The latest approval brings total disbursements under the programme to about $2.65 billion, including an additional $200 million in support to help Ethiopia manage economic pressures stemming from the conflict in the Middle East, particularly higher imported fuel costs.
The ECF arrangement, approved in July 2024, is designed to support Ethiopia’s Homegrown Economic Reform Agenda, which seeks to address macroeconomic imbalances and create conditions for private sector-led growth.
The IMF said programme performance has remained broadly on track, with all quantitative performance targets met and most indicative targets achieved. While government contributions to the Productive Safety Nets Programme were below target, donor support exceeded expectations, ensuring assistance to beneficiaries remained above programme objectives.
Ethiopia’s macroeconomic performance has remained resilient despite a challenging external environment. The IMF noted that maintaining a tight monetary policy stance remains appropriate to contain inflation and anchor expectations.
The National Bank of Ethiopia has continued efforts to improve the functioning of the foreign exchange market through measures that include easing certain exchange restrictions, developing an interbank foreign exchange market and increasing competition among banks.
Fiscal performance has also been strong, supported by improved tax revenue collection and prudent spending management. The IMF said continued reforms in revenue administration and expenditure control will be important to maintaining fiscal sustainability and supporting development priorities over the medium term.
Ethiopia has also continued to make progress on restructuring its debt. Several agreements have been reached with official creditors, while discussions with commercial creditors have advanced. The IMF welcomed the agreement in principle reached with Eurobond holders, describing it as consistent with programme objectives and financing requirements.
IMF Deputy Managing Director Nigel Clarke said the authorities have continued to make progress on their reform agenda despite external shocks. “The authorities continue to make progress in advancing their economic reform agenda, with favourable macroeconomic outcomes despite a challenging environment,” Clarke said.
He noted that the conflict in the Middle East has created a significant external shock and stressed the importance of maintaining reform momentum while responding effectively to emerging challenges.
The IMF also highlighted the need for further reforms to strengthen the foreign exchange market, deepen the financial sector and improve monetary policy transmission. Continued efforts to modernise the banking sector and strengthen central bank governance were identified as important priorities.
On the fiscal side, the Fund encouraged Ethiopia to continue strengthening domestic revenue mobilisation and gradually phase out fuel subsidies while protecting vulnerable households. It also called for further improvements in fiscal transparency, risk management and oversight of state-owned enterprises.
Looking ahead, the IMF said completing the debt restructuring process and maintaining prudent borrowing practices will be critical to restoring debt sustainability and reducing vulnerabilities.
The Fund concluded that continued implementation of reforms will help preserve macroeconomic stability, support growth and strengthen the foundations for a more competitive and resilient economy.
–IMF/ChannelAfrica–
