Ethiopian Government and Development Partners Convene to Discuss Macroeconomic Reforms

The Government of Ethiopia, in collaboration with the Development Partners Group (DPG), held a high-level meeting at the Ministry of Finance to discuss the country’s ongoing macroeconomic reforms and their impact on fiscal and monetary policies. This meeting represents a pivotal moment in Ethiopia’s economic transformation, building on the progress of the Home-Grown Economic Reform Agenda (HGER), now entering its second phase (HGER 2.0).

Launched in 2019, the Home-Grown Economic Reform Agenda (HGER) has been central to Ethiopia’s strategy for addressing macroeconomic imbalances, promoting sustainable growth, and establishing the private sector as the key driver of development. Notable progress has been made in reforming state-owned enterprises (SOEs), improving the investment climate, and enhancing domestic resource mobilization.

With the launch of HGERA 2.0, the government is intensifying its reform efforts to address deep-rooted challenges, including foreign exchange shortages, low productivity, and limited global competitiveness. A central aspect of this reform is the shift toward a market-based foreign exchange system, designed to revitalize the economy and stimulate growth.

The government has also introduced robust fiscal and monetary policies to complement these reforms, with a focus on debt sustainability, pro-poor spending, and domestic revenue mobilization. The fiscal strategy includes a commitment to limiting deficit financing through stringent provisions, while transitioning to an interest rate-based monetary policy framework designed to curb inflation and stimulate investment.

In her opening remarks, Her Excellency Semereta Sewasew, State Minister of Finance, emphasized the government’s dedication to these reforms and highlighted the importance of Development Partners’ technical and financial support. “Our macroeconomic reforms are designed to address longstanding challenges, such as foreign exchange shortages and limited global competitiveness. We are committed to creating an inclusive, market-driven economy,” she stated.

His Excellency Eyob Tekalign (PhD), State Minister of Finance, provided a detailed overview of HGER 2.0, describing it as a natural extension of the initial reform agenda. “The first phase laid the foundation for Ethiopia’s economic transformation, with GDP growth reaching 6.1% despite a multitude of internal and external shocks. HGER 2.0 builds on this progress, with a renewed focus on macroeconomic stability, productivity enhancement, and creating a conducive environment for private sector investment”, he stated.

Furthermore, fiscal policy reforms are aimed at ensuring inclusive growth and supporting essential public spending in sectors such as health and education. The government has outlined a comprehensive strategy to boost domestic revenue mobilization, strengthen tax administration, and protect vulnerable populations through targeted subsidies and social programs.

His Excellency Mamo Mihretu, Governor of the National Bank of Ethiopia, in his part highlighted the significant strides being made under the new monetary policy framework. The transition to an interest rate-based policy, combined with the ongoing liberalization of the foreign exchange market, is expected to stabilize inflation, which has already decreased from 29.3% to 17%. The government is also committed to eliminating foreign exchange surrender requirements and strengthening the financial sector to attract more foreign investment. The efforts towards streamlining monetary policies as well as financial sector development efforts have been discussed. Governor Mamo also highlighted the important reforms undertaken within the National Bank to ensure the Bank’s independence and competence.

Her Excellency Meleket Taye, deputy CEO of Ethiopian Investment Holdings highlighted the significant reforms made on the State-Owned Enterprises as part of the HGERA. She has emphasized on the important of SOEs reform agenda to contribute towards achieving the development aspirations of the country from the national priorities’ perspective. The SOEs reform has been instrumental in that it is has been put under the Macroeconomic reform perspective.

Representatives from key development partners, including the International Monetary Fund (IMF), the World Bank (WB) and other Bilateral partners expressed their continued support for Ethiopia’s reform agenda. They commended the government’s approach in implementing these reforms and noted early positive outcomes, including improved public finance management, enhanced revenue mobilization, and reducing inflation.

Development partners have also raised issues such as improving peace and security, improving business climate, tax administration as well as the push towards enhancing pro-poor and social spending. They have also highlighted the need for effective tax reform, civil service capacity building and system digitalization. In general, praised the government’s efforts towards such a historic reform and reaffirmed their commitment to supporting the reform agenda in various forms.

In his concluding remarks, His Excellency Ahmed Shide, Minister of Finance, acknowledged the vital role that development partners play in shaping and supporting the country’s reforms across various sectors. He stressed the government’s commitment to addressing peace and security issues through national dialogues and to significantly increasing domestic resource mobilization. He called on all development partners to contribute to the reform efforts in diverse ways and to enhance their support for effective implementation.

Minister Shide highlighted the need for increased development assistance for various programs and projects during this reform period. He reiterated the government’s dedication to fostering a stable, inclusive economy that benefits all citizens. Additionally, he suggested for a structured dialogue on the reform to ensure ongoing monitoring and review of progress in implementation.