The International Monetary Fund (IMF) has approved an immediate disbursement of about USD 261 million to Ethiopia after completing the fourth review of the country’s program under the Extended Credit Facility (ECF).
The decision brings total IMF disbursements to Ethiopia to about USD 2.18 billion under the 48-month program, which was approved in July 2024 to support the government’s Homegrown Economic Reform Agenda (HGER).
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According to the IMF, Ethiopia’s economic performance under the program has been better than expected, supported by strong growth, rising exports, improved revenue collection, higher foreign exchange reserves, and a steady decline in inflation.
Strong Macroeconomic Performance
The IMF noted that economic growth remains robust, with real GDP growth projected at 9.3 percent in 2025/26, before gradually easing in the following years. Inflation, which averaged 32.5 percent in 2022/23, is expected to fall to 11.9 percent in 2025/26 and continue declining toward single digits over the medium term.
Revenue mobilization has also improved significantly. Government revenue is projected to rise from 7.3 percent of GDP in 2023/24 to 10.5 percent in 2025/26, supported by recent tax policy reforms and improved administration.
“These results show that the reform program is delivering,” the IMF said, while stressing that maintaining reform momentum is essential to protect these gains and support poverty reduction.
Policy Reforms Largely on Track
The IMF said that all quantitative performance criteria and most indicative targets under the program were met. A key new reform limits foreign exchange intervention to auction-based mechanisms only, aimed at strengthening transparency and market functioning.
Progress was also reported in modernizing monetary policy, with the National Bank of Ethiopia (NBE) maintaining tight monetary conditions to support further declines in inflation. Recent increases in reserve requirements have helped contain excess liquidity, while gradual reforms are expected to move the system toward an interest-rate-based framework.
However, some challenges remain. The FY 2025/26 federal budget deviated from agreed program parameters, and a structural benchmark related to the publication of Ethiopian Investment Holdings’ financial statements was delayed. The authorities have committed to corrective measures to ensure fiscal sustainability.
Debt Restructuring and External Stability
The IMF welcomed progress in debt restructuring negotiations under the G20 Common Framework, including the signing of a Memorandum of Understanding with official creditors. Talks with private creditors are ongoing.
Public debt is projected to decline steadily from 50.3 percent of GDP in 2024/25 to around 32 percent by 2029/30, assuming continued reforms and successful debt treatment.
Foreign exchange reserves are also expected to improve, rising from 0.7 months of import coverage in 2023/24 to over 3 months by 2027/28, helping strengthen external stability.
IMF Calls for Continued Reform Commitment
Speaking after the Board meeting, IMF Deputy Managing Director Nigel Clarke praised Ethiopia’s reform progress but emphasized the importance of staying the course.
He highlighted the need to:
- Continue strengthening the foreign exchange market and develop an interbank FX market
- Maintain tight monetary conditions to sustain disinflation
- Expand the tax base fairly and improve customs administration
- Phase out fuel subsidies while protecting social spending
- Avoid non-concessional borrowing to reduce debt risks
- Strengthen financial sector oversight and central bank governance
“Maintaining reform momentum remains key to Ethiopia’s promising macroeconomic outlook,” Clarke said.
The IMF concluded that Ethiopia’s continued commitment to reforms under the ECF program will be critical for long-term stability, private-sector-led growth, and poverty reduction.
