IMF Reaches Staff-Level Agreement on Ethiopia’s Economic Program Review.

Addis Ababa: A staff team from the International Monetary Fund (IMF), led by Alvaro Piris, visited Addis Ababa between November 12 and 26, 2024, to evaluate the progress of Ethiopia’s economic reforms and policy priorities as part of the second review under the IMF’s Extended Credit Facility (ECF).

According to Ethiopian News Agency, the IMF’s Executive Board had initially approved the arrangement on July 29, 2024, for a total of SDR 2.556 billion, which was approximately 3.4 billion USD at the time. At the conclusion of the mission, Alvaro Piris announced that a staff-level agreement had been reached with Ethiopian authorities regarding the second review of the country’s economic program supported by the ECF arrangement.

The agreement awaits approval from the IMF management and Executive Board, anticipated in the coming weeks. Upon approval, Ethiopia would gain access to SDR 191.70 million, equivalent to about 251 million USD. Subsequent reviews are planned to occur biannually.

Ethiopia’s economic reform
initiatives, notably the shift towards a market-determined exchange rate, are making notable progress. Recent advancements have been aided by the relaxation of foreign exchange surrender requirements, increased interbank foreign exchange market activities, and the successful establishment of a domestic interbank money market. As a result, foreign exchange shortages have significantly reduced, and the disparity between official and parallel market rates has decreased to below 10 percent, following a temporary rise in October.

The statement from the IMF highlighted that macroeconomic stability is being maintained through prudent policy measures, with minimal impact from foreign exchange reforms on inflation, suggesting promising conditions for future economic growth. The execution of a supplementary budget approved by the Council of Ministers is expected to alleviate liquidity constraints while adhering to fiscal targets aligned with program objectives. To achieve low and stable inflation in the medium-term, i
t is crucial to uphold tight monetary and financial conditions during the transition to an interest rate-based monetary policy.

The IMF staff expressed gratitude to Ethiopian authorities for their collaborative discussions and strong commitment to the successful implementation of the IMF-supported economic program. During the mission, the team engaged with Minister of Finance Ahmed Shide, Governor of the National Bank of Ethiopia Mamo Mihretu, State Minister of Finance Eyob Tekalign, and other senior officials. They also held productive discussions with banks and businesses across various sectors.