Addis Ababa / Washington, DC — January 16, 2026

The has approved the fourth review of Ethiopia’s program under the Extended Credit Facility (ECF), unlocking an immediate disbursement of about $261 million to support the country’s balance-of-payments and fiscal needs.

The latest approval brings total IMF disbursements to Ethiopia to roughly $2.18 billion, under a four-year, $3.4 billion financing package agreed in July 2024 to back the government’s Homegrown Economic Reform Agenda.

Growth Accelerates, Inflation Falls Faster Than Expected

According to the IMF, Ethiopia’s macroeconomic performance has outperformed program expectations, driven by robust growth, improving exports, stronger revenue collection, and rising foreign-exchange reserves.

• Real GDP growth is projected to reach 9.3% in FY2025/26, up from 8.1% last year
• Inflation, which exceeded 30% two years ago, is expected to drop to 11.9%, with a path toward single digits
• Foreign-exchange reserves are projected to rise steadily, reaching 2.2 months of imports this fiscal year

“These outcomes point to tangible gains from Ethiopia’s reform efforts,” the IMF said, while stressing that policy discipline must be sustained to lock in progress.

FX Market Reforms Tighten, Auctions Take Center Stage

A key development under the review is the introduction of a new quantitative performance criterion that effectively bars discretionary foreign-exchange intervention, limiting FX operations strictly to auctions.

The IMF praised the for:

• Publishing FX auction guidelines aligned with international best practice
• Moving toward an interbank FX market, aimed at improving transparency and risk management
• Taking steps to rein in the Commercial Bank of Ethiopia’s FX exposure

The Fund said these reforms are essential for restoring confidence and reducing distortions in Ethiopia’s FX market.

Fiscal Pressures Remain Despite Revenue Gains

While tax reforms and stronger revenue mobilization have lifted government income to over 10% of GDP, fiscal pressures persist.

The IMF flagged deviations in the FY2025/26 federal budget, noting that spending plans exceeded earlier program commitments. Ethiopian authorities have since pledged corrective measures to ensure the deficit remains financeable and aligned with program objectives.

The Fund also reiterated calls to:

• Phase out fuel subsidies, freeing resources for priority spending
• Protect social safety-net programs amid adjustment measures
• Deepen tax and customs reforms to stabilize the investment climate

Debt Restructuring Progress Welcomed

On debt, the IMF welcomed Ethiopia’s progress under the G20 Common Framework, including the signing of a memorandum of understanding with official creditors. Talks with private creditors are ongoing.

Public debt, which spiked during the reform transition, is projected to decline steadily from 45% of GDP to below 32% by 2030, assuming reforms stay on track.

What It Means for Investors

The IMF’s endorsement sends a positive signal to investors and development partners, reinforcing Ethiopia’s commitment to macroeconomic stabilization, FX liberalization, and fiscal reform.

However, the Fund cautioned that reform momentum is critical, particularly as Ethiopia balances disinflation, credit growth normalization, and debt sustainability in a still-fragile external environment.

“Maintaining the reform momentum remains key to Ethiopia’s promising macroeconomic outlook,” the IMF said.