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The Federal Democratic Republic of Ethiopia: Staff Report for the 2013 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund. African Dept.
Published Date:
October 2013
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Fund Relations

Membership Status: Joined: December 27, 1945 Article XIV

General Resources Account:

SDR Million%Quota
Quota133.70100.00
Fund holdings of currency126.2094.39
Reserve Tranche Position7.515.62
Lending to the Fund
Holdings Exchange Rate

SDR Department:

SDR Million%Allocation
Net cumulative allocation127.93100.00
Holdings97.2576.02

Outstanding Purchases and Loans:

SDR Million%Quota
ESF Arrangement153.76115.00
ESF RAC Loan33.4325.00

Latest Financial Arrangements:

TypeDate of

Arrangement
Expiration

Date
Amount Approved

(SDR Million)
Amount Drawn

(SDR Million)
ESFAug 26, 2009Nov 22, 2010153.76153.76
ECF 1/Mar 22, 2001Oct 31, 2004100.28100.28
ECF 1/Oct 11, 1996Oct 22, 199988.4729.49

Projected Payments to Fund2/

(SDR Million; based on existing use of resources and present holdings of SDRs):

Forthcoming
20132014201520162017
Principal3.3425.4037.4437.44
Charges/Interest0.010.030.450.380.28
Total0.013.3725.8637.8137.72

Implementation of HIPC Initiative:

Enhanced
I. Commitment of HIPC assistanceFramework
Decision point dateNovember 2001
Assistance committed
by all creditors (US$ Million) 1/1,982.20
of which: IMF assistance (US$ million)60.85
(SDR equivalent in millions)45.12
Completion point dateApril 2004
II. Disbursement of IMF assistance (SDR Million)
Assistance disbursed to the member45.12
Interim assistance10.28
Completion point balance34.84
Additional disbursement of interest income 2/1.54
Total disbursements46.66

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

Implementation of Multilateral Debt Relief Initiative (MDRI):

I. MDRI-eligible debt (SDR Million)1/112.07
Financed by: MDRI Trust79.66
Remaining HIPC resources32.41
II. Debt Relief by Facility (SDR Million)

The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

Eligible Debt
Delivery DateGRAPRGTTotal
January 2006N/A112.07112.07

The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

Safeguard Assessment

An update safeguards assessment of the National Bank of Ethiopia (NBE) was completed in December 2009 in connection with Ethiopia’s ESF-RAC approved on January 23, 2009. The assessment found that, since the previous assessment in 2001, the NBE has implemented some improvements to the safeguards framework but that several initiatives were a work-in-progress and substantial gaps remained. Financial transparency has improved through the publication of independently audited financial statements, and internal audit capacity has been strengthened. In response to the assessment’s recommendations, action has been taken to commence Audit Committee (AC) oversight, and introduce controls and independent reviews over program data reporting to the Fund. The authorities are also in the process of addressing remaining safeguards issues relating to enhancing AC oversight of the external audit mechanism, further strengthening of reserve management capacity, and introducing bank-wide risk management practices. Going forward, the NBE Law will need to be strengthened with regard to independence of the central bank and the potential scope for unlimited financing of the government.

Exchange Rate Arrangement

The de facto exchange rate regime is classified as a crawl-like arrangement. The authorities describe their exchange rate regime as a managed float with no predetermined path for the exchange rate. The pace of the depreciation, however, has been stable. The NBE supplies foreign exchange to the market based on plans established at the beginning of each fiscal year that takes into account estimates of likely supply and demand. The transaction-weighted average interbank market exchange rate on July 31, 2013, was Br 18.90 = US$1.

Ethiopia currently maintains four restrictions on the payments and transfers for current international transactions, which relate to: (i) the tax certification requirement for repatriation of dividend and other investment income; (ii) restrictions on repayment of legal external loans and supplies and foreign partner credits; (iii) rules for issuance of import permits by commercial banks; and (iv) the requirement to provide a clearance certificate from NBE to obtain import permits. These restrictions are inconsistent with Article VIII, Section 2(a), of the IMF’s Articles of Agreement and remain unapproved.

The staff is continuing to assess whether a general finance and economic cooperation agreement signed between the government of Ethiopia and China in 2006 gives rise to exchange restrictions under Article VIII.

Article IV Consultation

Ethiopia is on the standard 12-month consultation cycle, in accordance with the Decision on Article IV Consultation Cycles (Decision No. 14747-(10/96), 9/28/2010). The last consultation was concluded on September, 2012.

Technical Assistance (2007–present)

DepartmentPurposeTime of Delivery
MCMBank supervisionJuly 2007
MCMMonetary operationsJuly 2007
MCMPayment systemJuly 2007
AFECustoms administrationOctober 2007
FADPublic expenditure managementDecember 2007
AFEProgram budgetingDecember 2007
AFEMacro-fiscalJanuary 2008
AFEProgram budgetingJanuary 2008
AFEBanking supervisionFebruary 2008
AFEConsumer price indexMarch 2008
MCMIslamic banking regulationApril 2009
AFEBanking supervisionJune 2009
AFEProgram budgeting chart of accountsJuly 2009
FADRevenue administrationSeptember 2009
FADProgram budgetingNovember 2009
FADTax policyDecember 2009
AFECash management and treasury single accountFebruary 2010
AFEPrice statisticsFebruary 2010
AFERisk-based supervisionMay 2010
AFEMedium-Term Expenditure FrameworkAugust 2010
AFEStress testingNovember 2010
FADTax administrationDecember 2010
AFECash managementFebruary 2011
STABalance of payments statisticsMarch 2011
AFENational accounts statisticsMarch 2011
FADTax incentives, tax expenditures, and transfer pricingDecember 2011
AFEPayment systemDecember 2011
AFENational Accounts StatisticsMarch 2012
FADReform review and monitoring on tax policyMarch 2013
FADProgram-based budgetingMarch-April 2013
AFESolvency framework for insurersMay 2013

Resident Representative

The IMF has had a resident representative office in Addis Ababa since 1993. The current Resident Representative, Mr. Jan Mikkelsen, took up the post in January 2012.

