Ethiopia Inflation Falls to 9.7% on Structural Reform Push

The moderation reflects both tighter policy settings and improvements in food supply dynamics — two critical drivers of overall price pressures.

Turning the inflation tide

After a sustained period of high inflation that peaked above 30 percent in 2023 and remained elevated through much of 2024, Ethiopia’s inflation trajectory has shown marked deceleration. The latest figure of 9.7 percent — reported by the country’s Central Statistical Agency and highlighted by policymakers — is the lowest rate in several years. The decline reflects a combination of demand management, adjustments to pricing mechanisms, and structural policy interventions.

Monetary tightening by the National Bank of Ethiopia helped anchor inflation expectations, while fiscal measures and efforts to liberalise the foreign exchange market reduced pass-through from external price shocks. Government initiatives to boost agricultural output and improve food logistics have also contributed to easing one of the most volatile components of the consumer price index.

Structural policy in action

Beyond headline monetary policy, Ethiopian authorities have pursued a series of supply-side and institutional reforms intended to improve market functioning. These include:

• steps to strengthen agricultural productivity and distribution networks, reducing periodic food shortages;

• partial liberalisation of the foreign exchange system, which has increased transparency in pricing and reduced black-market differentials;

• targeted support for key sectors that influence household consumption; and

• greater engagement with private sector actors to improve import supply and competitiveness.

These measures, in combination with tighter monetary policy, have helped realign inflation dynamics with broader macroeconomic stability goals.

Broader implications for households and business

For households, the return of inflation to near-single digits represents a significant shift. Food price inflation — typically the largest driver of household expenditure — has eased compared with prior years, helping to restore some real purchasing power. For businesses, more predictable prices reduce uncertainty in planning and input cost management.

Lower and more stable inflation also gives policymakers room to consider a more accommodative stance on interest rates, though authorities have emphasised caution in unwinding tightening until the disinflation trend is firmly entrenched.

Regional and external context

Ethiopia’s experience reflects a broader trend in several African economies where inflation has started to moderate following periods of elevated price pressures tied to global commodity swings and exchange rate volatility. In markets across East and Southern Africa, headline inflation has trended downward as currency conditions stabilise and food supply conditions improve.

However, risks remain. Food and energy prices are still vulnerable to weather patterns and global market shifts, and structural bottlenecks in logistics and production can reinstate volatility if left unaddressed.

The latest inflation reading highlights how a mix of policy tightening and structural reform can yield measurable results in price stabilization. For Ethiopia, maintaining this momentum will require continued focus on productivity, trade competitiveness, and sustainable monetary settings.

As the government intensifies its reform agenda, the moderation in inflation may support stronger confidence among domestic firms and international investors alike — a necessary condition for longer-term growth and stability.

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