Economists Say Reform-Linked Tax Measures Are Lifting Prices, but Few Want the Pace Slowed

#EBR_News Oct 5, 2026

Most Ethiopian economists believe the tax and revenue measures introduced under the International Monetary Fund (IMF)-supported reform programme are pushing up prices, yet very few want the reforms slowed. 

According to a research report by the Ethiopian Economics Association (EEA), 65.8% of the 266 experts surveyed said these measures have a significant cost-push effect and are adding noticeably to current inflation. A further 16.9% acknowledged some upward pressure but considered it manageable and temporary.

The report, authored by Naser Yenus Nuru (PhD), Senior Researcher and Team Leader for Macroeconomy at the EEA, draws on a survey of EEA members conducted in June 2026. Cost-push inflation refers to price increases driven by higher costs of production and distribution, rather than by excess demand. 

Taken together, the report indicates, 82.7% of respondents expect the measures to have either a significant or a manageable inflationary effect. Only 3.8% said the measures are not materially inflationary, and 8.6% believed any effect is minor and outweighed by the credibility gained from reduced deficit financing.

Despite that, the appetite for changing course is small. According to the report, only 3.4% argued that the short-term costs are too high and that the pace or sequencing of the reforms should be reconsidered. 

Naser interprets this as evidence that most experts accept the costs as part of the fiscal adjustment needed to strengthen macroeconomic stability. The report does not specify which tax measures respondents had in mind, and it presents the findings as expert perceptions rather than a measured estimate of their price impact.

The finding sits alongside official figures that show inflation easing, from a peak of 34.04% in 2022 to 13.21% in 2025, according to the report. But the same experts are cautious about what comes next. The report shows that 55.6% expect inflation to rise further over the next 12 months, including 36.1% who anticipate an increase of more than 10 percentage points. Only 18.8% expect a decline.

Doubts about the government’s fiscal discipline may help explain why. According to the report, 47.3% of respondents rate the government’s commitment to limiting central bank financing over the next two to three years as having low or no credibility, while only 7.9% consider it highly credible. 

Nearly three-quarters (73.6%) see political economic pressures, such as electoral cycles, regional fiscal demands and political transitions, as either a significant risk or the single greatest threat to macroeconomic discipline. Naser notes that credible fiscal consolidation is essential for anchoring expectations and reducing price pressures.

The report also places administered price changes among the main drivers of inflation. Removal of subsidies and administered price adjustments, including fuel price liberalisation and utility tariffs, ranked fifth of eight drivers, with 60.2% of experts calling it a major or dominant factor. The report notes that phased fuel price reforms began in July 2024 and led to successive fuel price increases through 2024 and 2025. Fiscal expansion and government borrowing ranked seventh, with 47.7% rating them a major or dominant factor.

In its recommendations, the report urges authorities to time major tax and expenditure measures carefully, limit domestic borrowing, and consider an independent fiscal council. It also calls for targeted measures to protect vulnerable households while fuel price reforms continue.