The International Monetary Fund announced that it may be possible to reduce inflation to single digits in Ethiopia by the end
of this financial year.
The government has been following a tight and consistent monetary policy to force inflation down to single digits and IMF supports the tightening of federal government monetary and fiscal policies said Jan Mikkelsen, IMF Resident Representative.
The public sector led development strategy of Ethiopia is encouraging although it may have a negative impact on the private sector according to Mikkelsen.
The robust economic growth in Ethiopia has led to poverty reduction but can result in macroeconomic imbalances which are manifesting in terms of high inflation and appreciation of currency he said.“Inflation causes very negative real interest rates and some real appreciation of real exchange rates” said Mikkelsen.
Discussions with the government and the visiting IMF mission and the subsequent staff report recognizes the achievements and further policies that would focus on sustained growth and readdressing some of the vulnerabilities and potential risks in the future are under discussion he explained.
The Ethiopian government and the IMF agree that inflation is still an issue that will require policies to be put in place with inflation still at the 20% mark. The IMF will support the fiscal monetary policy that the government is putting in place for this year and some of efforts to restructure tax administration and collection said Mikkelsen.
Source: Capital
