Ethiopia's economic reforms remain on course despite concerns over rising inflation, according to Finance Minister Ahmed Shide.
"Reform is on track," Ahmed told state media outlet EBC. "The impacts on citizens have been contained."
The minister said inflation is "slowing down," directly addressing fears that changing the exchange rate regime could fuel price rises. "The floating did not cause inflation," he stated.
The annual inflation rate in Ethiopia was at 17.5 percent in September 2024, up slightly from an over five-year low of 17.2 percent recorded in August. Food prices rose at a quicker pace (19.6 vs. 18.8 percent in August), whereas non-food prices saw another slowdown (14.3 vs. 14.7 percent).
Ahmed quoted government data showing the gap between official and parallel foreign-exchange markets has narrowed since a new managed-float regime was introduced.
Before the floating of the birr, the gap between the two was as much as 100 percent, which is now lowered to 8.4 percent.
Over the last three months, Ethiopia has secured significant foreign exchange financing from the International Monetary Fund (IMF), the World Bank, and other partners as part of its economic reform initiatives.
The World Bank approved a financing package of 1.5 billion dollars on July 30, 2024, which includes a one billion dollars grant and USD 500 million in concessional credit, in addition with long-term commitment of 16.6 billion dollars. This is in addition to 1.3 billion dollars disbursement made by the IMF from a 3.4 billion dollars package.
Gold and coffee exports have particularly surged, according to Ahmed. Last week, authorities announced the country secured over 519 million dollars from coffee exports in the first three months of the 2024/25 fiscal year.
While expressing optimism in further increase in export proceeds, Ahmed did not deny the administration's fear that inflation would climb.
To further offset the impacts, an additional 300 billion birr will be allocated in the upcoming budget, he announced.
A new civil service pay structure is being implemented as planned, with regional governments set to follow suit with subsidy support, Ahmed said adding this is also a part of offsetting the inflation impact. Fuel, edible oils and medicines will remain subsidized to protect citizens, he added.
While inflation risks persist, Ahmed said more social measures are being prepared. The comments point to authorities seeing the reforms as on track so far, though volatility cannot be ruled out.