Central Bank Governor commends homegrown reforms as historic, transformative reset of Ethiopian economy

Addis Ababa, January 14, 2025 (FMC) – In the latest episode of the “Ethiopia in Focus” discussion, the Governor of the National Bank of Ethiopia, Mamo Mihretu, praised the homegrown economic reform (HGER) as a historic and transformative shift for the country’s economy. The Governor reflected on the significant financial vulnerability in the economy before the introduction of HGER in 2019, citing problems like price pressure, project delays, and shortage of access to finance as among the leading factors that caused macroeconomic instability.

“Debt pressure was building up, price pressure was significant, there was shortage of access to finance, and the Commercial Bank of Ethiopia was forced to lend mainly to public enterprises,” Mamo Mihretu explained, highlighting the need for a transition to a private sector-driven economy.

The implementation of the first phase of the HGER started in 2019, and the Governor acknowledged that the reform addressed macroeconomic instability issues, structural policy issues, and introduced sectoral reforms to improve the investment climate and attract foreign direct investment.

Mamo Mihretu identified three key sources of growth for the Ethiopian economy: agriculture, ICT and tourism, mining, and manufacturing. Although the HGER started excellently, the Governor noted that the COVID-19 pandemic, domestic conflict in Ethiopia, and a war in Ukraine in 2022 disrupted the global chain and put a heavy toll on the Ethiopian economy.

Despite these challenges, the Governor commended the resilience of the economy and the government’s efforts to maintain the core elements of the HGER. The government has managed to continue with high economic growth rates and introduce a number of market-friendly institutions, including the Ethiopian Securities Exchange and the Ethiopian Investment Holdings.

The Governor highlighted the importance of the private sector, with 70% of loans from the Commercial Bank of Ethiopia being channeled to public enterprises before the HGER. However, with the reform, most of the access to finance has been channeled to the private sector, creating a more competitive and dynamic economy.

The Governor of the Central Bank emphasized that the homegrown economic reform was historic and effective in tackling critical structural, sectoral, and policy issues. “It is comprehensive and coordinated encompassing multiple issues. It was a reform program by the whole part of the government. The reform program represents a historic and transformative reset of the Ethiopian economy, which is now open, FDI-friendly, and market-based,” he pointed out.