ADDIS ABABA – In a significant overhaul of Ethiopia’s economic framework, National Bank Governor Mamo Mehretu announced a landmark decision on foreign exchange (FX) management aimed at revitalizing the country’s economic growth.

According to Ethiopian News Agency, this strategic move is not a result of external pressures from lending institutions but a self-initiated measure to tackle existing economic challenges. He critiqued the previous macroeconomic policies for their inefficiencies, such as high inflation rates, foreign currency scarcities, and an over-reliance on foreign credit which sidelined the private sector. These policies, he noted, drove the country’s economic engine through unsustainable government-financed investments.

The introduction of the Homegrown Economic Reform strategy has marked a significant turn, leading to substantial economic improvements. This first phase of the reform has already reduced public debt from over 40 percent to 17.4 percent and has significantly bolstered the private sector’s role within the financial system. The Governor emphasized the reformation steps that have been instrumental in enhancing public enterprise management and establishing new institutions to boost investment.

Further elaborating on the FX management reforms, Governor Mehretu highlighted the transition to a market-determined exchange rate system aimed at bridging the gap between the official and parallel market rates. This move, he assured, will combat illicit financial activities and foster a healthier economic environment by promoting exports and investments. While acknowledging potential market volatilities, he reassured that the National Bank would intervene as necessary to maintain stability.

Governor Mehretu expressed confidence in the ongoing reforms, projecting an 8 percent GDP growth annually over the next four years, as forecasted by the International Monetary Fund (IMF). He outlined the benefits of these reforms, including improved revenue collection, increased foreign exchange reserves, an enhanced investment climate, and greater economic equity.

In a significant endorsement of the country’s new economic path, Ethiopia has received considerable financial backing from international entities, with the IMF and the World Bank depositing $2.5 billion into the National Bank of Ethiopia just this Thursday. Governor Mehretu sees these macroeconomic adjustments as vital to Ethiopia’s long-term development, dismissing any opposition to the reforms as counterproductive to attracting foreign investment and increasing foreign exchange inflows.