Joint Managment Action Plan, July 2013-August 2014

TitleProductsProvisional and actual

timing of missions
Expected

and actual

delivery date
A. Mutual information on relevant work program
The World Bank work program in the next 12 monthsEconomic policy analysis and advice

• Ethiopia Economic Update (bi-annual)

• Public Expenditure Review



• Policy dialogue on economic reform issues

• Poverty assessment

• Poverty mapping
July 2013-June 2014

July 2013-June 2014



July 2013-June 2014

July 2013-June 2014

July 2013-June 2014
Q4 2013,

Q2 2014

Q2 2014

ongoing

Q2 2014

Q3 2013
Technical Assistance

• Capacity Building of the Central Statistical Agency

• Staff turnover study

• Public financial management
July 2013-June 2014



July 2013-June 2014

July 2013-June 2014

July 2013-June 2014


ongoing

(until 2016)

Q2 2014

ongoing
The Fund work program in the next

12 months
Macroeconomic policy analysis and advice

• Article IV consultation
May 2014June 2014
Technical assistance

• PFM

• Statistical capacity (national accounts, CPI)

• Tax administration


Ongoing

Ongoing

July 2012-June 2015
B. Requests for work program inputs
Fund request to Bank• Periodic update on progress on the financial sector capacity building project and social sector projects including poverty related work.

• Macroeconomic and financial data to be shared regularly.
Ongoing
Bank request to Fund• Periodic update on all TA activities.

• Macroeconomic and financial data to be shared regularly.
Ongoing
C. Agreement on joint products and missions
Joint products in the next 12 monthsDebt sustainability analysisJuly 2014

Statistical Issues

I. Assessment of Data Adequacy for Surveillance

General: Data provided to the Fund are broadly adequate for surveillance purposes, albeit with some shortcomings. Despite recent progress, there are some shortcomings in financial, real, fiscal, and balance of payments statistics.

National Accounts: Shortcomings in the source data and compilation practices affect the accuracy and reliability of the statistics. The GDP estimates are heavily dependent on benchmark data that may not reflect current economic activity. Further, the techniques used to compile the estimates for construction, distribution, and some other services activities do not conform to international best practice. While some progress has been made in compiling estimates of GDP by final expenditure, there remain substantial shortcomings, particularly in the estimation of private consumption and fixed capital formation. The statistical discrepancies between the estimates by expenditure categories and output remain large.

Government finance statistics: Despite recent improvements, general government fiscal statistics continue to be affected by shortcomings. Timely data on the consolidated operations of local governments is unavailable. Significant discrepancies between data on the domestic financing of the budget deficit and the monetary accounts continue to complicate assessment of fiscal developments.

Monetary statistics: Monetary statistics are broadly adequate for analytical purposes, although there is a need for the NBE to resume data submissions based on the SRF and IMD framework. For policy purposes, however, ensuring data collection and reporting in a timely manner continues to be critical.

Financial statistics: The staff does not have access to sufficient data to assess the soundness of the banking sector.

Balance of payments: Balance of payments data require improvements in coverage, valuation, timing, and classification of current account transactions. Financial and capital account transactions are also incompletely covered and data on FDI could to be better reconciled with alternative sources. Improvements in balance of payments compilation could most appropriately be pursued in the context of adopting the sixth edition of the Balance of Payments and International Investment Position Manual.

II. Data Standards and Quality

Ethiopia participates in the General Data Dissemination System (GDDS) and metadata were partially updated in early 2008. Ethiopia participates in the GDDS project for capacity building in statistics in Anglophone Africa (2006–09) including socio-demographic, macro-economic and financial statistics. No Report on the Observance of Standards and Codes has been completed.

Table of Common Indicators required for Surveillance

(As of July 31, 2013)

Date of

Latest

Observation
Date ReceivedFrequency

of

Data
Frequency

of

Reporting
Frequency

of

Publication
Exchange ratesJuly 2013July, 2012DDD
International reserve assets and reserve liabilities of the monetary authorities1/May 2013June 2012MMM
Reserve/base moneyMay 2013June 2013MMM
Broad moneyApril 2012June 2013MMM
Central bank balance sheetApril 2012June 2013MMM
Consolidated balance sheet of the banking system2/NANANA
Interest rates3/April 2012June 2013MMM
Consumer Price IndexJune 2012July 2013MMM
Revenue, expenditure, balance, and composition of financing4/ – general government5/December 2012May 2013QQQ
Revenue, expenditure, balance, and composition of financing4/ - central governmentJuly 2013April 2013MMNA
Stocks of central government and central government-guaranteed debt6/2011/12June 2013AOn missionA
External current account balanceMarch 2013June 2013QQQ
Exports and imports of goods and servicesApril 2013June 2013MQQ
GDP/GNP2011/12January 2013AAA
Gross external debt2011/12May 2013AOn missionA
International investment positionNANANA

Any reserve assets that are pledged of otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

The authorities provide some balance sheet items but not comprehensive enough for proper financial stability analysis.

Both market-based and officially determined, including discount rates, money market rates, and rates on treasury bills, notes, and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Any reserve assets that are pledged of otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

The authorities provide some balance sheet items but not comprehensive enough for proper financial stability analysis.

Both market-based and officially determined, including discount rates, money market rates, and rates on treasury bills, notes, and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

1/Formerly PRGF.
2/When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

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