By Kebour Ghenna
The IMF was back in town. And, by its own account, things are going “perfecto!”.
Inflation is down. The birr floats. The budget is tightening like a noose. And for its fiscal obedience, Ethiopia is about to receive another tidy sum of $260 million this time, from the guardians of global virtue in Washington.
The Fund’s latest review reads like a gospel of reform: less spending, more taxes, tighter money, deeper markets, flexible exchange rates, and the eventual holy grail of “private sector-led growth.” All in four years, all on schedule. A macroeconomic miracle, some say.
By the way, the current IMF program with Ethiopia officially kicked off in mid-2024, with the Extended Credit Facility approved in July of that year. Yet within this four-year window, the Fund is urging a breathtaking transformation: liberalize the exchange rate, overhaul the financial sector, cut subsidies, raise taxes, sell off state assets, and create functioning capital markets, all before 2028. That’s not reform; that’s macroeconomic speed dating. It’s no surprise, then, that what’s touted as “strong progress” often amounts to box-ticking reforms that dazzle on paper but remain brittle in practice. Ethiopia, already navigating conflict and fragility, is being asked to run a marathon at sprint pace, barefoot.
But allow me to play the village skeptic. Because somewhere between the spreadsheets and the sermons, real life is being left out.
Growth by Shrinking
Yes, inflation, we are told, has come down from over 30% last year to 18% today. But on the ground, in the markets and kitchens of Ethiopia, prices still rise. The IMF calls that a success. But what’s been crushed to make that happen?
Try the small business locked out of credit. The young worker watching fuel prices rise and job prospects dry up. The public project scrapped halfway through. This is not growth… it’s sedation.
The central bank raised interest rates to 15%. It rationed loans. The government slashed development spending. And people, quite sensibly, stopped spending.
That’s how you kill inflation. You kill demand.
And still, the Fund beams: “Better than forecast for inflation, exports, and reserves.” Right. But that’s like praising the patient for losing weight during a hunger strike.
Debt: The New Discipline
The government, meanwhile, is now spending more to service its debts than to build roads, schools, or power plants. And yet it owes more every year.
The IMF says this is fine so long as we “mobilize domestic revenues.” Translation: raise taxes. On who? The jobless? The small trader? The overworked teacher scraping by on 10,000 birr a month?
Let’s be honest. Ethiopia defaulted on its Eurobond last year. Now it borrows from the IMF to repay others, pledging austerity in return. It’s a brilliant racket, if you’re a creditor.
But if you’re a citizen? You get tighter belts, higher prices, and a lecture on fiscal discipline.
The Market Always Knows (Except When It Doesn’t)
Then there’s the foreign exchange market. “Real exchange misalignment has been corrected,” they say. Except the parallel market spread is growing again. High fees. Scarce dollars. Importers whispering nervously.
Why the disconnect?
Because people trust what works. And they know the official story of reform, reserves, and recovery is often missing a page.
The government reports growth of over 5% for four years straight. Even projects 6.4% for 2025. But where’s it coming from?
Not manufacturing. That sector is still gasping. Not exports.
Outside coffee and gold, there’s little movement. And certainly not consumer demand, which has been clubbed to the ground by interest rates and inflation.
Ahhh, but there’s always a new road in Addis. A new facade. A skyline to impress. Welcome to the mirage economy.
The Real Cost of Reform
The IMF’s goals are orderly. Its language is clean. But the reforms? They are not neutral. They pick winners.
Big capital wins. So do creditors. So do foreign investors who can now enter a market freshly scrubbed of “financial repression” and “distortion.”
But what about the Ethiopian entrepreneur who can’t get a loan? The farmer who can’t afford imported fertilizer? The teacher who’ll never own the house the city promises?
They get patience, austerity, and promises
The IMF wants private sector-led growth. But it forgets: an economy can’t run on foreign capital and macro targets alone. It needs trust, jobs, production, and sovereignty.
Final Thought: The Next Crisis, Prepaid
The Fund will issue its disbursement. The government will nod solemnly. And another few hundred million dollars will hit the account.
But beneath the surface, Ethiopia is borrowing tomorrow’s money to survive today. Growth is brittle. Reforms are uneven. And the people are being asked to carry burdens they had no part in creating.
The macro indicators look good… for now. But without real investment in productive sectors, rule of law, and social cohesion, they are just numbers on a screen.
And when the next shock comes, and it will, there won’t be another austerity rabbit left in the hat.
After all, you can only tighten the belt so many times before you run out of waist.