ADDIS ABABA – Governor of the National Bank of Ethiopia (NBE) Mamo Mihretu said Ethiopia’s sweeping economic reform is a product of deliberate planning, whole-of-government coordination, and strategic adaptability—delivering early results that surpass expectations.
Speaking at a high-level “Governor’s Talk” session on the sidelines of the 2025 IMF-World Bank Spring Meetings in Washington, D.C., Mamo emphasized that the country’s reform goes far beyond monetary tweaks or exchange rate liberalization.
“What Ethiopia has done is a comprehensive transformation of its foreign exchange (FX) regime, backed by institutional, fiscal, and financial reforms,” he said.
“For the first time in 50 years, Ethiopia has moved from a tightly controlled FX system to a fully liberalized one,” the Governor noted. Previously governed by nearly 87 directives, the FX regime has now been consolidated into a single, streamlined directive—simplifying compliance and enhancing transparency for economic actors.
The FX reform package removed surrender requirements, opened access to external credit, licensed new FX operators, and paved the way for foreign participation in Ethiopia’s capital market. The result? A dramatic uptick in foreign currency inflows.
“Exports are projected to double this year, and remittances are expected to rise by at least 25%,” Mamo said, attributing much of the gain to a shift from informal to formal channels. Reserves have also surged—tripling at the national level and doubling within the banking system.
But the Governor stressed that the reforms are not just about numbers. “The most satisfying outcome is that access to foreign currency for the private sector has improved significantly. That was the goal.”
Contrary to perceptions that the FX shift happened overnight, Mamo underscored the extensive groundwork. “We invested significant time in internal preparation, data analysis, and inter-agency consultation. This whole-of-government approach has been critical.”
He pointed to the careful sequencing of reforms, with tight monetary and fiscal policies introduced in July 2023—well before the FX liberalization on July 29, 2024. “Even after the FX reform, we didn’t abruptly eliminate all subsidies. Sequencing matters,” he said.
Adaptability, he added, remains a guiding principle. “We embrace uncertainty. Reform means continuous diagnosis, course correction, and learning.”
Beyond FX, Ethiopia has undertaken foundational changes across the financial sector. The Central Bank Act was revised for the first time in 20 years, enshrining price stability as the primary objective. The country also opened its banking sector to foreign competition and recapitalized the Commercial Bank of Ethiopia to ensure systemic stability.
These reforms have had a tangible effect on inflation. “We have brought inflation down from 30% to 13% as of March,” Mamo said. “Our target for the next fiscal year is 10%. If we hit that mark, it would be the lowest inflation rate in a decade.”
As Africa’s third-largest economy, Ethiopia is positioning itself for long-term competitiveness. The next steps, according to the NBE Governor, include deepening FX and monetary reforms, expanding financial inclusion, and reinforcing macroeconomic stability.
“We are committed to staying the course. Trust is built not through rhetoric but through results. We are focused on doing what we say, and saying what we will do.”
BY STAFF REPORTER
THE ETHIOPIAN HERALD SATURDAY 26 APRIL 2025
