Italy has committed €80 million (about US$91 million) in financing to support Ethiopia’s economic reform programme, strengthen fiscal stability and accelerate the country’s transition to a more climate-resilient economy.
The Ethiopian Ministry of Finance announced the funding in a statement, saying the package will support ongoing economic reforms as well as investments in renewable energy, agriculture and water resource management.
The financing includes €70 million in budget support from the Italian Revolving Fund for Development Cooperation (FRCS), which will help implement Ethiopia’s homegrown economic reform agenda and its 10-year national development plan.
According to the ministry, the funds will be used to strengthen public finances, improve economic management, reduce barriers to private investment, cushion the economy against external shocks and maintain macroeconomic stability.
The remaining €10 million will come from the Italian Climate Fund to support inclusive climate-resilient development.
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The climate financing will fund reforms in renewable energy, climate finance and carbon markets while supporting Ethiopia’s efforts to build a greener and more sustainable economy.
The programme will prioritise investments in the energy, agriculture and water sectors, including expanding access to electricity, improving agricultural productivity and market systems, and strengthening water resource management.
Ethiopia has embarked on an ambitious economic reform programme after years of rapid growth driven largely by public investment gave way to mounting macroeconomic challenges.
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According to the International Monetary Fund, prolonged reliance on external borrowing and domestic financing through state-owned financial institutions contributed to persistent foreign exchange shortages, high inflation, rising debt vulnerabilities and limited access to credit for the private sector.
In response, the government has introduced reforms that include liberalising the foreign exchange market, modernising banking regulations, allowing greater exchange-rate flexibility, strengthening fiscal consolidation and restructuring public debt.
Alongside economic challenges, Ethiopia remains highly vulnerable to climate change, facing recurring droughts, severe flooding, declining soil fertility and increasing pressure on biodiversity.
The latest financing forms part of a broader 2026–2028 cooperation programme agreed by Italian Prime Minister Giorgia Meloni and Ethiopian Prime Minister Abiy Ahmed during talks in July 2025.
Under the programme, Italy is expected to provide total financing of €150 million to support Ethiopia’s economic transformation, sustainable development and climate resilience.
