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International Monetary Fund

The Ethiopian authorities have been generally responsive to the policy recommendations from the 2008 Article IV Consultation. To help rebuild international reserves and improve external competitiveness, the authorities made another exchange rate adjustment (a 5 percent devaluation) on January 31, 2010. The overall fiscal balance during July-December 2009 indicates stronger revenue collection than programmed. Ethiopia has been resilient to the ongoing global crisis because remittances have remained stable in 2009/10, FDI has risen 20 percent, and imports are lower.

International Monetary Fund

Facing declining reserves and high inflation, Ethiopian authorities have implemented an effective macroeconomic adjustment package supported by the IMF under the rapid-access component of the Exogenous Shocks Facility. The global recession is putting renewed pressure on the external position, via weaker export receipts and remittances and slowing inward direct investment. Supporting structural measures focus on tax reform, the control of public enterprise borrowing, and the control of liquidity through indirect instruments.

International Monetary Fund

The Federal Democratic Republic of Ethiopia’s 2007 Article IV Consultation reports on the macroeconomic imbalances and on maintaining medium-term macroeconomic stability while fostering growth potential. Although agriculture continues to be the mainstay of the economy, the expansion has been broad-based, with manufacturing, construction, and services making significant contributions. Expansion of domestic credit has continued to be brisk, reflecting a pickup in private sector economic activity and increasingly negative real interest rates. A critical challenge for Ethiopia is to strike a judicious balance between demand-dampening measures and growth-enhancing structural reforms.

International Monetary Fund. African Dept.

Ethiopia pursues a public sector-led growth strategy that focuses on promoting growth through high public investment supported partly by low nominal interest rates. While the strategy has contributed to robust economic growth in the past, recent developments indicate a buildup of vulnerabilities which need to be addressed in order to sustain this growth performance. While inflation remains high (21 percent at end-2011/12), real GDP growth, which is estimated at around 7 percent in 2011/12 and is projected to decline to 6.5 percent in subsequent years under the continuation of current policies, is still robust.

International Monetary Fund. African Dept.

This 2013 Article IV Consultation highlights that recent macroeconomic developments in The Federal Democratic Republic of Ethiopia are encouraging, with a significant deceleration in inflation and continued robust economic growth. Despite significant decline in coffee prices and supply bottlenecks, growth remains robust, supported by better agriculture output and construction and other services activities. Inflation declined from the peak of 40 percent in July 2011 to about 7 percent in June 2013. This has significantly eased the extent to which real interest rates were negative. Fiscal policy at the general government level remains prudent with cautious execution of the government budget.

International Monetary Fund. African Dept.

KEY ISSUESContext: Ethiopia�s investment-led development strategy has delivered robust growth and progress toward Millennium Development Goals (MDGs). Restrained fiscal and monetary policies have helped maintain macroeconomic stability, although the financing mode of the continuing large-scale investment through public enterprises could risk undermining macroeconomic stability. A cautious policy stance will be critical in preserving the recent gains.Focus of the consultation: The discussions centered on policies to sustain strong economic growth and promote structural transformation. Issues covered included: (i) the policy mix to preserve macroeconomic stability and debt sustainability; (ii) the public sector investment program and its financing; and (iii) financial deepening, export competitiveness and the business climate.Outlook and Risks: Growth is expected to remain strong, driven mainly by agriculture and services. Inflation should continue to remain in single digits, in line with a tight monetary policy. Key downside risks include insufficient financing for infrastructure investment in the Growth and Transformation Plan (GTP), lower prices of main export commodities, and weather-related shocks, particularly a drought.Policy mix: Staff recommendations focused on sustaining a cautious policy stance, prioritization of public investments and closer monitoring of state-owned enterprises to ensure prudent borrowing in the context of a medium-term debt management strategy, enhancing export competitiveness, greater resource mobilization and development of the financial sector, and a more prominent role for the private sector. Structural improvements in the functioning of the money and foreign exchange market and building foreign reserves to at least three months of imports were suggested to enhance resiliency. The need for greater interest rate and exchange rate flexibility and improved competitiveness of the traded goods sector, including through exchange rate adjustment, was underscored.

International Monetary Fund. African Dept.

2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for The Federal Democratic Republic of Ethiopia

International Monetary Fund. African Dept.

2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for The Federal Democratic Republic of Ethiopia

International Monetary Fund
Facing declining reserves and high inflation, Ethiopian authorities have implemented an effective macroeconomic adjustment package supported by the IMF under the rapid-access component of the Exogenous Shocks Facility. The global recession is putting renewed pressure on the external position, via weaker export receipts and remittances and slowing inward direct investment. Supporting structural measures focus on tax reform, the control of public enterprise borrowing, and the control of liquidity through indirect instruments.