{
  "title": "IMF Executive Board Concludes 2019 Article IV Consultation with The Federal Democratic Republic of Ethiopia",
  "publication": "IMF News, January 28, 2020",
  "sourceUrl": "https://www.imf.org/en/news/articles/2020/01/28/pr2019-ethiopia-imf-executive-board-concludes-2019-article-iv-consultation",
  "canonical": "https://www.imf.org/en/news/articles/2020/01/28/pr2019-ethiopia-imf-executive-board-concludes-2019-article-iv-consultation",
  "overlayPath": "/en/news/articles/2020/01/28/pr2019-ethiopia-imf-executive-board-concludes-2019-article-iv-consultation/index.md",
  "summary": "On December 20, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation with The Federal Democratic Republic of Ethiopia.",
  "publishDate": "2020-01-28",
  "sections": [
    {
      "heading": "Summary Findings and Recent Developments",
      "content": "- On December 20, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation with The Federal Democratic Republic of Ethiopia and approved three-year arrangements under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) for Ethiopia.\n- Ethiopia sustained high economic growth over the last decade with substantial progress on reducing poverty and improving social indicators.\n- In 2018/19, real gross domestic product (GDP) is estimated to have grown by 9 percent, driven by manufacturing and services.\n- Goods export performance remained weak and foreign exchange shortages persist.\n- Policies targeting public investment and debt contributed to a narrowing of the current account deficit to 4.5 percent of GDP and a reduction in public and publicly-guaranteed debt to 57 percent of GDP.\n- Inflation remained elevated in double digits, largely due to higher food prices; non-food inflation has also been trending upward.\n- Revenues came in below target, but expenditure cuts contained the fiscal deficit to 2.5 percent of GDP, below budget.\n- The authorities announced a Homegrown Economic Reform Plan (macroeconomic, structural and sectoral policies) to address vulnerabilities and structural bottlenecks inhibiting private sector activity."
    },
    {
      "heading": "Near-term Outlook and Projections",
      "content": "- The macroeconomic measures under the Homegrown Economic Reform Plan are expected to contribute to slower real GDP growth of 6.2 percent in 2019/20.\n- Public expenditure restraint and tighter monetary policy are expected to contribute to a gradual reduction in inflation.\n- Reserves are expected to improve to around US$4 billion by end 2019/20, sufficient to cover 2 months of prospective imports, due to higher external financing flows, including from the Fund.\n- Over the medium term, announced macroeconomic and structural reforms are expected to reduce public debt, lower external vulnerabilities, and strengthen growth, investment and exports.\n- Outlook is subject to downside risks, particularly from domestic opposition to reforms ahead of upcoming elections, rising protectionism worldwide, weaker-than-expected global growth, and climate-related shocks."
    },
    {
      "heading": "Executive Board Assessment — Key Analysis and Recommendations",
      "content": "- Directors agreed that Ethiopia’s growth model, driven by public investment, supported rapid growth and improved living standards but led to a build-up of debt and external vulnerabilities.\n- Directors highlighted urgency of fundamental reforms to:\n  - Correct macroeconomic imbalances.\n  - Ease structural bottlenecks.\n  - Lay foundation for sustainable, inclusive growth led by the private sector.\n- Directors welcomed the Homegrown Economic Reform Plan and recommended Fund support to help catalyze private investment and donor financing.\n- Given high implementation risks amid external vulnerabilities and political uncertainty, Directors stressed the importance of:\n  - Steadfast determination.\n  - Strong communication.\n  - Social protection to obtain broad-based public buy-in.\n- Directors urged authorities to seek additional debt reprofiling from external creditors to improve debt dynamics."
    },
    {
      "heading": "Exchange Rate, Monetary Policy, and Financial Sector Recommendations",
      "content": "- Directors supported a comprehensive approach to address exchange rate overvaluation and foreign exchange shortages, prioritizing:\n  - Increasing exchange rate flexibility.\n  - Reducing inflation.\n  - Strengthening competitiveness.\n  - Rebuilding international reserves.\n- Recommendation for a reform roadmap to transition to a market clearing exchange rate regime.\n- Support for monetary tightening, complemented by:\n  - Spending restraint by state owned enterprises (SOEs).\n  - Phasing out of central bank financing of the government and the Development Bank of Ethiopia (DBE).\n- Continued efforts needed to modernize the monetary policy framework and further develop financial markets to deepen inclusion.\n- Financial sector priorities include:\n  - Reform SOEs to reduce public debt vulnerabilities and improve governance and transparency.\n  - Reduce SOEs’ borrowing, strengthen their financial positions, and prioritize investment activities.\n  - Immediate priorities: an asset quality review of the Commercial Bank of Ethiopia, and a strategy to address the DBE’s non-performing loans and develop a sustainable financing model."
