World Bank Staff Raise Concerns Over Ethiopia's Debt Assessment with IMF
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The memo in question highlights a significant development where World Bank staff have raised concerns about the debt assessment of Ethiopia that was previously agreed upon with the International Monetary Fund (IMF). This disagreement centers around the sustainability and management of Ethiopia's debt.Ethiopia's debt situation has been under intense scrutiny due to its high risk of external debt distress. The country's debt is considered unsustainable, primarily because of prolonged breaches of exports-related external debt indicators. This has led to a series of assessments and interventions by both the World Bank and the IMF to address the issue.In July 2024, the IMF approved a four-year Extended Credit Facility (ECF) arrangement for Ethiopia, amounting to SDR 2.556 billion (about US$3.4 billion), to support the country's economic reforms and help restore debt sustainability. However, despite these measures, the World Bank staff have questioned the effectiveness and accuracy of the debt assessment reached with the IMF. This questioning has been documented in a memo, which suggests that there are discrepancies or concerns regarding the methodologies or conclusions drawn in the initial assessment.The World Bank's Debt Management Performance Assessment (DeMPA) is a tool used to evaluate public debt management performance through a comprehensive set of indicators. This tool is crucial in assessing how well a country manages its debt and identifies areas for improvement. The recent questioning by World Bank staff indicates that there might be gaps or misalignments in the DeMPA's application to Ethiopia's debt situation.In summary, the memo reflects ongoing concerns within the World Bank regarding the debt sustainability of Ethiopia. It suggests that the debt assessment agreed upon with the IMF might not fully capture the complexities and risks associated with Ethiopia's debt management, prompting a need for further review and potential adjustments to the debt management strategies.