Demographic advantages, investment on clean energy propel Ethiopia’s economic growth: NBE

Addis Ababa, January 15, 2025 (FMC) – During the recent “Ethiopia in Focus” dialogue, Mamo Mihretu, Governor of the National Bank of Ethiopia, unveiled promising results from the financial reforms initiated last year.

With the government’s overhaul of the financial sector, foreign currency inflow has surged dramatically, resulting in a doubling of bank reserves. The once-pertinent foreign currency shortage is now no longer considered a challenge for the economy. Mamo noted the stabilization of the foreign exchange market, with the premium between the regular and parallel market narrowing to a mere 7%.

The governor expressed optimism about various sectors, stating that agricultural productivity is set to rise and mining is poised to become a major driver of economic growth. Notably, remittances and exports have soared, with gold exports alone skyrocketing from $255 million last year to an impressive $1 billion in just four months of this year following the reforms.

Mamo emphasized the consolidation of foreign currency regulations into a single framework, a pivotal reform aimed at modernizing Ethiopia’s monetary policy. He outlined the establishment of an inter-bank money market and the initiation of open market operations, signifying a leap in financial infrastructure.

Manufacturing, previously stymied by foreign currency shortages, is now functioning at higher capacities, enhancing production levels. In light of potential challenges, the government has implemented a social safety net program to aid low-income households and salary increment.

Mamo highlighted the coordinated approach to financial reform, addressing monetary policy, exchange rate stability, and fiscal discipline. He anticipates continued economic advancement, with the government striving for a prudent macroeconomic policy to combat inflation and stimulate job creation through increased private sector involvement.

Looking ahead, he confidently projected that investments in the agricultural sector will lead to reduced food prices, further benefiting the manufacturing and export industries. The opening of logistics, banking, telecom, energy, and retail sectors is expected to attract more foreign investment, enhancing Ethiopia’s appeal to global capital.

Ethiopia is on track to be a leading force in clean energy, sourcing nearly 99% of its power from renewable sources. With robust demographic advantages and ongoing clean energy initiatives, the governor foresees sustained economic growth, supported by IMF projections of an 8% growth rate over the next four years.

Mamo projected that foreign direct investment (FDI) could reach $60 billion annually, while the country’s debt-to-GDP ratio could stabilize around 30%. Additionally, Ethiopia’s international reserves are forecasted to reach $10 billion within the next three to four years, he said. The economic growth is paving the way for job creation, positioning Ethiopia as a lead model for other African nations.