{ "title": "Ethiopia’s Central Bank: Leading Transformative Reform", "publication": "IMF News, May 28, 2025", "sourceUrl": "https://www.imf.org/en/news/articles/2025/05/28/cf-ethiopias-central-bank-leading-transformative-reform", "canonical": "https://www.imf.org/en/news/articles/2025/05/28/cf-ethiopias-central-bank-leading-transformative-reform", "overlayPath": "/en/news/articles/2025/05/28/cf-ethiopias-central-bank-leading-transformative-reform/index.md", "summary": "Ethiopia has taken historic steps to address macroeconomic imbalances while fostering sustainable growth", "publishDate": "2025-05-28", "sections": [ { "heading": "Overview", "content": "- Ethiopia has embarked on a comprehensive transformation of its monetary and exchange rate regimes to address macroeconomic imbalances while fostering sustainable growth.\n- The reform program began under the Homegrown Economic Reform Program launched in 2019.\n- The IMF is supporting Ethiopia’s reform efforts through a four-year $3.4 billion Extended Credit Facility Arrangement.\n- Reforms target acute foreign exchange shortages, high inflation, budgetary constraints, financial vulnerabilities in state-owned enterprises and state-owned banks, and a sovereign debt restructuring, while mitigating social impacts and managing humanitarian pressures." }, { "heading": "Monetary policy reforms", "content": "- Revision of the Central Bank Act to prioritize price stability.\n- Introduction of a monetary policy rate.\n- Implementation of open market operations for liquidity management with banks.\n- Establishment of a Monetary Policy Committee to advise on monetary policy decisions based on comprehensive assessments of economic conditions.\n- Interest rates are now positive in real terms.\n- Inflation has declined from 30 percent to 13 percent." }, { "heading": "Foreign exchange reforms", "content": "- Move to a market-based foreign exchange regime for the first time in five decades.\n- Comprehensive liberalization of foreign exchange transactions.\n- Elimination of the requirement to surrender export earnings to the National Bank of Ethiopia (NBE).\n- Early results reported:\n - Exports are expected to double.\n - Foreign reserves have already been tripled.\n - Foreign exchange availability has increased." }, { "heading": "Institutional, legal, and organizational changes", "content": "- NBE is updating its legal framework and internal organization to support the new policy stance.\n- Emphasis on communication: transparent communication, active market monitoring, and open channels of dialogue with stakeholders to build credibility and trust." }, { "heading": "Macroeconomic context and objectives", "content": "- Background: After two decades of sustained economic growth primarily driven by public investment, Ethiopia faced unsustainable macroeconomic imbalances due to the state’s reliance on external creditors, a large public bank, and the NBE.\n- Primary objective of the reform agenda: to address fundamentally, boldly, and conclusively the sources of macroeconomic instability and create a much more open, investment-friendly, and private-sector-friendly environment to support job creation, increased income, and improved livelihoods." }, { "heading": "Outcomes and expectations", "content": "- Addressing foreign exchange shortages and inflation to create conditions for high, sustainable growth.\n- Increased foreign exchange availability and strengthened reserves.\n- Anticipated increase in exports (expected to double).\n- Progress toward a fully-fledged interest-rate based monetary policy and a deepened foreign exchange market." }, { "heading": "Lessons learned and next steps", "content": "- Lessons emphasized by NBE leadership:\n - Preparation and coordination among government agencies are crucial.\n - Sequencing of reforms matters to maintain stability and manage public expectations.\n - Adapting to evolving economic conditions is vital for success.\n- Next steps highlighted:\n - Deepen current monetary policy reforms as Ethiopia moves to a fully-fledged interest-rate based monetary policy.\n - Deepen the foreign exchange market.\n - Decisively address macroeconomic instability to create a strong foundation for sustainable growth.\n\nSource: Edited transcript of conversation between Mamo Mihretu, Governor of the National Bank of Ethiopia, and Abebe Aemro Selassie, Director of the IMF’s African Department, May 28, 2025.\n\n---\n\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- Extended Credit Facility Arrangement\n- view video\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2025/05/28/cf-ethiopias-central-bank-leading-transformative-reform" } ], "bullets": [ "[Markdown version](/en/news/articles/2025/05/28/cf-ethiopias-central-bank-leading-transformative-reform/index.md)", "[Structured JSON version](/en/news/articles/2025/05/28/cf-ethiopias-central-bank-leading-transformative-reform/index.json)", "[Bundle manifest](/en/news/articles/2025/05/28/cf-ethiopias-central-bank-leading-transformative-reform/bundle-manifest.json)", "Published: May 28, 2025", "Ethiopia has embarked on a comprehensive transformation of its monetary and exchange rate regimes to address macroeconomic imbalances while fostering sustainable growth.", "The reform program began under the Homegrown Economic Reform Program launched in 2019.", "The IMF is supporting Ethiopia’s reform efforts through a four-year $3.4 billion Extended Credit Facility Arrangement.", "Reforms target acute foreign exchange shortages, high inflation, budgetary constraints, financial vulnerabilities in state-owned enterprises and state-owned banks, and a sovereign debt restructuring, while mitigating social impacts and managing humanitarian pressures.", "Revision of the Central Bank Act to prioritize price stability.", "Introduction of a monetary policy rate.", "Implementation of open market operations for liquidity management with banks.", "Establishment of a Monetary Policy Committee to advise on monetary policy decisions based on comprehensive assessments of economic conditions.", "Interest rates are now positive in real terms.", "Inflation has declined from 30 percent to 13 percent.", "Move to a market-based foreign exchange regime for the first time in five decades.", "Comprehensive liberalization of foreign exchange transactions.", "Elimination of the requirement to surrender export earnings to the National Bank of Ethiopia (NBE).", "Early results reported:", "NBE is updating its legal framework and internal organization to support the new policy stance.", "Emphasis on communication: transparent communication, active market monitoring, and open channels of dialogue with stakeholders to build credibility and trust.", "Background: After two decades of sustained economic growth primarily driven by public investment, Ethiopia faced unsustainable macroeconomic imbalances due to the state’s reliance on external creditors, a large public bank, and the NBE.", "Primary objective of the reform agenda: to address fundamentally, boldly, and conclusively the sources of macroeconomic instability and create a much more open, investment-friendly, and private-sector-friendly environment to support job creation, increased income, and improved livelihoods.", "Addressing foreign exchange shortages and inflation to create conditions for high, sustainable growth.", "Increased foreign exchange availability and strengthened reserves.", "Anticipated increase in exports (expected to double).", "Progress toward a fully-fledged interest-rate based monetary policy and a deepened foreign exchange market.", "Lessons emphasized by NBE leadership:", "Next steps highlighted:", "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)", "[PRESS CENTER](http://presscenter.imf.org/)", "[Extended Credit Facility Arrangement](https://www.imf.org/en/News/Articles/2025/01/17/pr25006-ethiopia-imf-executive-board-completes-second-review-ecf-arrangement)", "[view video](https://www.imf.org/en/Videos/view?vid=6371892793112)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2025/05/28/cf-ethiopias-central-bank-leading-transformative-reform/index.md", "json": "/en/news/articles/2025/05/28/cf-ethiopias-central-bank-leading-transformative-reform/index.json", "bundleManifest": "/en/news/articles/2025/05/28/cf-ethiopias-central-bank-leading-transformative-reform/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T03:54:00.216Z" }