IMF, Ethiopia seal reform milestone with new $261m funding deal

By Chris Uba

The International Monetary Fund (IMF) has reached a staff-level agreement with the Ethiopian government on the fourth review of the country’s four-year Extended Credit Facility (ECF), paving the way for the release of about US$261 million in fresh financing once the IMF Board gives final approval.

The agreement marks another major step in Ethiopia’s ambitious Homegrown Economic Reform (HGER) agenda, which the IMF says is already delivering stronger growth, easing inflation and boosting government revenues.

The latest review brings total IMF support under the programme—approved in July 2024—to US$2.13 billion.

Reforms Delivering Strong Results

According to IMF mission chief Alvaro Piris, whose team held discussions in Addis Ababa between October and December 2025, Ethiopia’s economic reforms are gaining traction faster than expected.

“Available indicators point to accelerating growth since mid-2024, supported by strong gold, electricity, and agricultural production,” Piris said. Goods exports have more than doubled, inflation has fallen, and tax revenues have risen sharply.

Authorities are also moving forward with plans to modernize the monetary policy framework, improve the foreign exchange market, mobilize more fiscal revenue and strengthen financial sector oversight.

Reform Momentum Still Crucial

Despite the positive developments, the IMF stressed that Ethiopia must maintain its reform pace to secure long-term economic stability.

A tight monetary stance, Piris said, remains essential to keep inflation expectations anchored. The Fund also called for improved competition in the foreign exchange market, prudent public spending and continuous efforts to strengthen the business environment to attract private investment.

Debt Relief Talks Progressing

Ethiopia’s push for debt treatment under the G20 Common Framework is also advancing. A Memorandum of Understanding outlining key terms was reached in July 2025 between the Ethiopian government and members of the Official Creditor Committee.

The next step is for Ethiopia to negotiate bilateral agreements with individual creditors—a key requirement for restoring full debt sustainability.

Constructive Engagement

The IMF team met with Finance Minister Ahmed Shide, Central Bank Governor Eyob Tekalign, senior economic officials, banks, private-sector players and development partners during the review process.

Piris praised the authorities’ strong engagement, saying the IMF looks forward to continued progress once the Executive Board considers the agreement in the coming weeks.