⊲ Ethiopia continues to move forward on macroeconomic stabilization in a complex global environment. The IMF has successfully concluded the Fourth Review after discussions from October 30 – November 13, 2025. On the positive side, due to continued strong Government leadership, macroeconomic indicators are up, with increases in economic growth, declines in inflation, increase in exports, and strengthening in reserves. Reform momentum has been sustained. Two challenges persist – an exchange rate premium and underinvestment in social sectors.

⊲ Economic Growth: The IMF projects Ethiopia’s economy will expand by 7.2 percent in 2025, and continue to be one of sub-Saharan Africa’s fastest-growing economies, with growth expected to be at 7.1 percent in 2026. All sectors—industry, agriculture, and services—are expected to expand during this period. Mining, especially gold, has been a strong performer.

⊲ Forex and currency: As of January 2026, the gap between Ethiopia’s official and parallel foreign exchange markets has persisted. Banks are selling birr at close to 151 Birr/US$, while the parallel market reached above 180 Birr/US$ by January 2026. This is like some other countries like Nigeria and Sri Lanka, which floated their currency.

 There have been an increasing number of auctions of dollars by National Bank of Ethiopia (NBE). Under the leadership of the new NBE Governor, there has been a crackdown on illegitimate operators in the currency market, greater transparency, and stronger regulation of banks.

⊲ Fiscal: Ethiopia is returning to fiscal prudency in the aftermath of shocks. The fiscal deficit/GDP is projected to remain below 2 percent in 2025 thanks to expenditure rationalization and prioritization, coupled with a strong push for domestic revenue mobilization. Tax revenues have continued to perform well.

⊲ Monetary and inflation. Due to tighter monetary policy and persistence of credit caps,
inflation has been contained. As of December 2025, headline inflation in the country has abated to 9.7 percent, although there have been price hikes on selected commodities.

⊲ Balance of payments: The reserve position has more than tripled between 2024 and 2025 to over 3 months of imports and provided a strong buffer. From July to December 2025, the current account deficit (excluding official transfers) stood at $991 million, marking a significant improvement from the $1.8 billion deficit in the same period of the previous year. The balance of payments surplus however shrunk to US$ 1.2 billion from US$ 1.7 billion in the same period.

⊲ Debt. In December 2025, Ethiopia and the Eurobond holders continued the discussions to conclude on the restructuring of the $1 billion bond. Ethiopia continues to seek a solution to balance official and private creditors under comparability of treatment of the Common Framework. In early 2026, the OCC, co-chaired by France and China, declined Eurobond restructuring terms.

⊲ Human development and poverty. Macro-micro links are still of concern. The UNDP Human Development Index (HDI) for Ethiopia has been stagnant in recent years. In a recent study, the World Bank forecasts that poverty could rise to 43 percent by 2025, up from 33 percent in 2016 when measured at $3 per day in 2021 purchasing power parity (PPP).