ADDIS ABABA, July 30 (Reuters) – Ethiopia’s new $3.4 billion financing deal with the International Monetary Fund paves the way for completion of its long-delayed debt restructuring in the next three to six months, a senior finance ministry official said on Tuesday.

The announcement of the four-year, $3.4 billion programme on Monday came hours after Ethiopia had undertaken one of the IMF’s key recommendations and floated its currency, the birr.

“Debt restructuring should be finalised before the next IMF programme review,” State Minister of Finance Eyob Tekalign told Reuters, adding that would typically be between three and six months.

The IMF deal is expected to be followed by further financing of up to $7.3 billion from the World Bank and other creditors, Ethiopian officials have said.

The World Bank’s board was scheduled to meet later on Tuesday to approve its portion of the extra funds, Eyob said.

News of the IMF deal lifted the $1 billion government bond at the centre of the restructuring plan to its highest level since October 2021 on Tuesday. A more than 2 cents jump left it trading at almost 78 cents on the dollar or just over a 20% discount of its original face value.

In the foreign exchange market, leading commercial banks quoted the Ethiopian birr at 74.74 against the dollar. That was unchanged from where it had settled after Monday’s float announcement prompted it to drop 30% against the dollar.

Ethiopia’s development partners have welcomed the move to a market-based foreign exchange rate, but some analysts have said it could drive up inflation and the cost of living, especially for the poorest.

Ethiopia also faces other challenges including the impact of climate change and the need to reconstruct its northern Tigray region, which was ravaged by a two-year civil war that ended in late 2022.

(Reporting by Dawit Endeshaw in Addis Ababa and Marc Jones in London; Writing by Duncan Miriri; Editing by Andrew Cawthorne)