Six Things to Know about Ethiopia's New Program

IMF News, December 23, 2019

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The authorities developed a Homegrown Economic Reform Plan tailored to the country’s needs and preferences and engaged in wide-ranging outreach with key stakeholders.
The program is aimed at supporting the Ethiopian government’s Homegrown Economic Reform Program, which is designed to eliminate macroeconomic imbalances and lay the foundation for sustainable and inclusive growth.
The authorities want the economy to transition away from being public sector-led to one that is driven by the private sector.

The IMF has approved a program for Ethiopia of almost US$3 billion.
The IMF approved the Ethiopian authorities’ request for an almost US$ 3 billion loan under its Extended Credit Facility and Extended Fund Facility to back the Homegrown Economic Reform Plan.
The program will help address the foreign exchange shortage and aim to reduce debt vulnerabilities.

Reduce debt vulnerabilities through bringing public sector borrowing in line with lower debt levels and stronger oversight of state-owned enterprises.
Monetary policy will aim to bring inflation into single digits.
Exchange rate reform will address foreign exchange shortages and increase exchange rate flexibility to improve export competitiveness when combined with structural reforms.

Fiscal policy is designed to create space for more spending to tackle poverty.
Expenditures on the rural and urban poor will be increased to ensure sufficient resources for the Productive Safety Net Program, one of the largest and most successful social safety net programs in Africa.
Revenue reforms and increased efficiency of public investment are intended to ensure infrastructure and social spending needs are met while maintaining sustainable debt levels.

The program supports the transition from public sector-led to private sector-led growth by generating returns from past investments in infrastructure and education.
Key reforms include resolving the foreign exchange shortage and improving the business environment to boost investment and accelerate economic transformation.

The program aims to improve access to credit by the private sector, addressing a key obstacle to private investment.
Financial sector development will be accompanied by stronger supervision and financial safety nets to ensure financial sector stability.
Technical assistance and training will support financial sector reform and revenue mobilization.

Six Things to Know about Ethiopia's New Program (IMF News, December 23, 2019).