The International Monetary Fund (IMF) Executive Board has completed the second review under the Extended Credit Facility (ECF) arrangement for Ethiopia, enabling the immediate disbursement of approximately US$248 million (SDR 191.7 million). This brings total disbursements under the program to about US$1.611 billion since its approval in July 2024.
The four-year ECF arrangement supports Ethiopia’s Homegrown Economic Reform Agenda (HGER) aimed at addressing macroeconomic imbalances and fostering private sector–led growth. At the time of approval, the total arrangement stood at SDR 2.556 billion (850 percent of quota), or roughly US$3.4 billion, within a broader US$10.7 billion support package from various development partners and creditors.
In its review, the IMF noted that all quantitative performance criteria were met. However, the government’s contribution to targeted social safety nets fell short of the intended target, largely due to preparatory work needed to expand these programs. Additionally, the structural benchmark regarding audited accounts of the National Bank of Ethiopia (NBE) has been reset from end-January 2025 to end-March 2025 to allow for completion.
Progress on Key Reforms
- Foreign Exchange Market: The authorities have implemented significant policy actions to enhance market efficiency and narrow the parallel market premium to single digits. Restricting the NBE’s foreign exchange interventions and moving toward a more flexible exchange rate regime are helping improve transparency and stability.
- Monetary Policy: Tight monetary and financial conditions have been maintained to tackle inflationary pressures and reduce macroeconomic imbalances. Reaching a positive real interest rate is a key goal to anchor inflation expectations and support credibility in the new monetary policy framework.
- Fiscal Policy: A supplementary budget approved in late November 2024 remains consistent with program targets. Ongoing efforts to expand the Productive Safety Net Program (PSNP) will protect vulnerable households, while measures like fuel price adjustments and VAT/excise tax reforms aim to bolster domestic revenue, thereby creating room for social and development spending.
- Financial Sector Stability: Modernizing bank regulations, strengthening supervision, and closely monitoring non-performing loans are central to safeguarding financial stability. The authorities plan to remove the credit growth cap and adjust policy rates in a carefully sequenced manner to maintain orderly market conditions.
- Debt Sustainability: Ethiopia is pursuing a debt treatment under the G20 Common Framework, and negotiations have progressed with the Official Creditor Committee. Additional discussions with Eurobond holders and other external commercial creditors are underway to secure comparability of treatment. The IMF welcomes these efforts as critical steps toward restoring debt sustainability.
IMF Statement
Following the Executive Board’s discussion, Mr. Nigel Clarke, Deputy Managing Director and Acting Chair of the Board, underscored Ethiopia’s robust reform momentum and commitment:
“The authorities continue to make strong progress in implementing their Fund-supported program and addressing macroeconomic imbalances. The transition to a flexible exchange rate has advanced further, supported by macroeconomic and foreign exchange market policy measures, and the parallel market premium has stabilized in single digits with rising FX supply.”
Mr. Clarke emphasized maintaining prudent macroeconomic policies, such as tight monetary policy and avoiding monetary financing of government deficits, to sustain stability. He also highlighted the importance of broadening social safety nets, advancing revenue mobilization efforts, and making further progress on debt restructuring to secure a firm foundation for Ethiopia’s economic future.
Looking Ahead
With the second review successfully completed, the IMF and Ethiopian authorities are focused on the continued implementation of the Homegrown Economic Reform Agenda. Key next steps include advancing debt restructuring discussions, solidifying monetary policy credibility, and ensuring broader social support for vulnerable communities.
The completion of this review by the IMF Executive Board reaffirms the Fund’s support for Ethiopia’s ongoing reforms and acknowledges the strong commitment of Ethiopian authorities to address longstanding macroeconomic challenges and build a resilient, inclusive economy.
