[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"doc-detail-111115-en":3,"doc-seo-111115-105":29,"detail-sidebar-cat-0-en-105":91},{"code":4,"msg":5,"data":6},0,"success",{"doc_id":7,"user_id":8,"nickname":9,"user_avatar":10,"doc_module":4,"category_id":11,"category_name":12,"doc_title":13,"doc_description":14,"doc_content":15,"file_id":16,"file_url":17,"file_type":18,"file_size":19,"view_count":20,"is_deleted":4,"is_public":20,"is_downloadable":20,"audit_status":20,"page_count":21,"language":22,"language_code":23,"site_id":24,"html_lang":23,"table_of_contents":25,"faqs":26,"seo_title":13,"seo_description":14,"update_tm":27,"read_time":28},111115,687197100911,"Himbo","https://ap-avatar.wpscdn.com/avatar/a000239b6f1da00475?x-image-process=image/resize,m_fixed,w_180,h_180&k=1782698725881665579",8,"Research & Report","Ethiopia - Second Sustainable and Inclusive Growth Development Policy Financing Tranche Release Document - Full Compliance","Ethiopia’s Second Sustainable and Inclusive Growth Development Policy Financing (Credit No. IDA-78750; IDA Grant No. IDA-E4850) presents the basis for the release of the second tranche under full compliance. The document reviews the July 2024 economic reform launch aimed at correcting macroeconomic imbalances, restoring external debt sustainability, and shifting toward private sector-led growth. It summarizes early results in forex market liberalization, improved monetary and fiscal discipline, narrowing parallel spreads, rising reserves, stronger exports and inflation reduction, alongside progress on official and commercial debt restructuring. It also identifies remaining structural constraints on private investment and poverty reduction, and describes complementary reforms in banking, procurement transparency, energy tariffs, VAT, social safety nets, land tenure, capital markets, and trade and customs.","Public Disclosure Authorized Public Disclosure Authorized  \nEthiopia  \nSecond Sustainable and Inclusive Growth Development Policy Financing (Credit No.  \nIDA-78750) and (IDA Grant No. IDA-E4850)  \nRelease of the Second Tranche – Full Compliance  \nTranche Release Document  \nI. Background  \n1. Ethiopia launched a comprehensive economic reform program in July 2024 with the aim of addressing the major sources of macroeconomic imbalances, restoring external debt sustainability and supporting a (long overdue) shift to private sector led growth. The state-led development model it followed for more than two decades largely involved expanding infrastructures and was financed through significant domestic and external debt, overvalued exchange rates, financial repression, and other price and policy distortions. While it delivered impressive levels of GDP growth and improvement in public services, it created significant macroeconomic distortions, eroded the productive capacity of the economy, depleted fiscal buffers and worsened debt sustainability. While reforms initiated in 2019 under the Home-Grown Economic Reform (HGER) agenda had started to address these challenges, reform momentum stalled following several shocks. Multiple shocks including COVID-19, the Tigray conflict, drought, and lower aid compounded these challenges, leading to spreads of over 100 percent in parallel foreign exchange (forex) markets and Ethiopia’s debt default in 2023. The reform program launched in mid-2024 is supported by a four-year IMF Extended Credit Facility (ECF), World Bank DPF series and debt restructuring under the G-20 Common Framework.  \n2. Early results following the launch of the reform program have been encouraging. Reforms to liberalize the forex market and improve monetary and fiscal policy have significantly narrowed parallel spreads, reduced forex shortages, and raised forex reserves from 2 weeks to more than 2 months of import cover in a short time. Exports doubled in FY2025, helped by the forex reforms, higher gold exports, and good harvests. Average inflation fell from 27 percent in FY2024 to 16 percent in FY2025 due to monetary and fiscal discipline and lower food inflation. Debt restructuring negotiations with official creditors are progressing well with all official bilateral creditors having already signed a Memorandum of Understanding (MOU) agreed with the Official Creditors Committee (OCC) in early July 2025. Thereis also positive progress on restructuring the country’s commercial debt with authorities already securing an agreement in principle with one large commercial creditor on terms that are comparable to the OC MOU and announcing in early January 2026 of reaching an agreement in principle with the Ad Hoc Committee of bondholders of its US$1 billion Eurobond.  \n3. Notwithstanding the improvement in the macroeconomic environment, Ethiopia still needs to address deep-rooted constraints limiting private sector growth and poverty reduction. Ethiopia’s transition to a market economy remains nascent. Considerable structural policy distortions remain, including a heavy footprint of state-owned enterprises (SOEs), shallow financial markets, and onerous regulatory, licensing, and permit regimes that discourage private investment and trade. Agricultural labor productivity and employment shares are broadly at the same level as two decades ago.  \nO\"icial Use Only  \nMeanwhile, generous tax incentives for import substitution and export promotion have failed to  \ngenerate enough foreign direct investment, exports, or jobs. With Ethiopia not yet a member of the  \nWTO, its export-to-GDP ratio is among the lowest in the world. Furthermore, fiscal space remains  \ncompressed due to an overall tax-to-GDP ratio of 7.8 percent in FY2025 .  \n4. To address these challenges the government is implementing bold reforms supported by this DPO series. Measures implemented with the support of this DPO complement forex and monetary reforms supported by an IMF pr","cbCaijWRirbaoKvQ","https://ap.wps.com/l/cbCaijWRirbaoKvQ","pdf",360180,1,6,"English","en",105,"# Background\n## Recent Economic Developments","[{\"question\":\"What was the purpose of Ethiopia’s economic reform program launched in July 2024?\",\"answer\":\"The program targeted major sources of macroeconomic imbalances, aimed to restore external debt sustainability, and supported a shift toward private sector-led growth.\"},{\"question\":\"What early results were achieved after the reform program started?\",\"answer\":\"Forex liberalization and improved monetary and fiscal policy narrowed parallel spreads, reduced forex shortages, increased forex reserves, doubled exports in FY2025, and lowered average inflation.\"},{\"question\":\"Which key constraints still limit private sector growth and poverty reduction in Ethiopia?\",\"answer\":\"The transition to a market economy remains nascent, with persistent structural policy distortions such as a heavy footprint of state-owned enterprises, shallow financial markets, and burdensome regulatory regimes that discourage private investment and 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was the purpose of Ethiopia’s economic reform program launched in July 2024?","Question",{"text":75,"@type":76},"The program targeted major sources of macroeconomic imbalances, aimed to restore external debt sustainability, and supported a shift toward private sector-led growth.","Answer",{"name":78,"@type":73,"acceptedAnswer":79},"What early results were achieved after the reform program started?",{"text":80,"@type":76},"Forex liberalization and improved monetary and fiscal policy narrowed parallel spreads, reduced forex shortages, increased forex reserves, doubled exports in FY2025, and lowered average inflation.",{"name":82,"@type":73,"acceptedAnswer":83},"Which key constraints still limit private sector growth and poverty reduction in Ethiopia?",{"text":84,"@type":76},"The transition to a market economy remains nascent, with persistent structural policy distortions such as a heavy footprint of state-owned enterprises, shallow financial markets, and burdensome regulatory regimes 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