The International Monetary Fund (IMF) projects Ethiopia’s real GDP growth at 7.2% for the fiscal year 2025, positioning it as one of the fastest-growing economies in Sub-Saharan Africa, well above the regional average of 3.7%. This robust growth outlook is attributed to the sustained momentum from the government’s comprehensive macroeconomic reform agenda, launched in mid-2024. Key reforms include transitioning to a market-determined exchange rate, fiscal consolidation, and moving toward an interest-rate-based monetary policy.
Growth is also being powered by resilient commodity exports, notably gold and coffee, and investments across the industry, agriculture, and energy sectors. The reforms have already yielded tangible results: the exchange rate liberalization has led to a better alignment between the official and parallel market rates, and the reduction of central bank financing of government spending has helped to temper inflationary pressures. The country’s strong export performance has been vital, contributing to a more than doubling of foreign reserves to over $3.4 billion in early 2025, which is, however, still equivalent to only 1.6 months of import cover.Despite the strong growth, inflation remains a persistent concern. While inflation has slowed significantly from previous highs of over 30%, the IMF projects it will remain elevated at 20% in 2025, cautioning that it may not reach single digits until 2026/2027. Furthermore, the unresolved debt restructuring with private bondholders and continued political instability pose downside risks to the outlook. To sustain stability, the IMF urges continued reform momentum, prudent fiscal management, and the rebuilding of fiscal buffers.
