The International Monetary Fund (IMF) Executive Board has completed the third review under the Extended Credit Facility (ECF) arrangement for Ethiopia and concluded the 2025 Article IV consultation. This decision allows for an immediate disbursement of approximately US$262.3 million to assist Ethiopia in meeting its balance of payments and fiscal financing needs, bringing total disbursements under the arrangement to about US$1.873 billion.
The ECF arrangement, initially approved on July 29, 2024, supports Ethiopia's Homegrown Economic Reform Agenda by addressing macroeconomic imbalances and fostering private sector-led growth. All quantitative performance criteria were met, with notable overperformance in net international reserves due to strong gold exports.
Recent foreign exchange policy measures aim to enhance transparency and reduce costs for market participants while easing restrictions on current account transactions. Continued policy efforts are essential to solidify gains from these reforms and manage inflation through tight monetary conditions.
Efforts to mobilize domestic revenues, strengthen state-owned enterprises (SOEs), and improve fiscal transparency have shown positive results. The Ethiopian authorities are working towards restoring debt sustainability with progress made in negotiations with the Official Creditor Committee under the Common Framework.
Nigel Clarke, Deputy Managing Director and Chairman of the Board, stated: "The authorities have made strong progress in implementing their economic reform agenda... Growth has been resilient and inflation has fallen." He emphasized maintaining reform momentum amidst security challenges and declining donor support.
Executive Directors commended Ethiopia's progress but highlighted risks such as potential social discontent and climate shocks. They stressed the importance of continued revenue mobilization and prudent spending to address debt vulnerabilities while supporting private sector-led growth.
Directors also encouraged further development of a flexible exchange rate system and improvements in financial sector oversight. Strengthening governance, enhancing transparency, and reinforcing frameworks will be critical for improving investor confidence.
The next Article IV consultation with Ethiopia is expected according to IMF guidelines for members with Fund arrangements.