When Ethiopia’s central bank governor, Mamo Mihretu, announced his resignation last week, it might have sounded routine. Yet in a fragile economy under IMF supervision, the sudden exit of a central banker is never ordinary. The contradiction in narratives made it more striking: Mamo said he resigned, while the Prime Minister’s Office issued a short, perfunctory statement that read more like a dismissal. That discrepancy alone signals fracture, not orderly transition, and breakdown in the middle of an IMF program has far-reaching implications.
A Reality Check on Achievement Claims
In his farewell letter, Mamo highlighted what he called his key achievements: foreign exchange reserves “tripled,” $10.5 billion in external financing secured, inflation reduced, and macroeconomic stability restored. On the surface, these are impressive claims. But each requires scrutiny.
Reserves: Tripled but Borrowed.
Reserves did expand under his tenure, but the source was external inflows, not trade performance. Ethiopia’s merchandise exports declined from USD 4.1 billion in 2022 to $3.6 billion in 2023 and USD 3.8 billion in 2024. By contrast, the IMF disbursed USD 1.87 billion between July 2024 and July 2025, while the World Bank delivered USD 1.5 billion in budget support in 2024 and committed an additional USD six billion over 2024–27. These flows exceeded Ethiopia’s annual exports. The headline figure of “tripled reserves” is therefore accurate in nominal terms but misleading in substance: borrowed cushions masquerading as assets.
Inflation: Reduced by Austerity, Not Recovery.
Inflation fell from 34 percent in 2022 to 21 percent in 2024, but the decline stemmed from austerity. Broad money growth dropped from 27 percent in 2022 to 14 percent in 2024, while the fiscal deficit narrowed from nearly four percent of GDP in 2022/23 to 2.5 percent in 2023/24 through subsidy cuts and spending restraint.
Financing: Significant but a Liability.
The USD 10.5 billion in external financing Mamo cited is substantial, but it is debt, not income. It reflects emergency loans tied to IMF program performance, future repayment obligations rather than permanent additions to Ethiopia’s resource base.
Prices Stabilized, but Through Scarcity.
Inflation eased partly because households could no longer afford to buy. In 2024, 92 percent of low-income families in Addis Ababa were food insecure, many skipping meals or reducing diet quality. Nationally, the World Food Program estimated 10.9 million people acutely food insecure in mid-2024. Prices stabilized not because production expanded, but because consumption collapsed.
The claim of “restored stability” is therefore thin. An economy where real incomes are falling, unemployment remains high, and conflict disrupts production cannot be called stable. It is surviving, not thriving. In short, the governor’s letter emphasizes liquidity over solvency, borrowed buffers over structural renewal.
Why the Exit Matters
Mamo was not just another technocrat. He began his career as an advisor to the Prime Minister and was a chief architect of Ethiopia’s “Home-Grown Economic Reform.” He embodied both insider loyalty and technocratic credibility. His premature exit is therefore telling.
Why would a government remove the very face of its reform program? Three explanations are plausible.
First, a policy rift at the top. The Prime Minister may have balked at the political costs of IMF reforms, subsidy cuts, exchange-rate changes, and fiscal tightening that raise food and fuel prices and risk unrest. Although unlikely, the alternative explanation is that Mamo may have resisted strict compliance, favoring a more gradual path to avoid destabilizing the economy further. Either way, his departure suggests divergence over reform strategy.
Second, scapegoating a faltering program. With reserves borrowed, inflation relief grounded on suppressed demand, and growth still fragile, reforms may not be delivering. In this scenario, Mamo’s removal is less about disagreement and more about deflecting blame.
Third, external pressure. Although harder to prove, the possibility remains that the IMF or donors lost confidence and encouraged his replacement. Such interventions are rarely acknowledged, but not unprecedented in debt-dependent economies.
The IMF Angle
For the IMF and Ethiopia’s external partners, the governor’s exit is troubling. Central bank governors are not only policy managers but also the face of reform credibility. When the lead technocrat is ousted midstream, it signals to creditors that either political will is weakening or program outcomes are disappointing. That complicates negotiations for the next tranche of loans or debt relief.
Already, donors were questioning whether Ethiopia’s reforms delivered more than painful austerity. Now, with the governor gone, those doubts will multiply: is the Prime Minister’s Office backtracking, is reform fatigue setting in, and who will lead the next phase of negotiations?
How the IMF interprets Mamo’s exit will shape Ethiopia’s path forward. History elsewhere offers useful parallels:
If the Prime Minister is backtracking, the IMF will likely read it as weakened political will, as in Ghana (2022) or Pakistan (2019–2023), where programs stalled when leaders retreated.
If the Governor resisted IMF orthodoxy and was replaced, the Fund may be reassured, as in Argentina (2018) or Ukraine (2014–2015), where central bank shake-ups signaled compliance. But reassurance comes at the cost of independence.
If the program itself is faltering and Mamo was scapegoated, the IMF will not be fooled. As in Zambia (2020–2022) or Argentina (2019), the Fund demanded sharper corrections before releasing funds, deepening the squeeze.
And if the IMF itself pushed for his removal, that would signal compliance but undermine Ethiopia’s claim that its reforms are “home-grown,” fueling public skepticism.
In every scenario, credibility suffers. Either political will is eroding, reforms are faltering, or sovereignty is thinner than advertised.
What comes next?
Whoever replaces Mamo will face an impossible balancing act: securing IMF support while cushioning a population battered by years of conflict, inflation, and austerity. The task requires both political backing and technocratic skill, but the departure of a loyal insider makes clear how fragile that balance has become.
Ultimately, the governor’s exit is less about one individual and more about the reform project itself. It signals that Ethiopia’s much-touted “home-grown” reforms are at a crossroads. Whether the government is retreating from IMF conditions, scapegoating a failing program, or yielding to donor pressure, the illusion of smooth progress is over.
In the end, Mamo’s departure delivers a blunt message: Ethiopia’s economy is far less stable than official statements suggest, and its reform program is far more fragile than donors hoped.
Abrar M. Fitwi (PhD) is an Associate Professor of Finance at Saint Mary’s College, Notre Dame, IN.
Contributed by Abrar Fitwi (PhD)
