IMF says it is “too early to assess” the war’s cost to Ethiopia’s economy, with talks on its next loan review expected in early December

The headquarters building of the International Monetary Fund in Washington, D.C., seen from the street

The International Monetary Fund headquarters in Washington, D.C. [file photo] Photo: Tupungato via Wikimedia Commons (CC BY 3.0)

The IMF says it is "too early to assess" how fighting in Ethiopia will affect growth, though it is concerned about rising security tensions as the next review of its $3.4 billion loan nears.

"We are concerned about the increased security tensions and their impact on the communities in the affected areas," a spokesperson for the International Monetary Fund told DW Amharic, adding that because the scale and length of the conflict are not known, it is too early to say whether, or how much, it will hurt growth. DW Amharic journalist Eshete Bekele, who wrote the story, shared the quote on X on Wednesday.

According to the spokesperson, IMF staff are expected to travel to Addis Ababa around early December for talks with Ethiopian officials and the private sector on the sixth review of the Extended Credit Facility (ECF). The review is expected to go to the IMF Executive Board in early 2027, and if approved, about $200 million more would be released to the Government of Prime Minister Abiy Ahmed.

When the fifth review was approved in July, Ethiopia received $464 million, on top of $200 million released ahead of schedule to cushion the fuel price shock from the Iran war. So far the Government has received about $2.6 billion, more than three quarters of the four-year program approved in July 2024, the same month the birr was allowed to float, DW Amharic reported.

The IMF made a similar point to Addis Fortune last week. "We're concerned about the impact of the rising security tensions on people and communities," the Fund said in a statement to the weekly. "Security tensions can threaten to increase displacement and humanitarian needs. Domestic conflict presents an important risk for the economy and the authorities' economic reform program." The statement did not say Ethiopia had missed program targets or that any disbursement had been suspended, the paper noted. The IMF's July review had already listed the conflicts in the Amhara and Oromia regions, the war in Tigray and the tensions with Eritrea among the rising domestic security risks.

The governor of the National Bank of Ethiopia, Eyob Tekalign, who led Ethiopia's delegation to the IMF and World Bank annual meetings in Bangkok last week, played down the danger. "War always has a cost," he told Addis Fortune, but he said the recent operation in Tigray ended quickly and its economic consequences should be limited. "It was a very effective, quick, swift operation," he said, adding that relations with Eritrea remained a concern. The governor recently said that Ethiopia earned $11.2 billion from merchandise exports and $8 billion from remittances last year, and that the current account deficit narrowed from $6.2 billion in 2023/24 to about $971 million, according to DW Amharic.

"The risk isn't simply that one target gets missed," Trevor Lwere, an economist at the consultancy Development Reimagined, told Addis Fortune. "It's that a security shock pushes the authorities back toward direct currency intervention or central-bank financing, which are the very practices the programme is trying to move beyond." He warned that continued disruption could also put the assumptions behind Ethiopia's debt restructuring under pressure, and that creditors could be asked for more relief and may resist.

The IMF's July projections put import cover at 2.7 months in 2025/26, up from 2.2 months a year earlier, while Secure Africa Partners put gross reserves at $5.9 billion in the second quarter of 2026, about 2.1 months of imports and below the three-month minimum, Addis Fortune reported. A weaker birr would raise the local cost of servicing foreign-currency debt, the paper noted in a post on X on Thursday.

At the Bangkok meetings, the IMF's new Africa Department director, Zeine Zeidane, a Mauritanian economist who succeeded Abebe Aemro Selassie, said the exchange-rate and subsidy reforms in Ethiopia "strengthened macroeconomic stability," Kelala Brief and DW Amharic reported. The IMF forecasts sub-Saharan Africa will grow 4.5 percent this year and next. It sees Ethiopia's economy growing 9.2 percent in 2026 and slowing to 7.8 percent next year, while the Government expects 10 percent growth in the current Ethiopian fiscal year. Zeidane warned that bilateral aid to the region is expected to fall another 12 percent this year after a steep drop last year, and the IMF listed Ethiopia among countries where an El Niño could threaten food security and electricity supply.

The war comes as Ethiopia's long debt restructuring nears its end. Before moving to parliament, former Finance Minister Ahmed Shide said at his last Ethiopian Finance Forum that "we believe the debt restructuring is largely completed," and that a financial deal had been reached with Eurobond holders, with only legal documents left, DW Amharic reported. Addis Fortune reported on Wednesday that Ethiopia's bondholders would receive $99.375 million for three missed interest payments and a consent fee of 0.5 percent of the original face value.

Of the federal Government's 2.4 trillion birr budget for this fiscal year, 542 billion birr is set aside for debt payments, and the Government projects a net deficit of 308.6 billion birr, though economists worry that war spending could push it higher than planned, DW Amharic reported.

IMF says it is “too early to assess” the war’s cost to Ethiopia’s economy, with talks on its next loan review expected in early December

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