Ethiopia has secured an agreement with the International Monetary Fund for a new financing program worth $3.4 billion, the IMF said on Monday.

Ethiopia's central bank floated the country's birr currency on Monday, a key step to secure IMF support, and to make progress on a long-delayed debt restructuring.

The Horn-of-Africa nation, which is struggling with high inflation and chronic foreign currency shortages, became the third economy on the continent in as many years to default on its debt at the end of last year.

It has been in talks with the IMF since last year to establish a new lending program, after the last fund-supported program agreed in 2019 was abandoned due to conflict in the northern region of Tigray that ended with a November 2022 peace deal.

Reuters previously reported Ethiopia was seeking to secure about $3.5 billion in a deal with the IMF.

The IMF said the agreement will enable an immediate disbursement of about $1 billion.

Africa's second-most populous country requested a debt restructuring under the Group of 20's Common Framework process in early 2021, but progress was slowed by the civil war in Tigray that lasted two years.

The government in Addis Ababa has unveiled some economic reforms, which analysts say are linked to the negotiations for a new IMF program, including the adoption of an interest rate-based monetary policy earlier this month.