Ethiopia Implements Bold Economic Reforms to Foster Stability and Growth
Ethiopia has taken historic strides to address long-standing macroeconomic imbalances, introducing sweeping reforms to modernize its monetary and exchange rate frameworks while laying a foundation for sustainable growth.
Key changes include the liberalization of the foreign exchange regime for the first time in five decades, adoption of an interest-rate-based monetary policy, and ending central bank financing of government spending.
These reforms are part of the country’s broader Homegrown Economic Reform Program, which aims to create an investment-friendly and private-sector-led economy.
Speaking during the 2025 IMF–World Bank Spring Meetings, Governor of the National Bank of Ethiopia (NBE), Mamo Mihretu, noted that prior to the reforms, the Ethiopian economy faced severe foreign exchange shortages, limited credit access for the private sector, and high inflation, all compounded by debt and financial sector vulnerabilities.
“Inflation has dropped from 30% to 13%, foreign reserves have tripled, and exports are set to double,” Mihretu stated. “These are early but promising signs of recovery and transformation.”
To strengthen policy implementation, Ethiopia has revised the Central Bank Act to prioritize price stability, introduced a monetary policy rate, and established a Monetary Policy Committee. In the foreign exchange market, surrender requirements for exporters were removed, and a market-based regime was launched to boost transparency and competitiveness.
Communication and coordination have also been central to the strategy. “Building credibility and trust through transparent engagement with stakeholders has been vital,” Mihretu emphasized.
Supported by a $3.4 billion Extended Credit Facility from the IMF, the reform program also targets broader fiscal challenges, including debt restructuring and enhancing the resilience of state-owned enterprises.
Looking ahead, Ethiopia plans to deepen monetary policy reforms and expand the foreign exchange market while maintaining momentum toward a stable and inclusive economic future.
