ADDIS ABABA, Ethiopia – Ethiopia’s government expects its economy to grow by 8.9 percent in the upcoming fiscal year, up from 8.4 percent this year, signaling cautious optimism as the country deepens structural reforms backed by the International Monetary Fund (IMF).
Finance Minister Ahmed Shide announced the updated forecast on Tuesday during the release of the draft 2025/26 federal budget.
The growth projection, among the highest in sub-Saharan Africa, reflects what he called “continued resilience and recovery,” despite lingering challenges related to inflation, foreign exchange shortages, and regional instability.
“The government remains committed to economic stabilization and reform, which are bearing fruit,” Mr. Shide said in Parliament.
He highlighted improvements in agricultural productivity, expanded industrial output, and rising revenues from services and exports.
The budget also projects a slight widening of the fiscal deficit—from 2.1 percent to 2.2 percent of gross domestic product—due to increased spending on infrastructure, security, and social protection.
Ethiopia’s reform agenda has been closely tied to its $3.5 billion loan agreement with the IMF, secured last December after months of negotiations. In return, the government pledged to gradually liberalize the exchange rate, rein in inflation, and boost domestic revenue.
The IMF program marks Ethiopia’s most significant return to multilateral borrowing in years, following its temporary exit from international capital markets amid a post-conflict debt crisis.
Analysts say the growth forecast underscores a deliberate balancing act: expanding the economy while avoiding runaway borrowing or inflation.
Ethiopia’s annual inflation rate has slowed from a high of 34 percent in 2022 to around 19 percent this year, according to central bank data, though food prices remain volatile.
Still, structural constraints persist. The birr remains under pressure, with a thriving parallel market and sporadic fuel shortages. Foreign investment remains subdued, particularly in sectors such as telecoms and banking, despite the formal removal of state monopolies.
“Investors are watching how far and how fast the government is willing to go with reforms,” said Mekonnen Bekele, an Addis Ababa-based economist.
“Macroeconomic stability is improving, but there’s still uncertainty around currency policy and business regulations.”
The new budget will be debated in Parliament later this month and must be approved before the new fiscal year begins on July 8.
Despite the challenges, Ethiopia remains one of Africa’s most closely watched economies—a country emerging from civil conflict while attempting to revive its long-term vision of becoming a regional manufacturing and logistics hub.
