DPG HoA Meeting Reviews Progress on Ethiopia’s Macroeconomic Reforms

Government officials highlighted a year of reforms under HGER 2.0 and the IMF-supported macroeconomic program. Key measures include eliminating FX surrender requirements, transitioning to a market-based foreign exchange regime, and modernizing monetary policy. These steps, combined with targeted subsidies and social safety nets, aim to stabilize the economy while protecting vulnerable groups.

“Our goal is not just stability. It is prosperity – broad, sustainable, and transformative”, said H.E. Ahmed Shide, Minister of Finance, reaffirming the government’s commitment to sustaining reform momentum.

H.E. Eyob Tekalign (PhD), State Minister of Finance, emphasized the fiscal turnaround. “We have increased tax revenue to 700 billion birr and eased inflation from 34.5% to 13.7%. These results show that Ethiopia’s reform journey is delivering”.

Governor Mamo Mihretu underscored the significance of monetary and financial sector reforms. “For the first time in 12 years, there is no monetary financing of the budget. Inflation is down to 13%, and we are on track for single digits”. The governor added that “foreign exchange earnings rose from $24 billion to $33 billion, and the interbank market is now functioning with greater transparency”.

H.E. Bereket Tesfamarim, State Minister of Planning and Development, highlighted real-sector gains. “The economy grew by 8.8% last fiscal year, with 4.5 million new jobs created. Agricultural productivity, FDI inflows, and digital transformation are accelerating”.

Development partners welcomed the progress while noting remaining challenges. Tobias Rasmussen, IMF Resident Representative, while describing the reforms as “truly historic”, stressed that this is a multi-year program facing considerable risks. He noted that global official development assistance is declining, while Ethiopia contends with domestic challenges such as security concerns, a difficult business environment, and lagging foreign direct investment. Although foreign exchange market reforms have reduced premiums, the market is not yet functioning smoothly. Rasmussen warned that shocks are likely, resources remain limited, and prioritization will be critical. He emphasized that “eyes on the prize” is essential for all stakeholders, as achieving the reform goals will yield substantial long-term benefits.

Tehmina Khan, Lead Economist at the World Bank, reaffirmed the Bank’s commitment to supporting structural and social reforms and stressed that prosperity must be broad-based. She noted that job creation remains insufficient to meet the demands of job seekers and that, while reforms have eased tensions in some sectors, both micro and macro-level improvements are needed. Khan highlighted major challenges in health, education, civil service reform, WTO alignment, and private sector participation, emphasizing that these areas require sustained attention to ensure inclusive growth.

Both emphasized that these challenges – ranging from inflationary pressures and fiscal constraints to institutional bottlenecks and external shocks – pose risks to sustaining reform momentum.

Looking ahead, the government outlined a clear roadmap. Priorities include finalizing debt restructuring by December, preparing Development Policy Operation 3 (DPO-3), and deepening FX market reforms. Financial sector liberalization will continue, with foreign bank entry expected by late 2025. Social protection programs will be scaled up, including expanded community-based health insurance and targeted subsidies. The government also aims to boost private sector growth through SOE restructuring, improved investment climate, and enhanced public service delivery.