    },
    {
      "heading": "Fiscal Policy, Revenue Mobilization, and Social Protection",
      "content": "- Directors agreed reforms are urgently needed to reverse the recent decline in domestic revenue mobilization and meet social and infrastructure needs.\n- Directors welcomed planned extension of value added tax coverage.\n- Emphasized need to:\n  - Protect high quality social assistance programs.\n  - Rationalize subsidies.\n  - Improve expenditure efficiency more broadly."
    },
    {
      "heading": "Governance, AML/CFT, and Data",
      "content": "- Directors called on the authorities to build on progress made in improving the AML/CFT framework, and further strengthen data quality."
    },
    {
      "heading": "Key Economic Indicators and IMF Staff Projections (selected items)",
      "content": "- GDP at constant prices (at factor cost), annual percent change:\n  - 2017/18: 7.7\n  - 2018/19 (Prel.): 9.0\n  - 2019/20 (Program): 6.2\n  - 2020/21: 6.1\n  - 2021/22: 7.0\n  - 2022/23: 7.5\n  - 2023/24: 8.0\n- GDP deflator:\n  - 2017/18: 12.4\n  - 2018/19 (Prel.): 13.2\n  - 2019/20 (Program): 19.4\n  - 2020/21: 12.3\n  - 2021/22: 8.8\n  - 2022/23: 8.1\n- Consumer prices (period average):\n  - 2017/18: 14.5\n  - 2018/19 (Prel.): 12.6\n  - 2019/20 (Program): 11.1\n- Consumer prices (end period):\n  - 2017/18: 16.8\n  - 2018/19 (Prel.): 15.3\n  - 2019/20 (Program): 18.1\n  - 2020/21: 9.4\n- Current account and external:\n  - Exports of goods and services (U.S. dollars, f.o.b.), annual percent change: 13.1 (2017/18); 7.9 (2018/19); 12.8 (2019/20); 12.7 (2020/21); 14.0 (2021/22); 9.7 (2022/23)\n  - Imports of goods and services (U.S. dollars, c.i.f.), annual percent change: 0.2 (2017/18); 4.1 (2018/19); 11.3 (2019/20); 8.5 (2020/21); 6.6 (2021/22); 5.1 (2022/23)\n  - External current account balance, including official transfers (Percent of GDP): -6.2 (2017/18); -4.5 (2018/19); -5.5 (2019/20); -4.6 (2020/21); -4.0 (2021/22); -3.4 (2022/23)\n- Money and credit:\n  - Change in net foreign assets: 3.5 (2017/18); -63.2 (2018/19); 83.9 (2019/20); 222.1 (2020/21); 95.2 (2021/22); 71.7 (2022/23); 42.5 (2023/24)\n  - Broad money, annual percent change: 29.2 (2017/18); 19.7 (2018/19); 18.0 (2019/20); 19.2 (2020/21); 19.9 (2021/22); 21.6 (2022/23); 22.0 (2023/24)\n  - Base money, annual percent change: 19.1 (2017/18); 12.5 (2018/19); 13.0 (2019/20); 13.5 (2020/21)\n- Financial balances (Percent of GDP):\n  - Gross domestic savings: 24.1 (2017/18); 22.3 (2018/19); 25.2 (2019/20); 25.0 (2020/21); 26.7 (2021/22); 29.5 (2022/23); 31.8 (2023/24)\n  - Public savings: 2.1 (2017/18); 1.7 (2018/19); 2.6 (2019/20); 3.6 (2020/21); 4.7 (2021/22); 4.9 (2022/23); 5.0 (2023/24)\n  - Gross domestic investment: 34.2 (2017/18); 35.2 (2018/19); 34.3 (2019/20); 36.3 (2020/21); 38.1 (2021/22); 38.6 (2022/23); 40.8 (2023/24)\n  - Resource gap: -10.1 (2017/18); -12.9 (2018/19); -9.1 (2019/20); -11.4 (2020/21); -9.0 (2021/22)\n- Government finances (Percent of GDP, unless otherwise indicated):\n  - Revenue: 11.5 (2017/18); 11.7 (2018/19); 14.2 (2019/20); 14.7 (2020/21)\n  - Tax revenue: 10.7 (2017/18); 10.1 (2018/19); 13.3 (2019/20)\n  - Nontax revenue: 1.6 (2017/18)\n  - External grants: 0.8 (2017/18); 1.2 (2018/19); 0.9 (2019/20); 0.6 (2020/21); 0.7 (2021/22)\n  - Expenditure and net lending: 16.1 (2017/18); 15.0 (2018/19); 16.0 (2019/20); 17.1 (2020/21); 17.4 (2021/22)\n  - Fiscal balance, excluding grants (cash basis): -3.8 (2017/18); -3.0 (2018/19); -2.6 (2019/20)\n  - Fiscal balance, including grants (cash basis): -2.5 (2017/18); -2.2 (2018/19)\n  - Total financing (including residuals): 3.0 (2017/18); 2.5 (2018/19); 2.2 (2019/20); 