Ethiopia’s commitment to a tight monetary policy stance—hailed by international partners as a critical safeguard against rising inflation—has taken center stage as the country secured a staff-level agreement with the International Monetary Fund (IMF) for the fifth review of its economic reform program.
An IMF staff team led by Alvaro Piris visited Addis Ababa from May 6 to 20, 2026, for discussions on the review. According to a statement issued by the Fund, the talks have since continued virtually, focusing on recent economic developments and the impact of the conflict in the Gulf region on Ethiopia and its reform program.
“The authorities have continued to make progress in implementing their Homegrown Economic Reform Agenda, with favorable macroeconomic outcomes through to the onset of the war in the Middle East,” said Piris. “Output indicators, exports, reserves, and government revenue all continued to improve through early 2026, alongside declines in inflation.”
However, Piris noted that the Middle East war has caused a significant external shock, disrupting trade and leading to temporary fuel shortages as well as sharp increases in the price of imported fuel and fertilizer. “Even so, economic activity appears robust, with as-yet modest impacts on output growth and consumer price inflation,” he added.
The IMF team warned that risks to the economic outlook have risen due to global uncertainty and high commodity price volatility. “Higher costs for essential imports and the volatile environment call for adroit responses to emerging challenges and careful management of resources,” Piris said.
The international partners have commended the Ethiopian government’s tight monetary policy stance, describing it as a safeguard against potential inflationary pressures. “A tight monetary policy stance remains warranted to anchor inflation expectations,” Piris stated. He also emphasized the need for further efforts to enhance the functioning and transparency of the foreign exchange market, prudent expenditure management, and continued progress in domestic revenue mobilization.
Advancing structural reforms, including improving the business climate, strengthening financial sector resilience, and deepening market reforms, remains key to unlocking higher private sector-led growth, according to the IMF.
The statement also noted that good progress continues toward securing a comprehensive external debt treatment to restore debt sustainability, with discussions with official creditors advancing in line with expectations and talks with bondholders ongoing.
An IMF staff team led by Alvaro Piris visited Addis Ababa from May 6 to 20, 2026, for discussions on the review. According to a statement issued by the Fund, the talks have since continued virtually, focusing on recent economic developments and the impact of the conflict in the Gulf region on Ethiopia and its reform program.
“The authorities have continued to make progress in implementing their Homegrown Economic Reform Agenda, with favorable macroeconomic outcomes through to the onset of the war in the Middle East,” said Piris. “Output indicators, exports, reserves, and government revenue all continued to improve through early 2026, alongside declines in inflation.”
However, Piris noted that the Middle East war has caused a significant external shock, disrupting trade and leading to temporary fuel shortages as well as sharp increases in the price of imported fuel and fertilizer. “Even so, economic activity appears robust, with as-yet modest impacts on output growth and consumer price inflation,” he added.
The IMF team warned that risks to the economic outlook have risen due to global uncertainty and high commodity price volatility. “Higher costs for essential imports and the volatile environment call for adroit responses to emerging challenges and careful management of resources,” Piris said.
The international partners have commended the Ethiopian government’s tight monetary policy stance, describing it as a safeguard against potential inflationary pressures. “A tight monetary policy stance remains warranted to anchor inflation expectations,” Piris stated. He also emphasized the need for further efforts to enhance the functioning and transparency of the foreign exchange market, prudent expenditure management, and continued progress in domestic revenue mobilization.
Advancing structural reforms, including improving the business climate, strengthening financial sector resilience, and deepening market reforms, remains key to unlocking higher private sector-led growth, according to the IMF.
The statement also noted that good progress continues toward securing a comprehensive external debt treatment to restore debt sustainability, with discussions with official creditors advancing in line with expectations and talks with bondholders ongoing.
