• Ethiopia forecasts 8.9% growth in 2025/2026, up from 8.4% in 2024/2025
• Government unveils record $14.16 billion budget, up 31% from prior year
• Growth to be driven by IMF-supported reforms and rising investments

Ethiopia expects its economy to grow by 8.9% during the 2025/2026 financial year, up from an estimated 8.4% in 2024/2025, according to Finance Minister Ahmed Shide. The forecast reflects optimism tied to economic reforms backed by a $3.4 billion agreement with the International Monetary Fund reached in July 2024.

Presenting the draft budget to parliament on June 10, Minister Shide announced a spending plan of 1.93 trillion birr (about $14.16 billion), the largest in Ethiopia’s history. This represents a 31% increase over the previous fiscal year. Of the total, 1.2 trillion birr is allocated to recurrent expenses, 415 billion birr to investment, and 315 billion birr to regional subsidies.

The government is targeting a fiscal deficit of 2.2% of GDP in 2025/2026, slightly above the 2.1% recorded in 2024/2025.

The growth outlook is supported by reforms including foreign exchange liberalization, plans to launch a securities exchange, and the full lifting of forex restrictions in special economic zones. The government is also advancing debt sustainability initiatives and opening more sectors to private investors.

Ethiopia’s economy, which had seen growth rates near 10% prior to the COVID-19 pandemic, has been hit by multiple shocks, prolonged conflict in the Tigray region, drought, and flooding. In 2021, the country requested a comprehensive debt restructuring under the G20 Common Framework. A provisional deal was reached in March 2025 to restructure $8.4 billion in external debt.