The staff of the International Monetary Fund and the Ethiopian government have reached a preliminary agreement for a three-year, $2.9 billion financing package to support the African country's economic reform program, the IMF said on Wednesday.

It said the agreement was subject to approval by the Fund's executive board. If approved, it would be supported by the IMF under its Extended Credit Facility (ECF) and Extended Fund Facility (EFF).

The Ethiopian economic reform program would focus on addressing the foreign exchange shortage and transitioning to a more flexible exchange rate regime while working to strengthen oversight and management of state-owned enterprises to contain debt vulnerabilities in Africa's second-most populous nation.

It would also work to free up domestic revenue for poverty-reducing and essential infrastructure spending; financial sector reforms to support private investment and modernize the monetary policy framework; and strengthening of the supervisory framework and financial safety nets, the IMF said.

Ethiopian Prime Minister Abiy Ahmed pledged to undertake economic reforms when he took office last year, with a focus on leveraging private sector investment to help provide jobs for millions of unemployed youth in the nation's 100 million people.

Ethiopia's foreign exchange shortages have worsened in the past five years as the government spent heavily on infrastructure before export earnings from new sectors such as manufacturing took off.