is paired with broader policy reforms that the IMF describes as essential for continued access to external support.

Debt restructuring under the G20 Common Framework remains a critical component of Ethiopia’s financial strategy. Ethiopia’s Official Creditor Committee was formed in September 2021, and on November 9, 2023, the committee agreed to suspend debt service due in 2023 and 2024. Creditors reiterated their commitment to provide debt treatment as part of an IMF-supported program. However, IMF staff identified a residual financing gap of approximately $10.7 billion during the program period, with debt-service “bunching” in the near to medium term posing a key repayment risk.

Private creditor participation has been a challenge. A January 2025 Debt Justice briefing reported that private creditors have not fully engaged in Ethiopia’s restructuring efforts. The briefing indicated that Ethiopia’s debt would only meet IMF sustainability targets if bilateral creditors accepted significantly lower repayments than bondholders. BNN Bloomberg reported on October 3, 2024, that bondholders rejected the government’s proposal, describing it as “wholly inconsistent” with their assessment of Ethiopia’s repayment capacity. The Bretton Woods Project noted that bondholders had been offered a deal potentially yielding a 31% profit but still declined to participate.

Senegal has also sought support from the IMF and World Bank to manage similar challenges, including debt pressures, foreign exchange constraints, and growth ambitions. Senegal’s engagement with these institutions has focused on balancing fiscal discipline with development and investment needs, emphasizing macroeconomic stability, debt sustainability, and reform credibility, according to IMF and World Bank records. Senegal’s situation is often cited alongside other African sovereigns facing tighter global financing conditions and higher rollover risks.

Both Ethiopia and Senegal face the shared policy challenge of sustaining economic growth while addressing external financing needs and debt service obligations. The IMF report on Ethiopia underscores the importance of timely reforms and debt relief from external creditors to restore debt sustainability. Ethiopia’s authorities continue to seek international support to stabilize their external position amid ongoing reforms, while Senegal pursues similar objectives in coordination with multilateral partners.