Inflation in Ethiopia has risen sharply again, testing the country’s ongoing macroeconomic reforms following the liberalisation of its currency under an International Monetary Fund-backed programme.
Headline inflation climbed to 11.7 percent in April 2026, up from 9.4 percent in March, ending a brief period of single-digit price growth, according to data reported by Birr Metrics and Capital Market Ethiopia.
Food inflation rose even faster, reaching 13.5 percent, underscoring renewed pressure on household budgets in a country where food and transport costs make up a large share of consumer spending.
The latest surge marks the most significant challenge yet to Ethiopia’s reform programme, which began in July 2024 when authorities floated the birr under a US$3.4 billion IMF-supported package aimed at stabilising the economy and restructuring debt.
The move ended years of tightly managed exchange rates and multiple currency markets, triggering a sharp depreciation of the local currency.
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Since the reform, the birr has fallen from about 57 per US dollar before the float to over 100 by October 2024 and beyond 150 by late 2025, representing a depreciation of more than 165 percent over roughly 15 months, according to domestic financial tracking data.
Economists say the inflation rebound is largely driven by exchange-rate pass-through effects, where currency depreciation raises the cost of imported fuel, wheat and industrial inputs, feeding into broader price increases.
Ethiopia’s economy is highly dependent on imports, making it particularly sensitive to currency fluctuations and global commodity prices.
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Analysts note that a weakening birr directly affects transport and food prices, with studies from the Ethiopian Economics Association showing a strong correlation between exchange rate movements and non-food inflation.
According to research cited in local economic reports, inflation tends to accelerate once the exchange rate crosses the 100 birr-per-dollar threshold, amplifying cost pressures across the economy.
Despite inflationary pressures, the reform has delivered some macroeconomic gains. The currency float helped unlock IMF financing and enabled a debt restructuring process that had stalled for years.
Export performance has also improved, with Ethiopia reportedly generating a record $8 billion in export revenues in fiscal year 2024/25, driven largely by coffee and gold exports, according to Africa Practice.
However, the benefits of the reform remain uneven. While exporters and foreign investors have gained from improved competitiveness, households face higher living costs, particularly for essential goods.
The timing of the inflation spike adds political sensitivity, as Ethiopia prepares for general elections scheduled for June 2026.
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The government now faces competing pressures: maintaining fiscal and monetary discipline to preserve IMF-backed stability reforms, or adopting short-term measures to ease public frustration over rising living costs.
Economists warn that loosening fiscal policy ahead of elections could undermine progress on stabilisation, while strict adherence to reform targets could deepen social strain.
The International Monetary Fund-supported programme remains a key anchor for Ethiopia’s economic strategy, but the latest inflation figures highlight the fragility of progress in the face of currency adjustment and external shocks.
For policymakers, the challenge is increasingly about managing the aftermath of reform rather than the reform itself, as the economy continues to adjust to a market-determined exchange rate environment.
