The International Monetary Fund has called on Ethiopia's central bank to stand ready to tighten monetary policy if inflation pressures return, following approval of the fifth review under a credit facility that released about $464 million.
The IMF completed its fifth review of Ethiopia’s 48-month Extended Credit Facility on an unspecified recent date. This step unlocked an immediate disbursement of about US$464 million to help meet balance of payments and fiscal needs.
Inflation in Ethiopia dropped to single digits in February but rose again after April. The government linked the increase mainly to higher imported fuel costs caused by conflict in the Middle East and shipping concerns at the Strait of Hormuz.
The IMF said a tight monetary stance is still suitable and advised the National Bank of Ethiopia to tighten further if second-round effects appear. It also recommended continued work to modernize the monetary framework and expand the interbank foreign exchange market.
The central bank has kept a 24 percent credit growth cap on banks since August 2023. Plans to start lifting the cap by September 2025 were not carried out, and further adjustments signaled for the end of last month have not been announced.