1.9 (2020/21)\n  - External financing: 1.3 (2017/18); 1.0 (2018/19)\n  - Domestic financing (including privatization): 2.7 (2017/18); 0.3 (2018/19); 0.4 (2019/20)\n- Public debt (Public and publicly-guaranteed debt, including the National Bank of Ethiopia and Ethio Telecom), Percent of GDP:\n  - 59.5 (2017/18)\n  - 56.8 (2018/19)\n  - 53.4 (2019/20)\n  - 52.7 (2020/21)\n  - 52.0 (2021/22)\n  - 47.5 (2022/23)\n  - 43.3 (2023/24)\n  - Domestic debt: 28.6 (2017/18); 25.4 (2018/19); 16.6 (2019/20); 15.5 (2020/21)\n  - External debt (including to the IMF): 30.4 (2017/18); 28.2 (2018/19); 28.0 (2019/20); 30.1 (2020/21); 32.8 (2021/22); 30.9 (2022/23); 27.9 (2023/24)\n- External and reserves (in millions of U.S. dollars):\n  - Overall balance of payments: -202 (2017/18); 58 (2018/19); -346 (2019/20); 22 (2020/21); -547 (2021/22); 184 (2022/23); 1,692 (2023/24)\n  - Gross official reserves: 2,848 (2017/18); 3,415 (2018/19); 4,031 (2019/20); 5,661 (2020/21); 7,441 (2021/22); 9,551 (2022/23); 11,232 (2023/24)\n  - Months of imports of goods and nonfactor services of the following year: 1.8 (2017/18); 2.0 (2018/19); 3.9 (2019/20); 4.3 (2020/21)\n- GDP at current market prices (billions of birr): 2,200 (2017/18); 2,696 (2018/19); 3,391 (2019/20); 4,094 (2020/21); 4,828 (2021/22); 5,630 (2022/23); 6,594 (2023/24)\n\nSource: IMF Communications Department, \"IMF Executive Board Concludes 2019 Article IV Consultation with The Federal Democratic Republic of Ethiopia\", January 28, 2020.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- The Federal Democratic Republic of Ethiopia and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2020/01/28/pr2019-ethiopia-imf-executive-board-concludes-2019-article-iv-consultation"
    }
  ],
  "bullets": [
    "[Markdown version](/en/news/articles/2020/01/28/pr2019-ethiopia-imf-executive-board-concludes-2019-article-iv-consultation/index.md)",
    "[Structured JSON version](/en/news/articles/2020/01/28/pr2019-ethiopia-imf-executive-board-concludes-2019-article-iv-consultation/index.json)",
    "[Bundle manifest](/en/news/articles/2020/01/28/pr2019-ethiopia-imf-executive-board-concludes-2019-article-iv-consultation/bundle-manifest.json)",
    "Published: January 28, 2020",
    "On December 20, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation with The Federal Democratic Republic of Ethiopia and approved three-year arrangements under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) for Ethiopia.",
    "Ethiopia sustained high economic growth over the last decade with substantial progress on reducing poverty and improving social indicators.",
    "In 2018/19, real gross domestic product (GDP) is estimated to have grown by 9 percent, driven by manufacturing and services.",
    "Goods export performance remained weak and foreign exchange shortages persist.",
    "Policies targeting public investment and debt contributed to a narrowing of the current account deficit to 4.5 percent of GDP and a reduction in public and publicly-guaranteed debt to 57 percent of GDP.",
    "Inflation remained elevated in double digits, largely due to higher food prices; non-food inflation has also been trending upward.",
    "Revenues came in below target, but expenditure cuts contained the fiscal deficit to 2.5 percent of GDP, below budget.",
    "The authorities announced a Homegrown Economic Reform Plan (macroeconomic, structural and sectoral policies) to address vulnerabilities and structural bottlenecks inhibiting private sector activity.",
    "The macroeconomic measures under the Homegrown Economic Reform Plan are expected to contribute to slower real GDP growth of 6.2 percent in 2019/20.",
