IMF Program for Ethiopia Expected to Set Benchmark for African Nations: NBE Governor.

Addis Ababa: Governor of the National Bank of Ethiopia (NBE), Mamo Mihretu, expressed optimism that the International Monetary Fund (IMF) program for Ethiopia would succeed and establish a constructive precedent for other African countries.

According to Ethiopian News Agency, the governor discussed these insights in an interview published in Central Banking Journal, a respected publication among central bankers and financial regulators. During the interview, Mamo highlighted the comprehensive economic reforms underway in Ethiopia, which include adjustments to monetary policy, exchange rate reforms, and the opening up of the financial system. He emphasized that these reforms were initiated voluntarily by Ethiopia as part of a strategy to gain credibility through external support and not as a forced measure.

Mamo elaborated on Ethiopia’s proactive approach, noting that the reforms had been in place over a year before the initiation of the IMF program. These efforts are part of a broad ‘Three-Year Strategy Pla
n’ launched in June 2023, which provides a strategic framework for macroeconomic policy-making, financial system enhancements, and the role of the NBE.

The governor pointed out that as part of these reforms, the NBE aims to operate with greater autonomy and independence. This involves acquiring new responsibilities, such as acting as a lender of last resort, resolution authority, and focusing on consumer protection. The financial sector is also undergoing liberalization, allowing for the entry of new financial institutions, including foreign banks, and the development of innovative business models.

Mamo expressed confidence that the IMF program would be successful in Ethiopia because the government owns the reform plan, which is expected to lead to sustainable economic growth driven by the private sector. He believes that Ethiopia’s success will serve as a positive example for other African nations.

According to Mamo, the IMF program plays a crucial role in providing financial, policy, and technical suppor
t to Ethiopia’s self-initiated economic reform agenda. Many of the policy changes, such as monetary policy reform, were already underway before the IMF’s involvement and continue to evolve under its guidance.

The governor also touched upon the potential benefits of opening the banking sector to foreign investment, which could improve service delivery and foster technological innovation. He stressed the importance of competition in achieving these objectives.

In discussing Ethiopia’s digitalization strategy, Mamo highlighted the impact of telecom companies like Safaricom and the introduction of M-Pesa on the country’s payment infrastructure. The transition towards digital transactions marks a significant milestone, with digital payments surpassing cash transactions for the first time. The governor acknowledged the support from organizations like the Bill and Melinda Gates Foundation and Mastercard Foundation in these endeavors.

The governor concluded by emphasizing the importance of financial inclusion, aim
ing to provide accessible financial products and services to all categories of borrowers. Success in this area will be measured by the growth in offerings related to savings, credit, and insurance, among other products.