The Federal Democratic Republic of Ethiopia

Abstract

In the last decade, rapid growth, the fastest in Sub-Saharan Africa, and strong policies to address poverty have yielded a remarkable improvement in living standards. But the debt-financed public investment-led development model has reached its limits, amid a buildup in external vulnerabilities, as illustrated by severe foreign exchange shortages and high premia on the parallel market, as well as debt and likely financial sector vulnerabilities. Recognizing these vulnerabilities, the authorities have prepared a “Homegrown Economic Reform Plan”. Their reform agenda is appropriately ambitious and wide-ranging, encompassing macroeconomic reforms, structural reforms to ease institutional and structural bottlenecks to productivity and job growth, and sectoral reforms.