The International Monetary Fund says it has reached a staff-level agreement with Ethiopia on the fifth review of its US$3.4 billion Extended Credit Facility programme, paving the way for a US$468 million disbursement pending board approval.
The Fund said the agreement reflects continued progress in Ethiopia’s homegrown economic reform agenda, despite external pressures linked to the war in the Middle East.
It said economic activity remained broadly resilient, with only modest impacts on growth and inflation so far, though it warned that risks had increased due to global uncertainty and volatile commodity prices.
“The war in the Middle East was a significant external shock that disrupted trade,” IMF mission chief Alvaro Piris said, noting temporary fuel shortages and higher import costs.
The IMF said Ethiopia had recorded improvements in exports, reserves, government revenue and inflation before the shock, but stressed that policy discipline would be needed to maintain stability.
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It called for a tight monetary stance to anchor inflation expectations, stronger foreign exchange market functioning, and continued fiscal restraint to preserve debt sustainability.
The Fund also highlighted progress in debt restructuring talks, saying negotiations with official creditors and bondholders were advancing.
Structural reforms to improve the business environment, strengthen financial sector resilience and deepen market reforms remained essential for private sector-led growth, it added.
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The IMF team met senior Ethiopian officials, including Finance Minister Ahmed Shide and central bank governor Eyob Tekalign, during its mission to Addis Ababa in May.
Ethiopia has been undergoing a wide-ranging economic reform programme supported by the International Monetary Fund (IMF) under a four-year Extended Credit Facility (ECF) worth about US$3.4 billion. The arrangement, approved in 2024, is designed to stabilise the economy while supporting a transition toward more private sector-led growth.
The programme was launched after Ethiopia faced mounting macroeconomic pressures, including foreign exchange shortages, high inflation, external debt vulnerabilities, and structural constraints linked to years of state-led development policies. In response, the government introduced what it calls a “Homegrown Economic Reform Agenda,” aimed at liberalising key sectors, improving fiscal discipline, and modernising monetary and exchange rate frameworks.
A central pillar of the reforms has been gradual foreign exchange market adjustment and efforts to strengthen export performance, attract investment, and rebuild external reserves. However, progress has been complicated by global shocks, including rising import costs, commodity price volatility, and regional instability linked to the Middle East conflict, which has disrupted trade routes and increased energy and transport costs.
Ethiopia is also in parallel negotiations over broader debt restructuring with official creditors and private bondholders, as part of efforts to restore long-term debt sustainability and unlock continued external financing support.
