Ethiopia has received a vital boost to its economic reform efforts with the International Monetary Fund’s (IMF) approval of a $248 million disbursement. This follows the successful completion of the second review under the country’s 48-month Extended Credit Facility (ECF) program, demonstrating IMF confidence in Ethiopia’s commitment to addressing macroeconomic imbalances. 

This disbursement increases Ethiopia’s total allocation under the ECF framework to approximately $1.61 billion, supporting the nation’s economic stabilization efforts. The IMF also approved the equivalent of 191.7 million Special Drawing Rights (SDRs) as part of the funding, which will help address Ethiopia’s balance of payments needs. 

Ethiopia’s ECF arrangement, amounting to SDR 2.556 billion (roughly $3.4 billion), is designed to support the Homegrown Economic Reform Agenda (HGER), aimed at rectifying economic imbalances and fostering private sector-driven growth. The IMF’s assessment highlights Ethiopia’s progress, noting that the country has met all quantitative performance criteria, particularly in strengthening the foreign exchange market. 

A significant part of the reform agenda includes the National Bank of Ethiopia’s (NBE) disciplined monetary policy, helping stabilize financial conditions. The IMF commended these efforts, while stressing the importance of sustaining the reforms to ensure long-term economic stability. Additionally, the IMF emphasized the need to expand social safety nets to protect vulnerable populations from the impact of these changes. 

Despite these achievements, the IMF highlighted areas requiring ongoing attention, particularly the finalization of the audited accounts of the central bank, with the deadline extended to March 2025. The IMF’s review underscores Ethiopia’s progress but also calls for continued efforts to address inflation, rising debt, and foreign currency shortages.

Prime Minister Abiy Ahmed’s economic liberalization program aims to attract foreign investment by shifting away from decades of state control. A key reform has been the liberalization of the foreign exchange market, which moved from a fixed exchange rate system to a more market-driven approach. This reform, backed by the IMF, has allowed commercial banks to set their own foreign exchange rates and non-bank entities to operate exchange bureaus, promoting greater competition and transparency. 

However, the reform path is not without challenges. The IMF urges Ethiopia to maintain focus on achieving debt sustainability, noting the importance of debt restructuring efforts under the Common Framework, a multilateral initiative to assist countries facing unsustainable debt burdens. The government has made progress in this area, which will be crucial for long-term economic stability.

While the recent disbursement signals positive steps in Ethiopia’s economic journey, the path ahead remains challenging. Continued commitment to reforms, managing inflation, stabilizing the currency, and enhancing social protections will be vital. The IMF’s support shows that Ethiopia is on the right track, but the success of its reforms will depend on sustained efforts to address remaining economic challenges.