Ethiopia’s ‘Tough’ Macroeconomic Reforms Poised to Yield ‘Tremendous Outcomes,’ Says IMF Chief

Addis Abeba — Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), acknowledged the challenges of Ethiopia’s ongoing macroeconomic reforms, describing them as “tough” and noting that they “take time.” During her recent visit to Ethiopia, the IMF chief urged the public to “maintain unity” in implementing these policies, emphasizing that they would ultimately yield “tremendous outcomes.”

“The reform program that Ethiopia has embraced is tough; it takes time, but it will bring tremendous rewards,” Georgieva stated. “Some are already becoming evident. Society must remain united behind this reform.”

She made these remarks during a press conference in Addis Abeba on 09 February, 2025, before concluding her two-day visit to Ethiopia.

Georgieva further highlighted that “there is a lot for Ethiopia to be proud of,” pointing to the country’s 8.1% economic growth recorded last year, which she indicated surpassed the projected 6.1% by her organazation.

Her visit to Ethiopia followed the IMF’s recent endorsement of the country’s tax reforms, which aim to bolster revenue by streamlining exemptions and closing corporate tax loopholes.

In its country report published on 29 January, 2025, the IMF indicated its support for the ongoing macroeconomic reforms, disclosing that the Ethiopian government is proceeding with reforms including eliminating tax exemptions for imported intermediate inputs, closing gaps in the corporate income tax regime, and introducing motor vehicle ownership taxes.

However, reports indicate that Ethiopia’s ambitious economic reforms, designed to enhance revenue generation and address macroeconomic challenges, have had a significant impact on low-income households, exacerbating the rising cost of living and persistent inflation. Civil servants and fixed-wage earners describe the situation as increasingly “unsustainable.”

According to a recent article published by Addis Standard, economic measures such as higher electricity tariffs, revised tax laws, and increased service fees have placed additional strain on household finances. While the government has introduced measures to curb inflation and adjust public sector salaries, experts warn that these reforms disproportionately burden lower-income groups.

During a press briefing in Addis Abeba, Georgieva emphasized that a “collective effort is necessary” to curb inflation as part of the reform agenda, asserting that the macroeconomic policies will “strengthen economic capacity and attract more foreign investment over time.”

The IMF’s latest country report projects inflation will peak at approximately 25% between mid- and late 2025 before declining to single-digit levels by 2028. Official data show headline inflation eased to 17% in November 2024, down from 19% in September, with reductions in both food and non-food inflation.

As part of her visit, Georgieva met with Prime Minister Abiy Ahmed and other senior government officials, including Finance Minister Ahmed Shide and Mamo Mihretu, governor of the National Bank of Ethiopia (NBE).

“We value the IMF’s continued technical and financial support, as well as your [Georgieva’s] personal efforts and contributions to our economic reform program,” the premier stated in a social media post. “The results of the program so far are positive and very encouraging.”

Over the past six months, Ethiopia has been implementing comprehensive macroeconomic reforms, spanning fiscal, monetary, exchange rate, and financial sector policies. These measures include the country’s transition to a market-based foreign currency regime in late July 2024, replacing the previous crawling peg exchange rate system.

The reforms align with Ethiopia’s efforts to secure foreign currency-denominated loans from Bretton Woods institutions, including the IMF and World Bank. Despite pursuing IMF assistance since 2021, tangible progress materialized only in early August 2024, when the IMF Executive Board approved a $3.4 billion loan under the Extended Credit Facility (ECF).

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On 17 January, 2025, the IMF announced the completion of its second review of Ethiopia’s ECF arrangement, allowing for the immediate disbursement of approximately $248 million. This brings total disbursements under the program to $1.611 billion.

In a social media statement, the NBE underscored the significance of the IMF’s financial support, stating that it is “equivalent to an exceptional 850% of the country’s quota.” The central bank also described this commitment as the “largest ever concessional funding” in the organization’s history.

“This [IMF’s support] is a testament to the strength of our macro reforms and policy commitments,” the NBE stated.

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