Ethiopia’s inflation rate is projected to fall to 10% in the 2025/2026 fiscal year, marking the lowest level in a decade, as the country implements wide-ranging economic reforms under a $3.4 billion programme supported by the International Monetary Fund (IMF).
Signed in July 2024, the four-year agreement includes key structural adjustments, such as floating the Ethiopian birr and restructuring national debt, aimed at stabilising the economy, improving fiscal management, and restoring investor confidence.
Following three consecutive years of inflation hovering around 30%, Ethiopia has already made significant progress, with the rate easing to 13% by March 2025. This downward trend reflects the early impact of the reform programme, as well as tighter monetary policy measures introduced by the National Bank of Ethiopia.
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Governor of the Central Bank, Mamo Mihretu, expressed optimism about the country’s economic trajectory, citing forecasts of a doubling of exports, a 25% increase in remittances, and a significant boost in foreign currency reserves. These indicators are expected to strengthen Ethiopia’s balance of payments position and ease pressure on the birr.
The reforms are part of Ethiopia’s broader effort to revive its economy after years of internal conflict, foreign exchange shortages, and inflationary pressures. The IMF programme also emphasises improving the business environment, reducing state dominance in key sectors, and enhancing transparency in public finances.
Analysts say that if current policies are sustained, Ethiopia could be on track for macroeconomic stabilisation, stronger private sector participation, and renewed international engagement.
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The anticipated decline in inflation, combined with rising external inflows, signals growing momentum in Ethiopia’s economic recovery—positioning the country as a key reformer in East Africa.
