Staff-Level Agreement on ECF Review
The International Monetary Fund (IMF) and Ethiopian authorities have finalized a staff-level agreement on the third review of the four-year $3.4 billion Extended Credit Facility (ECF) arrangement. Upon approval by the IMF Executive Board, Ethiopia will access approximately $260 million in financing, bringing the total disbursed under the ECF to about $1,849 million since the program’s start in July 2024.
Strong Macroeconomic Performance
Ethiopia’s economic performance has surpassed expectations, with notable improvements in key areas. IMF mission chief Alvaro Piris highlighted the progress, stating,
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“The authorities’ policy actions in the first year of the program have yielded strong results. The transition to a flexible exchange rate regime has proceeded with little disruption.”
He also noted better-than-expected outcomes in inflation, goods exports, and international reserves, alongside advancements in monetary policy, revenue collection, social safety nets, and financial stability.
Addressing Foreign Exchange Market Challenges
Despite progress, challenges remain in the foreign exchange (FX) market, with a widened gap between official and parallel market rates in early 2025. Piris emphasized recent actions, saying,
“Recent policy action should help deepen the FX market and tackle remaining distortions.”
Measures to improve transparency, reduce fees, and ease transaction restrictions are being implemented to enhance FX market functionality.
Focus on Sustained Reforms
The IMF stressed the importance of ongoing reforms to maintain economic gains. Piris noted,
“Maintaining reform momentum will be key to consolidating gains and securing sustainable high growth.”
Priorities include tight monetary policies to manage inflation, increased revenue mobilization, and reforms to boost private sector investment and develop capital markets. The agreement awaits a memorandum of understanding with creditors and final IMF Board approval.
