Birr Metrics: The Easy Part of Ethiopia's Reform Is Done, and the Hard Part Has Not Started

Inflation has eased, foreign-exchange reserves have recovered and the official-to-parallel exchange gap has narrowed sharply since the July 2024 reforms. Birr Metrics argues those are the stabilisation gains, and that what comes next is harder and slower.

Ethiopia has brought its most visible macroeconomic pressures under control, Birr Metrics argues in an assessment published this week — and that is the part of the reform that was always going to move first.

Since the July 2024 reform package, inflation has eased, foreign-exchange reserves have recovered, and the gap between the official and parallel exchange rates has narrowed sharply.

Stabilisation is a different task from growth

The distinction matters because the two are achieved by different means. Stabilisation is largely monetary and administrative: float the currency, tighten credit to the government, stop financing the deficit at the central bank, and let the official rate find the parallel one. These are decisions a central bank and a finance ministry can take on their own authority, and their effects show up in published series within a year.

What follows cannot be delivered the same way. Getting investment into tradeable production, fixing the balance sheets of state enterprises, widening a tax base that still rests on a narrow set of payers, and making the credit system allocate to firms rather than to the state — each of these requires other ministries to act, other interests to lose something, and several years before anything appears in a number.

What to watch instead of the headline

A narrowed parallel-market spread is the easiest indicator to point at and one of the least informative about the next phase. The harder questions are whether the foreign exchange now reaching the auction is being won by importers of inputs or of finished goods; whether private credit is growing faster than lending to government; and whether the reserve recovery reflects earned export receipts rather than borrowed or donated inflows.

Open

Birr Metrics does not publish the underlying figures for inflation, reserves or the rate spread in this piece, and the assessment is its own rather than an official one. The National Bank has not set out its sequencing for the next phase.

Sources: Birr Metrics, 29 September 2026