Ethiopia could face persistent double-digit inflation through 2030 unless monetary restraint is accompanied by stronger fiscal discipline and improvements in agricultural supply chains, according to a macroeconomic outlook published by the Ethiopian Economics Association (EEA).
The report’s baseline model projects inflation at 16.54 per cent in 2026, declining gradually to 14.91 per cent in 2030. Those projections assume annual broad money supply growth of approximately 25 per cent and a 5 per cent depreciation in the nominal effective exchange rate, broadly reflecting historical trends. They are conditional simulations rather than official inflation forecasts.
Prepared by researchers Mezid N. Keraga and Jeleta G. Kebede, the September 2026 report, Ethiopia’s Macroeconomic Performance and Outlook, examines economic developments between 1993 and 2025. Its findings and conclusions represent the authors’ views and do not necessarily reflect the EEA’s official position.
The authors argue that lasting price stability requires action on several fronts: controlling monetary expansion, reducing reliance on central bank financing of government deficits, improving food production and distribution, and protecting vulnerable households from adjustment costs.
The study identifies agricultural supply conditions as a major influence on Ethiopia’s inflation, noting that food price movements have historically played a central role in shaping the overall consumer price index.
Its analysis finds that headline and food inflation rose together between 2018 and 2022 before moderating through 2025. Non-food inflation followed a different path, peaking later and showing renewed upward pressure towards 2025.
The authors associate the latter trend with the delayed transmission of higher imported input costs following foreign exchange reforms.
However, their statistical model does not find a significant relationship between movements in the nominal effective exchange rate and overall inflation across the full estimation period. The distinction highlights the difference between the report’s interpretation of recent price movements and the relationships established by its model.
The report argues that tighter monetary and fiscal policies alone may be insufficient when inflation also reflects constraints in agricultural productivity, storage and domestic logistics.
It recommends directing public investment towards agricultural value chains to reduce supply disruptions and improve the movement of food from producers to consumers.
The authors also identify government financing as a source of inflationary pressure, arguing that public-sector credit expanded sharply after 2020 while private-sector borrowing faced restrictions.
They describe this imbalance as a form of fiscal dominance, in which government financing needs constrain the effectiveness of monetary policy.
To address it, the report recommends ending reliance on direct central bank advances to finance public deficits and shifting government borrowing towards competitive domestic debt markets.
At the same time, the authors favour replacing rigid administrative credit ceilings with interest-rate-based instruments, arguing that productive private businesses need access to finance.
The recommendations therefore combine overall monetary restraint with a change in how credit is allocated, rather than advocating uniform restrictions on all borrowers.
The report warns that prolonged inflation above nominal interest rates has reduced the purchasing power of savings and weakened incentives to keep money in formal financial institutions.
It argues that borrowers able to obtain credit against substantial collateral can benefit from low inflation-adjusted borrowing costs, while savers bear losses in real terms.
The authors recommend allowing nominal interest rates to adjust more flexibly to restore positive real returns and support domestic savings mobilisation. They also call for targeted, temporary social protection measures to cushion vulnerable households against higher imported prices associated with foreign exchange adjustment.
The projections require caution. The report’s model estimated inflation at 28.47 per cent for 2025, compared with an official figure of 13.9 per cent cited in the study—a substantial discrepancy.
The authors treated the 2025 observation as an outlier and excluded it from the baseline model. The report also acknowledges that a statistical test continued to find non-normal model residuals after adjustments and says the results were interpreted cautiously.
Its alternative scenarios produce substantially different outcomes, underscoring the sensitivity of the forecasts to assumptions about money supply, exchange rates and policy settings. The baseline path should therefore not be read as an inevitable outcome or as a replacement for observed inflation data.
The report’s central policy message is that reducing inflation sustainably requires coordination between monetary management, government financing and measures to expand supply. Restraining liquidity without addressing food-market bottlenecks would leave important sources of price pressure unresolved, the authors argue.