    "Public expenditure restraint and tighter monetary policy are expected to contribute to a gradual reduction in inflation.",
    "Reserves are expected to improve to around US$4 billion by end 2019/20, sufficient to cover 2 months of prospective imports, due to higher external financing flows, including from the Fund.",
    "Over the medium term, announced macroeconomic and structural reforms are expected to reduce public debt, lower external vulnerabilities, and strengthen growth, investment and exports.",
    "Outlook is subject to downside risks, particularly from domestic opposition to reforms ahead of upcoming elections, rising protectionism worldwide, weaker-than-expected global growth, and climate-related shocks.",
    "Directors agreed that Ethiopia’s growth model, driven by public investment, supported rapid growth and improved living standards but led to a build-up of debt and external vulnerabilities.",
    "Directors highlighted urgency of fundamental reforms to:",
    "Directors welcomed the Homegrown Economic Reform Plan and recommended Fund support to help catalyze private investment and donor financing.",
    "Given high implementation risks amid external vulnerabilities and political uncertainty, Directors stressed the importance of:",
    "Directors urged authorities to seek additional debt reprofiling from external creditors to improve debt dynamics.",
    "Directors supported a comprehensive approach to address exchange rate overvaluation and foreign exchange shortages, prioritizing:",
    "Recommendation for a reform roadmap to transition to a market clearing exchange rate regime.",
    "Support for monetary tightening, complemented by:",
    "Continued efforts needed to modernize the monetary policy framework and further develop financial markets to deepen inclusion.",
    "Financial sector priorities include:",
    "Directors agreed reforms are urgently needed to reverse the recent decline in domestic revenue mobilization and meet social and infrastructure needs.",
    "Directors welcomed planned extension of value added tax coverage.",
    "Emphasized need to:",
    "Directors called on the authorities to build on progress made in improving the AML/CFT framework, and further strengthen data quality.",
    "GDP at constant prices (at factor cost), annual percent change:",
    "GDP deflator:",
    "Consumer prices (period average):",
    "Consumer prices (end period):",
    "Current account and external:",
    "Money and credit:",
    "Financial balances (Percent of GDP):",
    "Government finances (Percent of GDP, unless otherwise indicated):",
    "Public debt (Public and publicly-guaranteed debt, including the National Bank of Ethiopia and Ethio Telecom), Percent of GDP:",
    "External and reserves (in millions of U.S. dollars):",
    "GDP at current market prices (billions of birr): 2,200 (2017/18); 2,696 (2018/19); 3,391 (2019/20); 4,094 (2020/21); 4,828 (2021/22); 5,630 (2022/23); 6,594 (2023/24)",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[The Federal Democratic Republic of Ethiopia and the IMF](http://www.imf.org/external/country/ETH/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
  ],
  "alternates": {
    "markdown": "/en/news/articles/2020/01/28/pr2019-ethiopia-imf-executive-board-concludes-2019-article-iv-consultation/index.md",
    "json": "/en/news/articles/2020/01/28/pr2019-ethiopia-imf-executive-board-concludes-2019-article-iv-consultation/index.json",
    "bundleManifest": "/en/news/articles/2020/01/28/pr2019-ethiopia-imf-executive-board-concludes-2019-article-iv-consultation/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-25T23:23:38.358Z"
}