Ethiopia has embarked on a comprehensive macroeconomic reform program, focusing on key areas such as fiscal, monetary, exchange rate, and financial sector policies. These reforms have already yielded significant results, including improved revenue collection, declining inflation, and stronger foreign exchange reserves.

In July 2024, Ethiopia secured a landmark financing agreement with the International Monetary Fund (IMF), totaling $3.4 billion, or 850% of its quota, the largest concessional funding package in IMF history. This agreement is contingent on Ethiopia’s continued commitment to its reform agenda, which has been designed to stabilize the economy, attract investment, and promote sustainable growth.

The fiscal reforms are aimed at enhancing domestic revenue mobilization while ensuring that pro-poor spending remains a priority. Meanwhile, the country’s monetary policy is transitioning to an interest rate-based framework to manage inflation and stimulate economic investment. In addition, Ethiopia is shifting to a market-based exchange rate system to address imbalances and foster greater economic growth. Significant efforts have also been made to modernize the financial sector, with a focus on improving the competitiveness and inclusivity of the banking industry.

Alongside the IMF’s support, Ethiopia has also secured a financing package from the World Bank, which includes $1.5 billion, consisting of a $1 billion grant and a $500 million low-interest credit line. These funds are intended to support the ongoing economic reforms and contribute to building a more inclusive economy.

Despite the promising progress, Ethiopia still faces challenges, such as managing inflation, addressing foreign exchange shortages, and ensuring the successful implementation of the reform agenda. Continued support from international partners and a steadfast commitment to reform will be essential for Ethiopia’s long-term economic transformation.