(2 minutes)
· The Executive Board of the International Monetary Fund (IMF)
concluded the Article IV Consultation with The Federal Democratic
Republic of Ethiopia and approved three-year arrangement under the
Extended Credit Facility (ECF) and the Extended Fund Facility (EFF)
for Ethiopia.
· Over the medium term, macroeconomic and structural reforms
announced by the authorities are expected to lead to a reduction in
public debt, lower external vulnerabilities, and stronger growth,
investment and exports.
The Executive Board of the International Monetary Fund (IMF) concluded
the Article IV Consultation with The Federal Democratic Republic of
Ethiopia and approved three-year arrangement under the Extended
Credit Facility (ECF) and the Extended Fund Facility (EFF) for
Ethiopia.
Ethiopia has made substantial progress on reducing poverty and
improving social indicators. The real gross domestic product (GDP) for
2018-19 for the country is estimated to have grown by 9 percent,
riding on the back of manufacturing and services. But goods exports
were weak, leading to foreign exchange shortages. Policies for
containing public investment and debt contributed to a further
narrowing of the current account deficit to 4.5 percent of the GDP and
a reduction in public and publicly-guaranteed debt to 57 percent of
GDP. Inflation was in double digits triggered by higher food prices.
The fiscal deficit was reigned at 2.5 percent of GDP, below budgeted
estimates.
Another important feature was the Homegrown Economic Reform Plan,
consisting of a mix of macroeconomic, structural and sectoral
policies, to address vulnerabilities and tackle structural bottlenecks
inhibiting private sector activity. The Plan will address external
imbalances, debt vulnerabilities, and inflation is expected to
contribute to a slower growth in real GDP of 6.2 percent in 2019-20.
Public expenditure restraint and tighter monetary policy are expected
to contribute to a gradual reduction in inflation. Reserves are
expected to improve to around US$4 billion by end 2019-20, sufficient
to cover 2 months of prospective imports.
Over the medium term, macroeconomic and structural reforms announced
by the authorities are expected to lead to a reduction in public debt,
lower external vulnerabilities, and stronger growth, investment and
exports. This outlook is subject to downside risks, in particular from
domestic opposition to reforms ahead of the upcoming elections, rising
protectionism worldwide, weaker-than-expected global growth, and
climate-related shocks.
