Ethiopia Sees Return to Double-Digit Growth on IMF-Backed Reforms

BREAKING NEWSFebruary 4, 2026 at 12:48 PM UTC

TLDR

Ethiopia anticipates economic growth to exceed 10% this fiscal year, driven by IMF-supported reforms and boosted exports, particularly in gold and coffee sectors.
Government liberalization of the exchange-rate regime and opening key sectors to foreign investors have led to a surge in merchandise exports, surpassing targets.
Despite positive growth, Ethiopia faces debt restructuring challenges and political stability concerns that may impact market access and foreign investment inflow.

Ethiopia expects economic growth to exceed 10% this fiscal year for the first time in nearly a decade, as reforms supported by the International Monetary Fund ease foreign exchange shortages and boost exports.

Prime Minister Abiy Ahmed said gross domestic product will expand 10.2% in the year ending July 7, up from a previous forecast of 8.9%. The upgrade follows a review of the first half of the fiscal year, which showed stronger-than-expected performance. Ethiopia last recorded growth above 10% in 2016–17.

The rebound has been driven by higher export earnings and improved access to foreign currency after the government liberalized its exchange-rate regime and opened key sectors to foreign investors. Merchandise exports reached $5.1 billion in the first half of the fiscal year, more than double the official target.

Gold and coffee led the gains. Gold exports rose to nearly 39 tons last year from 4 tons previously, reflecting the formalization of supply that had moved through informal channels. Coffee exports are expected to exceed $3 billion this season. Passenger traffic at Ethiopian Airlines also increased, adding to overall growth.

Key Takeaways

Ethiopia’s growth rebound marks a turning point after years of conflict, foreign exchange shortages, and debt stress. IMF-backed reforms have improved export flows and stabilized access to dollars, helping lift confidence in the economy. The government says debt exposure has improved from high risk to moderate. Still, risks remain. Ethiopia defaulted on $1 billion of eurobonds in 2024 and is restructuring its external debt. While it has reached agreement with official creditors on $8.4 billion of bilateral loans, talks with commercial bondholders have stalled. A proposed deal involving a 15% haircut was rejected by the Official Creditor Committee, forcing renewed negotiations. Investors will watch whether Ethiopia can secure a revised restructuring without legal disputes that could delay market access. Political stability is another key factor, with recent tensions raising concerns about renewed conflict. If reforms continue and exports hold up, Ethiopia could sustain faster growth and attract foreign investment into banking and telecommunications. Failure to resolve debt talks or contain political risks could slow that momentum.

Ethiopia