Ethiopia's external accounts are under renewed pressure as the National Bank of Ethiopia (NBE) moves to unwind its premium-based role in the artisanal gold market. It has also locked in an interest-rate-anchored monetary regime, even as the war in the Middle East lifts fuel and fertiliser import bills and keeps foreign-exchange backlogs high.

The balance-of-payments position weakened throughout the 2025/26 fiscal year, and policymakers are now leaning on tighter monetary policy, gold-market reform, and front-loaded IMF financing to hold risks in check.

The numbers show a system under load but not yet buckling. Trade deficit narrowed to 12.6 billion dollars by year-end, helped by strong coffee and gold receipts, yet the IMF warned that sustained high fuel prices could complicate the goal of lifting reserves to 3.5 months of imports by the programme's end.

Gross reserves were 5.9 billion dollars, covering 2.1 months of imports at the fiscal-year close, a slim buffer against a conflict-driven import bill, a source of immediate shock.

According to Merid Fikeremariyam, chief executive officer (CEO) of Pragma Capital, the reserves sit well below the medium-term target of 10 billion dollars to 12 billion dollars by 2028, a goal he judged "very tough" unless federal and regional authorities agree on how to share resource revenues.

“The mining proclamation had stalled partly over that dispute,” he said.

He advocated a model in which a dedicated entity buys gold nationwide, channels it to the refinery and exports it, with regional states benefiting in ways that reward formal production rather than political capture.

“Persistent premiums push producers toward the parallel market,” said Merid. “Any new buyer can’t repeat the NBE's practice of paying premiums funded by money creation.”

The war in the Middle East has disrupted trade routes and forced the government onto the spot oil market after a major supplier declared force majeure in March this year. Full-year exports offered partial relief, with coffee and gold projected to earn three billion dollars and 30tns, respectively. But, the IMF cautioned that a prolonged price spike could erase the gains.

The Birr has held in headline terms, depreciating about 1.3pc a month since October 2025, yet foreign-exchange backlogs at banks reached an estimated 1.4 billion dollars by the end of April, a sign of pressure beneath the calm.

The IMF has urged the Central Bank to commit to a long-term exit from the artisanal gold trade by December 2026, to end its role as sole buyer, and to phase out, by September 2026, the five percent to 15pc premium it pays above international prices.

According to Tobias Rasmussen, the outgoing IMF resident representative for Ethiopia, the premium scheme had helped build reserves but caused "significant liquidity injections" that sped up money-supply growth, turning what began as a formalisation tool into a source of macroeconomic risk.

Eyob Tekalign (PhD), governor of the Central Bank, briefing the media last week on the Monetary Policy Committee (MPC), disclosed his intention to shift settlement to private banks gradually.

Officials expect that opening the market to commercial banks and ending the premium will help narrow the parallel foreign-exchange spread, which swung between 10pc and 20pc before easing to about 11pc in late May 2026. Authorities attribute the spread to heavy import taxes, customs duties of up to 35pc, and excise taxes of up to 500pc. Along with bank fees of nearly four percent and the absence of hedging instruments, monetary officials claim that all these have “rewarded smuggling and dollar sourcing outside formal channels.”

The Central Bank has fully lifted the annual cap on private-sector credit growth and consolidated its move to an interest-rate framework anchored by a 15pc policy rate.

“Removing the cap will free finance for productive sectors including manufacturing,” the Governor said. “There is ‘no hidden ceiling’ on credit beyond the reserve requirement.”

IMF staff have advised against legislated sectoral quotas, warning that directed lending could weaken asset quality, and the IMF noted that 20 of 28 banks had already breached the old ceiling by March 2026, a measure of the tension between administrative control and a rules-based regime.

Total disbursements under the IMF arrangement have reached 2.6 billion dollars, with 200 million dollars rephased to ease immediate pressure from the war. Budget support under the fifth review is capped at 130.24 million dollars, while Ethiopian authorities plan to draw a further 390.71 million dollars from the sixth and seventh reviews next year.

Domestic financing is projected to cover 1.3pc of GDP next fiscal year, up from 1.1pc, as the federal government sticks to zero monetary financing of deficits and relies more heavily on the emerging local securities market.

According to the Resident Representative, tax revenue has been among the “brighter outcomes,” consistently beating projections and “creating room for priority spending without inflationary central-bank funding,” though the tax-to-GDP ratio remains below that of peer economies.

Rasmussen, to be replaced by Kyungsuk Lee in August, called the recent measures by the Monetary Committee, among them cutting the Central Bank’s foreign-exchange commission from 2.5pc to 1.5pc and lowering exporters' surrender requirement from 50pc to 30pc, “positive moves toward a more market-friendly system”. He backed holding the 15pc rate, ready to raise it if second-round inflation appears.

Despite the shock of global and domestic nature, real GDP growth for this year is projected at 9.2pc. Banking liquidity has improved after remittance inflows and 14 foreign exchange auctions held by the Central Bank, totalling 2.5 billion dollars over 11 months, though bank backlogs remain sizeable.

The Central Bank and the Ministry of Finance are to finalise NBE’s recapitalisation plan by September 2026, to restore "policy solvency" through “stronger earnings” and the eventual removal of the foreign-exchange commission by June 2028. The plan also envisages a gradual reduction in the NBE's exposure to the Development Bank of Ethiopia (DBE) and other public lenders, which are considered preconditions for a clearer and more credible split between monetary and fiscal roles.

For all the official confidence, independent voices see hard trade-offs.