Feb 9, 2026
- The fuel subsidy will be completely lifted this month.
- Starting from the end of 2026, the National Bank will gradually exit the gold business and private banks will enter the gold business.
- The National Bank of Ethiopia will lift the limit on banks’ annual lending rates by the end of 2026.
Wazema- One of the changes that Prime Minister Abiy Ahmed’s administration has made since coming to power and its impact on the lives of many citizens is the economic reform program. The program, which followed the conditions of the International Monetary Fund and which the government called “indigenous economic reform,” was launched in 2019, but was delayed due to the war in Tigray, and the second and “complete” program was launched in 2024 (July 2016).
Regarding this reform, the International Monetary Fund (IMF) recently conducted an in-depth review of the process. It outlined the key points raised during its closed-door discussions with Ethiopian government officials, the steps taken, and the plans for the future. It also wrote a comprehensive report on the review. Wazema reviewed the report and summarized its key points as follows:
The institute has issued a report that examines the progress of the transformation so far, in accordance with the agreement it signed with the Ethiopian government in July 2016 to support the second phase of Ethiopia’s economic transformation.
Indeed, the Ethiopian government began implementing the reform it called “Indigenous” in 2019, but it was delayed and delayed due to the war in the north.
It is known that the second phase of the “homegrown” transformation, which has been implemented since July 2024, is the IMF’s Structural Adjustment Program (SAP), which is fully designed by the IMF.
The main argument of this program is that the Ethiopian economy, due to the “developmental state” economic ideology (Growth model) followed by the EPRDF, “has not only gone from being in decline to being in political decline, but has also led to the 2010 change of government.”
Therefore, in order to save the “economic collapse” caused by the EPRDF, the development ideology must change from government-led to private sector-led, and the new government has agreed to have the IMF lead this transition from a developmental state to a “free market” context.
The pillars
The main pillars of the transformation are debt burden, cost of living, unemployment, budget deficit, and foreign exchange shortage. This transformation, which fundamentally affects politics and security, will be completed in a four-year journey by 2028, according to the agreement.
To achieve this four-year (48-month) structural transition, $10.6 billion is needed. Of this, it has been agreed that $3.4 billion will be covered by the IMF itself, $3.7 billion by the World Bank, and the remaining $3.4 billion will be covered by debt restructuring.
The report shows that although the Ethiopian government has implemented all of the IMF’s recommendations, the results have fallen short of the intended goals.
What has been the result of the change process so far?
The first plan of the reform is to reduce the debt burden. The other is to correct the distorted market between the birr and the dollar (bank and black market) and improve foreign exchange earnings. However, the steps taken to reform the foreign exchange rate have hindered the path taken to reduce the external debt burden.
The report notes that the country’s debt to GDP ratio increased from 5.4 percent to 50.3 percent due to the market-led exchange rate change in July 2016.
Negotiations with international creditors, which have been ongoing for five years, are still ongoing, but Ethiopia’s request for a 1 billion Eurobond to be considered separately from its main external debt has been rejected by China and France, which are leading Ethiopia’s negotiating committee.
The budget deficit was expected to fall from 1.5 percent to 0.6 percent under the agreement, but instead doubled to 3 percent. This was mainly due to mandatory spending on corridor development, resorts, and public service workers.