Economy
IMF Advises Ethiopia to Phase Out Broad Fuel Subsidies
Addis Fortune · 5 hours ago · Read the Full Story on Addis Fortune
AI SUMMARY
The IMF has advised Ethiopia to withdraw broad fuel subsidies once international prices normalize, as the government caps subsidy spending and recapitalizes the state fuel importer.
- The International Monetary Fund has advised the federal government to withdraw broad fuel subsidies once international oil prices return to normal.
- The federal budget caps fuel subsidy spending at 20 billion Birr.
- The board of Ethiopian Investment Holdings authorized a 286-billion-Birr recapitalization of the Ethiopian Petroleum Supply Enterprise in June 2026.
- The recapitalization funding comprises 170 billion Birr from the World Bank and 116 billion Birr from the federal budget.
- The injection aims to clear legacy claims on the Fuel Price Stabilisation Fund and improve the Enterprise's liquidity to reduce financing costs.
- The IMF Executive Board completed the fifth review under the Extended Credit Facility in July 2026, disbursing about 464 million dollars and bringing forward about 200 million dollars.
- The Productive Safety Net Programme rural beneficiaries are expected to increase from eight million to 9.5 million in the 2026/27 fiscal year, with four billion Birr set aside for shock-response payments in 2025/26.
- Policymakers are planning a shift to market-based pump prices paired with targeted subsidies for vulnerable populations, though the plan was stalled by the war in the Middle East.
- Investment expert Mere'ed Fikereyohannes warned that the current subsidy is financed by Treasury-bill borrowing and proposed reallocating about 150 billion Birr toward public-sector wages and power infrastructure.
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