Ethiopia forecasts faster growth next fiscal year

Ethiopia's economy will grow slightly faster in the fiscal year that starts next month, while its budget deficit will increase marginally, its finance minister said on Tuesday.

The East African nation, which is restructuring its external debt, is implementing far-reaching economic reforms backed by an International Monetary Fund (IMF) loan programme.

Finance minister Ahmed Shide told parliament that the government is forecasting economic growth of 8.9% in the fiscal year that runs from July 8 2025 to July 7 2026, up from an estimated 8.4% in the current fiscal year.

A budget deficit of 2.2% of gross domestic product (GDP) is expected versus 2.1% this fiscal year, while overall spending will be about 1.9-trillion birr (R248.16bn) next year, he said.

Ethiopia's export revenue over the past 11 months of this fiscal year stood at $7.2bn (R127.62bn), Ahmed said, up 118.2% from the previous financial year. Prime Minister Abiy Ahmed has told domestic media outlets in recent days that the country's coffee and gold exports have surged.

The IMF projected in its January assessment that goods exports for the full financial year would grow to $4.59bn (R81.36bn) and for services to $7.97bn (R141.27bn). The fund has been carrying out another assessment of the economy, with its findings expected to be published in the coming weeks.

Ethiopia's export figures are being watched closely by markets as they are at the centre of a row between bondholders and the government over whether Ethiopia faces an insolvency problem or a liquidity issue, which could determine whether the investors will accept a writedown or not.

Strong export earnings growth could support the bondholders' case that Ethiopia faces a liquidity issue.

That would enable them to push for repayments on Ethiopia's defaulted $1bn (R17.73bn) bond to be stretched out, rather than taking losses on the principal of their investments, also known as haircuts, if an assessment of insolvency carries the day.

Formal talks between the two sides on the restructuring of the bond are expected to start in the coming weeks.

Reuters