Ethiopia’s Inflation Declines 13.9 Percentage Points as Exports Reach Record Levels

The National Bank of Ethiopia has announced a substantial decrease in the country’s inflation rate, which fell to 15.5% in January from 29.4% a year earlier. This represents a decline of 13.9 percentage points, with food inflation decreasing by 16.6 percentage points and non-food inflation by 10.2 percentage points over the same period. The sharp decline signals that recent economic policies, such as the transition to a market-based exchange rate and tighter monetary controls, are beginning to stabilize price pressures. However, concerns about the cost of living persist for many households.

Ethiopia’s export sector is experiencing remarkable growth, particularly in gold and coffee exports. Gold exports surged by 735.2% compared to the previous year, while coffee exports increased by 60%. In contrast, total imports decreased from $8.99 billion between July and December 2023 to USD 8.63 billion during the same period in 2024, reflecting adjustments to the new exchange rate.

Additionally, foreign currency inflows are rising, with private individual transfers through banks up by 23.3%. The average daily foreign exchange sales by banks nearly doubled, increasing from USD 22.0 million in August to USD 42.9 million in January.

Activity in the interbank market is also strengthening, with trading volumes steadily rising in both the money and foreign exchange markets. Cumulative transactions in the interbank money market reached ETB 183.3 billion in week 12, indicating enhanced liquidity and market confidence.