The International Monetary Fund (IMF) has approved the release of about US$261 million in fresh financing to Ethiopia after completing the fourth review of the country’s programme under the Extended Credit Facility (ECF), the Fund said.
The decision allows Ethiopia to draw 191.7 million Special Drawing Rights (SDRs), bringing total disbursements under the 48-month programme to about US$2.18 billion. The ECF arrangement, approved in July 2024, totals SDR 2.56 billion, equivalent to roughly US$3.4 billion at the time of approval.
The IMF said Ethiopia had made continued progress toward the programme’s objectives, supported by stronger-than-expected macroeconomic outcomes. These include solid economic growth, rising exports, improved revenue mobilisation, higher foreign exchange reserves and easing inflation.
“The authorities continue to make progress in advancing their ECF-supported economic reform agenda,” IMF Deputy Managing Director Nigel Clarke said following the Executive Board meeting, while stressing that maintaining reform momentum remained critical to sustaining the recovery and reducing poverty.
The Fund said overall programme performance had been broadly in line with commitments. All quantitative performance criteria were met, along with most indicative targets. Most structural benchmarks were also achieved, although some delays were reported.
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The Ethiopian government missed a structural benchmark linked to the fiscal framework after the federal budget for the 2025/26 financial year deviated from parameters agreed at the previous review. The authorities have since committed to corrective measures to ensure the fiscal deficit remains financeable and spending aligned with programme objectives, the IMF said.
A separate benchmark requiring the publication of financial statements for Ethiopian Investment Holdings, the state-owned investment arm, was also not met due to implementation delays.
On monetary policy, the IMF said maintaining tight conditions remained appropriate to anchor inflation expectations and support further disinflation. Ethiopia’s central bank has recently raised reserve requirements to keep liquidity tight, while preparing for a gradual move toward a more market-based monetary policy framework.
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The Fund welcomed steps to improve the functioning of the foreign exchange market, including limiting central bank intervention to foreign exchange auctions and publishing auction guidelines aligned with international standards. A new programme condition has been introduced, setting a zero limit on discretionary foreign exchange intervention outside auctions.
Revenue collection has remained strong, according to the IMF, supported by recent tax policy reforms. The Fund said further improvements in tax and customs administration would be essential to broaden the tax base sustainably and create a more stable environment for private investment.
On public finances, the IMF called for continued prudence in spending and greater reliance on domestic sources of financing to preserve fiscal sustainability. It also urged Ethiopia to phase out fuel subsidies to rebuild fiscal buffers, while protecting social spending.
Progress has also been made on debt restructuring under the G20 Common Framework, the Fund said, noting the recent signing of a memorandum of understanding with official creditors. Discussions with private external creditors are ongoing.
“Securing a debt treatment will help restore debt sustainability and meet financing needs,” Clarke said, adding that Ethiopia should continue to avoid non-concessional borrowing, with the exception of financing for the Koysha hydropower project.
The IMF also highlighted the need to strengthen financial sector oversight and governance at the National Bank of Ethiopia, including finalising reforms to ensure the central bank’s independence and capacity to carry out its mandate.
The ECF programme is designed to support Ethiopia’s Homegrown Economic Reform Agenda, which aims to address macroeconomic imbalances and lay the groundwork for private sector-led growth in one of Africa’s most populous countries.
