Economy
IMF Cautions Ethiopia Against Premature Capital-Account Opening
Addis Fortune · 4 hours ago · Read the Full Story on Addis Fortune
AI SUMMARY
The IMF stated that Ethiopia's recent foreign exchange reforms do not constitute opening the capital account, urging the country to wait until it is fully equipped to manage cross-border capital risks.
- The International Monetary Fund stated that policy reforms to Ethiopia's foreign exchange regime do not equate to opening the capital account.
- An IMF spokesperson clarified that capital-account liberalization is not under consideration in the current reform program, with focus remaining on current-account restrictions.
- The IMF urged that any future relaxation of controls must be well-sequenced, condition-based, and guided by a risk assessment.
- The National Bank of Ethiopia is managing capital flows across four distinct categories: foreign direct investment, portfolio investment, external borrowing, and outward investment.
- Central bank officials credit the July 2024 monetary policy reforms with introducing a market-based exchange rate, full current-account convertibility, and lowering the parallel-market premium below 12pc.
- NBE officials reported balance-of-payments receipts exceeding 37 billion dollars, FDI inflows topping 4.4 billion dollars, and a current-account deficit below 0.7pc of GDP.
- Think tank Secure Africa Partners estimates gross reserves at 5.9 billion dollars, equivalent to 2.1 months of import cover, which sits below the international three-month minimum.
- Both the IMF and independent experts emphasize that a sustainable external position, adequate reserves, monetary stability, and stronger institutional capacity must precede any wider capital-account opening.
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