Addis Ababa, Ethiopia – Ethiopia’s economy is expected to grow at a faster pace in the coming fiscal year, fueled by structural reforms, increased public spending, and improved investor sentiment, the government announced this week.
Finance Minister Ahmed Shide, speaking before Parliament on Tuesday, projected national economic growth of 8.9 percent for the fiscal year starting July 8, 2025, up from an estimated 8.4 percent this year.
The revised forecast follows sweeping changes to the country’s economic management strategy, including floating the Ethiopian birr and restructuring segments of its external debt.
“We are navigating one of the most transformative fiscal periods in our history,” Shide told lawmakers.
“The results of our reform path are now visible—despite headwinds.”
Reforms Gain Traction
The optimistic outlook aligns with the government’s ongoing implementation of an IMF-supported $3.4 billion program designed to stabilize Ethiopia’s macroeconomic environment.
A third review by the International Monetary Fund is expected this month, which could unlock an additional $265 million in support.
Over the past two years, Ethiopia has embarked on a series of liberalization policies, including scaling back state involvement in key sectors, loosening foreign exchange controls, and tightening monetary policy to combat inflation.
These steps have gradually improved investor confidence and led to an easing of price shocks.
The Bank of Ethiopia expects inflation to decline to 10 percent in the upcoming fiscal year—its lowest level in more than a decade.
In tandem with its growth projection, the cabinet approved a record 2 trillion birr (roughly $15 billion) budget for 2025/26—a 31 percent increase over the current fiscal year.
The expanded budget places a strong emphasis on security, disaster response, and productivity-enhancing investments, signaling Addis Ababa’s intention to balance stability with inclusive development.
“We are prioritizing vulnerable communities and addressing inflationary stress through coordinated fiscal support,” Shide noted during his remarks.
Recovery With Risks
While the upbeat forecast has drawn cautious optimism from international lenders and development partners, analysts warn of persistent challenges.
“Debt sustainability remains a concern,” said Mekdes Alemu, an Addis-based economist.
“While restructuring offers short-term relief, long-term fiscal discipline will be critical, especially with an election cycle approaching.”
The IMF and World Bank have both underscored the importance of transparency and domestic resource mobilization in Ethiopia’s next reform phase.
Still, for a country that only recently emerged from conflict and economic volatility, the tone in Addis Ababa is markedly more hopeful.
