The International Monetary Fund has approved the release of about 261 million US dollars to Ethiopia after completing the fourth review of its lending programme, raising total disbursements to roughly 2.18 billion US dollars.

The funding is part of Ethiopia’s 48-month Extended Credit Facility, approved in July 2024, which totals SDR 2.556 billion, equivalent to about 3.4 billion US dollars at the time. The programme supports the government’s Homegrown Economic Reform Agenda aimed at correcting macroeconomic imbalances and enabling private sector-led growth.

The IMF said programme performance remained broadly in line with commitments. All quantitative performance criteria and most indicative targets were met. A new requirement now sets a zero limit on foreign exchange intervention outside official auctions.

Some benchmarks were missed. Contributions to social safety nets were lower than targeted as authorities prioritised development partner funding. The 2025/26 federal budget deviated from previously agreed parameters, while delays in publishing Ethiopian Investment Holdings’ financial statements led to a missed structural benchmark.

Maintaining tight monetary conditions remains appropriate to anchor inflation expectations, the Fund said, alongside continued efforts to strengthen the foreign exchange market.

Revenue mobilisation has remained strong, supported by recent tax reforms that could broaden the tax base. The IMF stressed the need for continued tax and customs administration reforms, prudent spending control and development of domestic financing sources to maintain fiscal sustainability.

Progress on debt restructuring under the Common Framework was welcomed, including the signing of a memorandum of understanding with official creditors. Discussions with private external creditors are ongoing.

IMF deputy managing director Nigel Clarke said reforms to the foreign exchange market, monetary policy and financial regulation were delivering better-than-anticipated macroeconomic outcomes.

The Fund highlighted steps by the National Bank of Ethiopia to limit foreign exchange intervention to auctions, strengthen market rules and develop an interbank foreign exchange market, while supporting a gradual removal of private credit growth caps.

Further priorities include phasing out fuel subsidies, safeguarding social spending, avoiding non-concessional borrowing except for the Koysha hydropower project, and advancing governance reforms at the central bank.