Ethiopia’s foreign exchange reserves are projected to approach USD 6 billion by the end of the 2025/26 fiscal year, according to the International Monetary Fund (IMF), reflecting continued progress under the country’s ongoing economic reform program.
The projection was outlined in the IMF’s latest review of Ethiopia’s Extended Credit Facility (ECF) arrangement, released following the completion of the fifth review of the reform program. The IMF Executive Board recently approved the disbursement of approximately USD 464 million, including additional financing intended to help Ethiopia address external pressures and support macroeconomic stability.
According to the report, gross international reserves are expected to reach about USD 5.9 billion by the end of the fiscal year, providing import coverage of more than two months. The IMF expects reserve levels to continue improving over the medium term, with reserves projected to reach the equivalent of three and a half months of imports by the completion of the reform program.
The Fund noted that Ethiopia’s macroeconomic performance has remained broadly resilient despite significant external challenges. It highlighted strong export performance during the first half of the 2025/26 fiscal year, supported by higher gold prices and increased export volumes.
Coffee and gold exports are expected to remain key drivers of foreign exchange earnings throughout the year. The IMF said strong export revenues are likely to offset rising fuel import costs and support growing foreign currency availability in the economy.
As a result, the country's goods trade deficit is projected to narrow slightly and end the fiscal year at approximately USD 12.6 billion. Service exports, led by continued strong performance from Ethiopian Airlines, are also expected to contribute positively to external sector performance.
The report further indicated that remittance inflows have shown modest growth, while foreign direct investment projections remain largely unchanged.
The IMF also noted improvements in the banking sector’s foreign currency position. Foreign exchange deposits held by banks reportedly reached around USD 1.4 billion by the end of April 2026. In addition, the National Bank of Ethiopia has conducted 14 foreign exchange auctions over the past eleven months, distributing approximately USD 2.5 billion to commercial banks.
Despite these gains, the IMF cautioned that several risks could affect the pace of reserve accumulation and broader economic stabilization efforts.
Among the key concerns are rising global oil prices following the conflict involving Iran, which could increase Ethiopia’s fuel import bill. As a net importer of refined petroleum products, Ethiopia remains vulnerable to external energy price shocks. The IMF also pointed to potential declines in international coffee and gold prices as risks to export earnings.
The report noted that while foreign exchange market reforms have contributed to greater market flexibility, the gap between official and parallel market exchange rates remains significant, fluctuating between 10 and 20 percent in recent months.
The IMF identified a number of structural challenges contributing to the persistence of the parallel market, including limited access to foreign currency for legitimate business transactions, transaction costs associated with foreign exchange purchases, and the absence of sufficient financial instruments to hedge against exchange rate fluctuations.
The Fund also observed that restrictions on capital movements and incentives in certain foreign exchange related transactions continue to influence market behavior.
Nevertheless, the IMF concluded that Ethiopia’s economy has demonstrated resilience despite external shocks, a large trade deficit, and ongoing reform related adjustments. The institution expects continued implementation of macroeconomic and foreign exchange reforms to support stronger reserve accumulation, improved external balances, and sustained economic stability in the coming years.
Source: IMF's July 2026 Report on Ethiopia
Additional source: Sheger FM
