## Ethiopia: Remarkable Progress Over More Than a Decade

_IMF News, December 4, 2018_

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**Canonical URL:** [Ethiopia: Remarkable Progress Over More Than a Decade](https://www.imf.org/en/news/articles/2018/12/04/na120418-ethiopia-remarkable-progress)

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## Bibliographic details
- Published: December 4, 2018

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### Development achievements and welfare gains
- High growth over more than a decade has led to a significant reduction in poverty and improved living standards.
- Large infrastructure investments are beginning to bear fruit and the provision of public services such as education and health has increased dramatically.
- Welfare indicators:
  - Number of maternal deaths per 100,000 live births fell from 1,080 in 1995 to 353 in 2015.
  - Proportion of people living in poverty fell from over 45 percent in 1995 to around 23 percent in 2015.

### Recent growth performance and near-term outlook
- 2017/18 growth dipped to 7.7 percent due to:
  - Reduced government public expenditure aimed at tackling the growing current account deficit and indebtedness.
  - Political uncertainty.
  - Severe foreign exchange shortages.
- Near-term projections and expectations:
  - Growth is expected to recover to 8.5 percent this fiscal year as the political climate settles and investment recovers.
  - The current account deficit should continue to narrow.
  - IMF staff expect inflation—which currently exceeds the single-digit authorities’ target—to continue to fall due to an appropriately tight monetary policy.

### Risks to the medium-term outlook
- Large external imbalances and the public debt burden are constraining future growth and pose risks to the medium-term outlook.
- Debt assessment:
  - While debt is sustainable in the medium term, Ethiopia remains at high risk of debt distress.
- Policy priorities to mitigate risks:
  - Restrained public sector borrowing—particularly on non-concessional loans—while protecting pro-poor spending programs.
  - Mobilize tax revenues and raise exports to reduce vulnerabilities over the medium term.

### Reform agenda to support private sector–led, sustainable growth
- Political and reform context:
  - Since his election, Prime Minister Abiy has created space for a more inclusive political dialogue and taken steps to bring stability to the region.
  - The new government has announced an ambitious reform program aimed at opening the economy to private investment and competition.
- Public-private partnerships and privatization:
  - A new legal framework for public-private partnerships can strengthen growth by promoting private sector development and provision of public services while reducing government costs.
  - The report calls for privatization and removal of barriers to private investment in key sectors, supporting government policy announcements.
- Financial sector and exchange rate policies:
  - Develop the domestic financial system by introducing a market for government securities with market-determined interest rates.
    - This would allow the central bank to reduce direct financing of the government and increase the effectiveness of monetary policy in maintaining low and stable inflation.
  - Reform the Development Bank of Ethiopia:
    - IMF staff encourage authorities to review the strategy and financial model of the Development Bank of Ethiopia, which has seen lower-than-expected returns to its investments in recent years.
  - A more flexible system for the exchange rate is needed to:
    - Increase foreign exchange reserves.
    - Improve external competitiveness.
    - Increase the availability of foreign exchange.

### Gender equality and inclusive growth
- Analysis by IMF staff and UN Women finds promoting gender equality could yield large economic benefits over time.
- Key areas to close gender gaps:
  - Educational attainment.
  - Formal labor force participation rates.
  - Access to quality land and other resources.
- Government actions:
  - The new government has appointed a gender balanced cabinet.
  - Women have been placed in key decision-making positions, including the presidency and the head of the Supreme Court.

*Source: International Monetary Fund — Ethiopia: Remarkable Progress Over More Than a Decade*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [Read the report](https://www.imf.org/en/Publications/CR/Issues/2018/12/04/The-Federal-Democratic-Republic-of-Ethiopia-2018-Article-IV-Consultation-Press-Release-Staff-46434)
- [Read the selected issues](https://www.imf.org/en/Publications/CR/Issues/2018/12/04/The-Federal-Democratic-Republic-of-Ethiopia-Selected-Issues-46435)
- [Read the press release](https://www.imf.org/en/News/Articles/2018/12/04/pr18452-ethiopia-imf-executive-board-concludes-2018-article-iv-consultation)
- [Ethiopia and the IMF](https://www.imf.org/en/Countries/ETH)
- [https://www.imf.org/en/Publications/REO/EU/Issues/2018/11/07/EURREO1118](https://www.imf.org/en/Publications/REO/EU/Issues/2018/11/07/EURREO1118)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2018/12/04/na120418-ethiopia-remarkable-progress_