IFC Applauds Ethiopia’s Economic Reforms, Highlighting Stronger Private-Sector Foundations

Addis ababa: The International Finance Corporation (IFC) has welcomed Ethiopia's economic reform efforts, saying progress in the foreign-exchange market, international reserves, and inflation is helping address some of the key constraints that previously discouraged private-sector investment. Speaking exclusively to The Pulse of Africa, IFC Managing Director Makhtar Diop noted Ethiopia's significant strides in tackling economic challenges that had historically created uncertainty for investors.According to Ethiopian News Agency, Diop reflected on his prior engagement with Ethiopia, identifying three major constraints: high inflation, foreign-exchange pressures, and inadequate reserve levels. These challenges, he explained, directly impacted businesses' ability to operate and invest, as foreign-exchange shortages hindered the import of essential goods and complicated profit repatriation.Ethiopia has since taken steps to address these constraints, moving toward a more flexible exchange-rate system, rebuildi ng foreign-exchange reserves, and reducing inflation. Diop highlighted that inflation, which had previously remained in double digits, has now fallen into single-digit territory at certain points, though it continues to fluctuate based on economic conditions.For private-sector investors, these developments are crucial as investment decisions heavily rely on economic predictability. Diop emphasized that investors need a degree of certainty before committing resources to a market, crediting the Ethiopian government for taking serious steps to address economic constraints that previously weighed on private-sector investment.The ongoing economic reforms are part of a broader effort to create a more predictable environment for domestic and international businesses, impacting investment, trade, infrastructure, and private-sector-led growth across the country. For Africa, these developments underscore the importance of macroeconomic stability, access to foreign exchange, and investment certainty in unlocking gre ater private-sector participation in the continent's economic transformation.Diop also pointed out opportunities in Ethiopia's digital economy, tourism, aviation, infrastructure, and renewable energy sectors, as well as the country's potential to attract investment into housing. During his 1-3 September visit to Ethiopia, Diop met with Prime Minister Abiy Ahmed and other government officials to discuss economic reforms, private-sector investment, and job creation.On 3 September, Prime Minister Abiy oversaw the signing of a framework agreement between the National Bank of Ethiopia and the IFC to establish the country's first mortgage refinance company. The proposed institution is expected to be capitalized at 100 billion birr, with the IFC contributing at least 200 million US dollars, supporting the government's ambition to deliver 1.5 million homes over the next five years. The IFC chief noted that expanding housing would also require greater participation from private developers and investment in skills and construction capacity.