The International Monetary Fund says it had reached a staff-level agreement with Ethiopia on the fourth review of its US$3.4 billion Extended Credit Facility (ECF), paving the way for the release of about US$261 million once the deal is approved by the Fund’s Executive Board.
The agreement follows weeks of discussions between IMF staff and Ethiopian officials in Addis Ababa and virtually between October and early December. The ECF arrangement, approved in July 2024, supports Ethiopia’s Homegrown Economic Reform (HGER) agenda, which aims to stabilise public finances, restore external balance and shift the economy towards a more market-oriented model.
In a statement, mission chief Alvaro Piris said Ethiopia’s reform programme continued to show “favourable macroeconomic outcomes,” citing stronger-than-expected growth, rising government revenue and improved external indicators.
“Available indicators point to accelerating growth since mid-2024, supported by strong gold, electricity and agricultural production,” he said. “Goods exports have more than doubled in value, inflation has declined, and government revenue has grown strongly.”
The fourth review will bring total IMF disbursements under the programme to about US$2.13 billion, provided the Board gives its approval in the coming weeks.
Reform momentum critical
Piris said the authorities had made progress in modernising Ethiopia’s monetary policy framework, strengthening financial regulation and taking steps to improve the functionality of the foreign-exchange market long seen as one of the country’s most rigid bottlenecks.
He stressed, however, that sustaining the pace of reform will be key to restoring durable macroeconomic stability. “A tight monetary stance continues to be appropriate to anchor inflation expectations and support price stability,” he said, adding that stronger revenue mobilisation and prudent spending were essential to ensure fiscal sustainability.
The Fund also urged the government to continue improving the business environment to attract more private investment, a critical plank of Ethiopia’s strategy to transform its state-dominated economy.
Debt restructuring moves forward
The IMF said Ethiopia had made progress in its bid to secure a comprehensive debt treatment under the G20 Common Framework. In July 2025, Addis Ababa and its Official Creditor Committee agreed on a memorandum outlining the key parameters for restructuring, though finalisation now depends on bilateral agreements.
Restoring debt sustainability is a major condition for the IMF programme. Ethiopia’s external debt burden ballooned in recent years as the government financed large infrastructure projects while grappling with the economic fallout of the Tigray conflict and foreign-exchange shortages.
Ethiopia, once one of Africa’s fastest-growing economies, has faced severe macroeconomic pressure since 2020. The civil conflict in the north cost billions of dollars in damage, disrupted trade routes and strained agricultural output. Foreign investment slowed sharply, remittance inflows weakened and the country’s reserves fell to critically low levels.
Inflation surged into double digits for several years, peaking above 30 percent in 2022, driven by supply shocks, currency depreciation and global food and fuel price pressures.
The government introduced the Homegrown Economic Reform agenda in 2019 to widen fiscal space, reduce reliance on state-owned enterprises and open sectors such as telecoms and logistics to private investment. The ECF approved in 2024 built on this strategy, tying IMF financing to reforms in revenue administration, exchange-rate flexibility, monetary tightening, and governance improvements.
Despite progress, the economy remains vulnerable. Foreign-exchange shortages persist, and the birr continues to face depreciation pressure. Major state-owned enterprises including Ethiopian Airlines and Ethio Telecom dominate the economy, and large external financing gaps remain.
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Nonetheless, recent indicators show a gradual recovery. Strong electricity exports, rising agricultural output and new gold-production capacity have lifted external earnings. Inflation has eased, and the government has intensified efforts to raise tax revenue and contain non-priority spending.
Next steps
The IMF mission said it held discussions with Finance Minister Ahmed Shide, central bank governor Eyob Tekalign and senior officials. The Executive Board is expected to consider the fourth review in the coming weeks.
If approved, the disbursement will help bolster Ethiopia’s foreign-exchange reserves and support macroeconomic stability as the government implements reforms aimed at returning the country to sustained, inclusive growth.
