IMF to Review Implementation Schedule for Ethiopia’s New Economic Forecasting Model

The International Monetary Fund (IMF) plans to discuss the implementation timeline for Ethiopia’s new macroeconomic forecasting model with government authorities, as questions remain over the project’s completion following an initial September 2026 target. Ethiopia has been working with the IMF to overhaul its economic forecasting framework through successive rounds of technical assistance dedicated to the Comprehensive Adaptive Expectations Model (CAEM). The government requested the framework in October 2024 to bring greater rigor to its fiscal and macroeconomic projections. “Since the Technical Assistance team’s initial scoping mission in May 2025, multiple rounds of TA have been provided, and we understand that substantial progress has been made,” an IMF spokesperson told The Reporter . The Fund plans to assess progress alongside authorities and discuss remaining steps, including the timeline for full implementation, the spokesperson added. The model is intended to replace the Ministry of Finance’s legacy forecasting framework, enhancing the government’s ability to assess how shifts in economic growth, inflation, public finances, monetary conditions, and the external sector interact. The IMF’s Institute for Capacity Development, in collaboration with its Fiscal Affairs Department, launched the initiative with an initial scoping mission in May 2025 to evaluate forecasting capabilities across the Ministry of Finance, the Ministry of Planning and Development, and the National Bank of Ethiopia (NBE). The project roadmap initially envisaged around seven technical assistance missions scheduled roughly two to three months apart. Beyond improving scenario analysis and projection consistency, the technical assistance report notes that data gaps—particularly the annual availability of national accounts and production data—remain a constraint. It recommends incorporating nowcasting and near-term forecasting tools to allow authorities to update assessments more frequently. Additionally, the project aims to link CAEM with the IMF’s Debt Dynamics Tool (DDT) to better evaluate how economic developments and policy choices influence public debt trajectories. “These tools would enable the forecasting team to provide regular updates throughout the year. Given that debt sustainability is a critical consideration for Ethiopia, incorporating a Debt Dynamics Tool (DDT) into the projection model will enhance the discussion of policy options and their implications on debt dynamics,” the technical assistance report stated. This technical upgrade coincides with a broader, high-stakes overhaul of Ethiopia’s economic architecture. In July 2024, the government took a bold step by allowing the birr to float, dismantling a core pillar of its long-standing managed foreign-exchange regime. The currency depreciated by about 30 percent against the US dollar in the official market upon floating. For an import-dependent economy, the adjustment sent immediate shockwaves through the price system, raising import bills and squeezing consumer purchasing power. The pace of depreciation has since moderated. According to the IMF’s fifth review of Ethiopia’s program, the exchange rate has depreciated by an average of about 1.3 percent per month since October 2025. “The real effective exchange rate has remained broadly stable since the initial depreciation. Banking sector FX liquidity improved after falling through November 2025, reflecting FX inflows from remittances, FDI and other sources. However, adverse terms-of-trade shocks, including those stemming from the conflict in the Middle East, have created renewed pressures,” the report noted. Despite inflationary pressures, the reform has eased long-standing foreign currency bottlenecks. Importers report improved access to official FX channels compared to the previous system, which largely forced businesses toward the parallel market. The parallel market premium narrowed to 11 percent by May 2025, according to the IMF. The central bank has continued refining forex regulations. In May, the NBE relaxed approval requirements for certain letters of credit and cash-against-documents transactions, transferring greater autonomy to commercial banks. In July, the NBE reduced its foreign-exchange commission rate from 2.5 percent to 1.5 percent and lowered export surrender requirements from 50 percent to 30 percent, enabling goods exporters to retain a larger share of foreign earnings. Since securing a USD3.4 billion loan program from the IMF in July 2024, Ethiopia has received USD 2.647 billion in disbursements under the Extended Credit Facility (ECF). Remaining funds are contingent on continued program reviews and the fulfillment of structural conditionalities. The IMF is scheduled to conduct the program’s sixth review in November, with Executive Board approval anticipated in early 2027. Discussions will cover the CAEM implementation timeline as well as the government’s Treasury Bill and Bond Issuance Directive, an IMF spokesperson told The Reporter . The directive—slated for completion by the end of this month—ranks among the 12 structural conditionalities established during the fifth program review.