IMF国际货币组织全球-The-Federal-Democratic-Republic-of-Ethiopia_2019-Article-IV-Consultation-and-Requests-for-Three_121页_2mb

2019 Article IV Consultation with Ethiopia: Summary

Core Content

The International Monetary Fund (IMF) conducted a 2019 Article IV Consultation with The Federal Democratic Republic of Ethiopia and approved three-year arrangements under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF). The total Fund financing requested was SDR 2.1 billion, equivalent to 700 percent of quota, sourced from a blend of PRGT and GRA resources. The consultation aimed to support Ethiopia's Homegrown Economic Reform Plan, which includes macroeconomic, structural, and sectoral reforms to address external imbalances, debt vulnerabilities, and inflationary pressures.

Main Views and Key Information

Economic Performance

• Ethiopia has experienced high economic growth over the last decade, with real GDP growth of 9% in 2018/19, driven by manufacturing and services.
• Public investment and debt management helped narrow the current account deficit to 4.5% of GDP and reduce public and publicly-guaranteed debt to 57% of GDP.
• Inflation remained elevated, reaching 19.4% in 2019/20, primarily due to food price increases and rising non-food inflation.
• Foreign exchange shortages persisted, with reserves improving to US$4 billion by the end of 2019/20, covering 2 months of prospective imports.

Reform Plan

• The Homegrown Economic Reform Plan is a comprehensive strategy to address structural bottlenecks, public debt, and external vulnerabilities.
• It includes three pillars:
  1. Macroeconomic and financial sector reforms to correct foreign exchange imbalances, control inflation, and ensure debt sustainability.
  2. Structural reforms to improve productivity, job creation, and institutional efficiency.
  3. Sectoral reforms to address market failures in strategic sectors such as telecommunications and sugar.

Program Objectives

• The program aims to address FX shortages, reduce debt vulnerabilities, lift financial repression, improve domestic revenue mobilization, and strengthen public financial management.
• It seeks to promote private sector growth and enhance financial sector development.

Risks and Challenges

• Downside risks are present, including domestic opposition to reforms before the 2020 elections, global protectionism, weaker-than-expected global growth, and climate-related shocks.
• Exchange rate overvaluation and financial repression remain key issues, with the parallel market rate significantly higher than the official rate, averaging 27% in 2018/19 and widening to 35% in November 2019.
• State-Owned Enterprises (SOEs) are a major source of public debt, and reforms are needed to reduce borrowing, improve governance, and enhance financial sustainability.

Fiscal and Monetary Policy

• The general government deficit in 2018/19 was 2.5% of GDP, below the budget target, due to expenditure cuts.
• Tax revenue fell short of targets, declining to 10% of GDP (underperforming by 7%), partly due to import compression and political unrest.
• The Central Bank of Ethiopia (NBE) tightened monetary policy in 2018, leading to a slowdown in credit and base money growth.

External Sector

• The current account deficit was reduced to 4.5% of GDP, supported by foreign financing and grant inflows.
• International reserves rose to US$3.4 billion in 2019, but remained below adequacy metrics.
• External debt continues to pose a high risk of distress, despite debt reprofiling efforts with China and other creditors.

Key Recommendations

• The Executive Board emphasized the need for ambitious reforms, strong communication, and social protection to ensure public support.
• Reform of SOEs is critical to reduce public debt and improve governance.
• Exchange rate flexibility and monetary tightening are recommended to combat inflation and strengthen competitiveness.
• Modernization of the monetary policy framework and development of financial markets are necessary for deeper inclusion.
• Domestic revenue mobilization and expenditure efficiency should be prioritized to support social and infrastructure needs.

Outlook

• Over the medium term, macroeconomic and structural reforms are expected to lead to lower public debt, reduced external vulnerabilities, and stronger growth.
• Private sector-led growth is a long-term goal, with reforms aimed at improving access to credit and reducing financial repression.
• Sustainable and inclusive growth requires rebalancing the economy and addressing institutional bottlenecks.

Conclusion

The IMF supported Ethiopia's reform agenda, recognizing the ambition and comprehensiveness of the Homegrown Economic Reform Plan. The three-year arrangement under the ECF and EFF is expected to catalyze private investment and improve debt sustainability, although implementation risks remain high due to political uncertainty and external challenges. The Executive Board called for continued efforts in reform, communication, and social protection to ensure the success of the program and long-term economic stability.