The International Monetary Fund (IMF) predicted lower economic growth at 6 percent for Ethiopia in the 2011/12 fiscal year. Led by Mr. Paul Mathieu the IMF mission made the prediction at the conclusion of its 12-day discussions for the 2011 Article IV Consultation in Addis Ababa on May 30.

The mission met with Prime Minister Meles Zenawi, Sufian Ahmed, Minister of Finance and Economic Development, Teklewold Atnafu, Governor of the National Bank of Ethiopia (NBE), other senior officials, and representatives of the private sector, the international community, and civil society.

The IMF mission blamed restrictions on private bank lending, high inflation, and a more difficult business environment as the causes of the expected low economic growth. It approved of the decision to lift most price controls and recommended reducing the costs of trade.

The mission estimates the 2010/11 growth at 7.5 percent compared to an official estimate of 11.4 percent. Though exports and fiscal revenues are doing well, inflation reached 30 percent in April and was cited as the major macroeconomic challenge. The budget saw a domestic financing surplus in the first half of 2010/11, but there was significant recourse to central bank financing, as the Treasury bill market collapsed, reflecting highly negative interest rates.

At its conclusion the IMF mission urged the authorities to reconsider aspects of the recent NBE directive transferring resources from private banks to the Development Bank, in order to lessen its disruptive impact on the banking system, and reinforce financial sector supervision, continue tax and customs reform plans, strengthen debt management, and improve the national accounts statistics.

IMF press release