Ethiopia hopes painful reforms will stabilise economy

Significance Ethiopia applied for IMF support in September 2021 but the ensuing negotiations were difficult. However, up-front implementation of major reforms eventually convinced the IMF to agree to a programme that sets economic policy priorities for the coming years. Impacts The exchange rate float will aggravate inflation and trigger a more restrictive monetary policy with higher interest rates. After the failure of recent privatisation efforts, the government is likely to relaunch new efforts as early as 2025. Painful reforms and IMF disbursements are both heavily front-loaded, raising the risk that reform momentum may fade somewhat from 2025 on.