Press Release No. 10/108

Press Release No. 10/108
March 24, 2010

An International Monetary Fund (IMF) mission led by Mr. Paul Mathieu visited Addis Ababa March 12-24 to conduct discussions on the 2010 Article IV consultation and the first review under the program supported by the Exogenous Shocks Facility. The mission met with His Excellency Prime Minister Meles Zenawi, Minister of Finance and Economic Development Sufian Ahmed, and Governor of the National Bank of Ethiopia Teklewold Atnafu, as well representatives of the private sector, labor unions, and civil society.

At the conclusion of the mission, Mr. Mathieu issued the following statement:

“Good progress was made in the first half of 2009/10 in macroeconomic stabilization. Macroeconomic conditions continued to improve while broad-based growth momentum has been maintained. Overall, inflation decelerated sharply to 7.1% at end-2009 following very high inflation in 2008 and early 2009. But non-food inflation remains close to 20% and has been rising in recent months.

“The economic outlook remains generally favorable with continued strong growth expected. Ongoing efforts to lower inflation and rebuild foreign reserves will require a tight rein on money growth and achieving interest rates that are positive in real terms. Ethiopia’s public external debt has risen in recent years on large physical infrastructure investments, but remains within the moderate risk range. Going forward the authorities are encouraged to reinforce financial sector supervision, promote private sector development and financial deepening, and improve the national account statistics.”

“With regard to the program, strong external assistance (including from IMF financing) and weak import growth helped international reserves recover to 2.2 months of imports cover. Fiscal performance in 2009/10 has been commendable with higher revenues and lower domestic financing than targeted. All quantitative targets at end-December 2009 were met with margins. On the structural side, progress is being made to raise tax revenue, monitor borrowing by the public enterprises, and manage monetary liquidity by the National Bank.”

“We expect to finalize a Letter of Intent that summarizes the agreement, with a view to allowing the IMF Executive Board to consider the completion of the first review in May, allowing the disbursement of SDR 40.1 million (about US$61.3 million). The second program review, expected to be completed in October, will focus on progress in liquidity management, implementation of the tax reform, and improvements to the national income statistics.”

The 14-month arrangement under the High Access Component of the Exogenous Shocks Facility was approved August 26, 2009 for SDR 153.8 million (about US$235 million). (see Press Release No. 09/289).