IMF Program for Ethiopia Will Succeed, Set Positive Example to Rest of Africa: NBE Governor 

Addis Ababa, November 5/2024 (ENA) Governor of the National Bank of Ethiopia (NBE), Mamo Mihretu expressed hope that the International Monitory Fund (IMF) program for Ethiopia will succeed and set a positive example to the rest of Africa. 

The governor made this remark in his interview published on Central Banking Journal, which is an equivalent of Time Magazine for Central Bankers and financial regulators and widely read by other central bankers.

NBE head highlighted about the overall reform activities of the economy including monetary policy and exchange rate reform, opening the financial system and a fundamental reset of the economy in his interview with the Central Banking Journal.  

He indicated that unlike in some other countries – “the IMF work is not forced upon us. We took the decision to seek external support from our creditors and to have an external anchor, which gives our reforms credibility.” 

Mamo said most of the reforms in Ethiopia were set in place over a year before the IMF program as part of a comprehensive ‘Three-Year Strategy Plan’ the country laid out for itself in June 2023. 

“This Strategy Plan has provided the core framework for our ambitious and transformative reforms – to Ethiopian macroeconomic policy-making, to the Ethiopian financial system, and to the NBE – before the IMF program and continues to do so even after the IMF program.” 

The NBE is set to become a central bank with greater autonomy and enhanced independence, the Governor stated pointing out that the Bank is also set to acquire several new responsibilities as per the draft NBE proclamation, notably as lender of last resort, as resolution authority, on consumer protection.  

“The financial sector is being liberalized, opening the way for new financial institutions – including foreign banks – and for new business models to become part of the Ethiopian financial system. There is also an ambitious multi-year plan to develop/enhance the financial market infrastructures that support Ethiopia’s financial system.”

All these transformative changes are now being implemented rigorously and purposefully, Mamo said, adding “I am hopeful that the IMF program for Ethiopia will succeed, simply because – unlike in some other countries – the IMF work is not forced upon us. We took the decision to seek external support from our creditors and to have an external anchor, which gives our reforms credibility. But it is the government’s reform plan. And because we own it, I think it has a high chance of making progress to put the country on a sustainable path to high-quality, inclusive, and private sector driven economic growth. We know if we succeed, we’ll set a positive example to the rest of Africa.” 

According to Mamo, the IMF program is very important to provide financing as well as policy and technical support to Ethiopia’s homegrown economic reform agenda. 

Many of the policy reforms under the IMF program were initiated well before the start of the program – including, for example, monetary policy reforms to re-focus the mandate of the central bank, to reduce deficit monetization, to tackle inflation and to introduce modern monetary policy instruments. 

These reforms are continuing under the IMF program, with further fine-tuning to be expected as our money markets and financial markets develop. In many other areas as well, including in the fiscal and financial sectors, IMF support is building upon policy decisions and directions that were put in place as part of the home-grown economic reform package. 

The opening-up of the banking sector to foreign investment into Ethiopia  could bring important improvements in service delivery, service quality and technological innovation, the Governor said adding that “competition will also be enhanced, which we view as an important objective.”

Mamo also highlighted about digitalization strategy noting that the country has a national payment strategy and a national financial inclusion strategy. 

“The growth in terms of digital payment, particularly with the participation of telecoms companies like Safaricom – we have given a license to [Kenyan mobile payments platform] M-Pesa – has revolutionized the payment infrastructure in Ethiopia. For the first time in our history, digital transactions have exceeded cash transactions. We want to move towards digital lending, digital investment and digital insurance. On this, we’ve been supported by the Bill & Melinda Gates Foundation and Mastercard Foundation.”

He said that a key strategy is to develop financial inclusion, not just focusing on geographic reach and access points but also on the widespread availability of products and services responsive to the needs of all categories of borrowers – irrespective of economic sector, business size, location and gender. 

“In this regard, we want to go beyond payments. A key measure of success in this area will be a widespread growth of offerings related to savings, credit, insurance and other products.”