IMF Reaches Staff-Level Deal on Ethiopia Review, Paving Way for USD 468mln Disbursement

Ethiopia has reached a staff-level agreement with the International Monetary Fund on the fifth review of its economic reform program, a step that could unlock approximately USD 468 million in additional financing and bring total IMF disbursements under the program to about USD 2.65 billion.

The agreement, announced on Wednesday following discussions between IMF officials and Ethiopian authorities, remains subject to approval by the Fund’s management and executive board in the coming weeks.

An IMF mission led by Alvaro Piris visited Addis Ababa from May 6 to May 20 for talks under Ethiopia’s Extended Credit Facility (ECF) arrangement, with negotiations continuing virtually afterward. The mission met with Finance Minister Ahmed Shide, National Bank Governor Eyob Tekalign and other senior government officials, as well as representatives of the private sector and development partners.

The four-year program, approved in July 2024, initially provided access to about USD 3.4 billion in financing to support the government’s economic reform agenda.

In a statement, the IMF said Ethiopia had continued to make progress in implementing its Homegrown Economic Reform Agenda, citing improvements in economic activity, exports, foreign exchange reserves and government revenues through early 2026. Inflation also continued to decline during that period.

However, the Fund said the outbreak of war in the Middle East had created a significant external shock for the Ethiopian economy, disrupting trade routes, contributing to temporary fuel shortages and driving up the cost of imported fuel and fertilizer.

Despite those pressures, the IMF said the impact on economic growth and consumer prices had so far been limited, with overall economic activity remaining resilient.

The Fund nevertheless warned that risks to the outlook had increased amid heightened global uncertainty and volatility in commodity markets.

“While pressures on growth, external and domestic balances, and inflation are expected to remain moderate if the shock is not prolonged, higher costs for essential imports and the volatile environment call for careful management of resources,” the IMF said.

The Fund emphasized the need for continued policy discipline to preserve macroeconomic stability. It said maintaining tight monetary policy would be important to contain inflationary pressures, while further reforms aimed at improving the transparency and efficiency of the foreign-exchange market would support external adjustment.

The IMF also called for stronger domestic revenue collection and prudent public spending to maintain fiscal sustainability while addressing emerging expenditure pressures.

Beyond short-term stabilization efforts, the Fund said structural reforms remained essential to achieving stronger private sector-led growth. Key priorities include improving the business environment, strengthening the resilience of the financial sector and deepening market-oriented reforms.

The review comes as Ethiopia continues negotiations with creditors to restructure its external debt under the G20 Common Framework. The IMF said discussions with official creditors were progressing as expected and that talks with international bondholders were continuing.

Last week, the Ethiopian government’s latest proposal to restructure its USD one billion Eurobond debt was rejected by an Ad Hoc Committee established under Ethiopia’s Official Creditors Committee (OCC). The Ministry of Finance has said it will explore alternative solutions, including a potential exchange offer or other market transactions.