As Ethiopia navigates one of the most ambitious economic reform programs in its recent history, the International Monetary Fund (IMF) has reaffirmed its support and cautious optimism about the country’s direction. In a media round table briefing, Alvaro Piris, IMF Mission Chief to Ethiopia, said that despite considerable challenges— ranging from inflation to external debt pressures—the country is making notable progress in critical areas including tax reform, debt restructuring, and financial sector liberalization.
The IMF has been working closely with Ethiopian authorities since the approval of a new reform-linked financing program aimed at stabilizing the economy, improving macroeconomic management, and stimulating inclusive growth. The program includes not only financial assistance but also broad-based capacity development and policy advisory services.
Ambitious revenue targets: Ethiopia’s strong start
One of the cornerstones of Ethiopia’s reform is domestic revenue mobilization. Under the IMF-supported program, Ethiopia has committed to significantly increasing its tax-to-GDP ratio, which remains one of the lowest in Sub-Saharan Africa.
“The tax revenue targets in the program that are agreed with the authorities are very ambitious,” Piris acknowledged. “The Ethiopian government has not been shy about making that same point.”
Despite these ambitious targets, the early results have been promising. “They have made a very good start in the first year of the program,” he added, noting that the country has successfully raised the expected revenue despite the broader economic challenges it faces.
However, Piris emphasized that sustained progress will require continued effort, particularly in expanding the tax base and improving administration. “It’s going to take some effort in terms of policy reform, but also the tax administration. That effort should make sure that tax collection is broad across many different businesses and as many people as can afford to pay across the economy—and fair. And that’s also important,” he stressed.
To help the Ethiopian government implement these reforms, the IMF and other development partners, including the World Bank, have stepped up their support. “We’re offering capacity development to make sure that tax administration is strengthened,” Piris said, adding that these efforts are designed to support long-term institutional improvements rather than just short-term gains.
Debt restructuring and fiscal sustainability
As Ethiopia continues to implement fiscal reforms, another pressing issue is the country’s external debt. Ethiopia, like several other low-income countries, has faced significant repayment pressures, prompting the government to engage with international creditors for restructuring.
Asked whether Ethiopia is on track to meet its debt obligations, Piris responded with optimism. “I think once the debt restructuring that is currently underway is concluded, Ethiopia is on the right track to be able to pay,” he stated.
The IMF’s view is informed by ongoing negotiations with official creditors and the broader macroeconomic adjustments under the program. “Once the restructuring is complete, we would expect Ethiopia to be on a good path,” Piris affirmed.
Debt restructuring is essential to restore Ethiopia’s fiscal space and create room for development spending. The IMF’s involvement not only provides financing but also signals confidence in the country’s reform path—both to domestic stakeholders and international partners.
Broad-based support through capacity development
Beyond financing, a significant pillar of the IMF’s engagement with Ethiopia is capacity development—a form of technical assistance that includes training, advisory services, and policy design support.
“There is an extensive capacity development program with Ethiopia, which has, in fact, stepped up substantially since the program began,” Piris noted. The support spans a wide range of areas including revenue mobilization, tax policy, monetary policy frameworks, legal reforms, and macroeconomic modeling.
Much of the IMF’s assistance is tailored to support the very reforms that the Ethiopian authorities are undertaking. “Really a very extensive capacity development program, a lot of which is focused on developing capacity to implement some of their recommendations and some of the reforms that the authorities are pushing through,” he explained.
Piris also highlighted the role of the IMF in helping Ethiopia communicate these reforms to the wider investment community. “The IMF and the Ministry of Finance together have some convening power,” he said. “We’re sending a signal to domestic and international investors about the changes… which I think highlights many of the very significant reforms that have been undertaken.”
Such signaling can play a vital role in restoring investor confidence, particularly at a time when Ethiopia is looking to attract more foreign investment to stimulate growth and job creation.
Reforming the financial sector: Entry of foreign banks
Another milestone in Ethiopia’s reform journey is the opening up of its banking sector to foreign competition. While this decision originated from the Ethiopian authorities rather than the IMF, the Fund supports the broader goal of improving competitiveness and financial inclusion.
“It’s the authorities’ initiative to open the banking sector to foreign banks. We think it’s a good idea, but it’s not been a key policy or recommendation under the program,” Piris clarified.
Nevertheless, the IMF sees this as part of a much larger picture. “There’s a lot going on in the Ethiopian economy with lots of macroeconomic changes and changes in the environment,” he noted. “All of which call for a lot of care and investment in improving banking supervision and making sure that financial stability continues.”
He commended the efforts of the National Bank of Ethiopia (NBE) to enhance regulatory oversight, while stressing that continued progress will be essential. “It will require a continued effort from the NBE to keep their supervision strong and keep upgrading their capacities to help manage the sector as it deals with all of these macroeconomic changes.”
Looking ahead: A partnership for reform
Ethiopia’s reform agenda is vast and complex, encompassing structural, fiscal, and monetary changes. Yet the country’s early commitment and results offer signs of a government determined to turn the tide.
For the IMF, Ethiopia represents not just another country program, but a long-term partnership centered on shared goals of macroeconomic stability, sustainable development, and inclusive growth.
“The program is ambitious, yes,” Piris reiterated, “but with sustained reform, administrative strengthening, and continued collaboration with partners, the goals are achievable.”
The coming years will be critical as Ethiopia implements deeper reforms and navigates both domestic and external shocks. But with the right policy mix and continued support from institutions like the IMF, the country appears well-positioned to lay the foundation for a more stable and prosperous economic future.
Editor’s Note: The views entertained in this article do not necessarily reflect the stance of The Ethiopian Herald
BY DANIEL ALEMAYEHU
THE ETHIOPIAN HERALD SUNDAY EDITION 20, July 2025
