Ethiopia’s FY2025/26 ended with strong macroeconomic stabilization and robust economic growth, with real GDP expanding by 10.2%. External sector performance also strengthened, with exports reaching a record of $11.2bn, up 34%, while international reserves increased to around 2.5 months of import cover. Progress towards debt restructuring with China and the Paris Club, alongside the agreement in principle on the Eurobond reprofiling further strengthened the country’s external position. Continued implementation of the IMF program also supported the stabilization process, with 74% of the total program amount disbursed by the end of the fiscal year. However, during the fiscal year, rising foreign-exchange demand continued to exert pressure on the FX market despite improved inflows, as import goods increased by approximately 18% to $22bn and services imports rose by around 20% to $8bn, reflecting continued dependence on imported goods and services, particularly fuel, capital goods, and production inputs. Meanwhile, inflation declined significantly during much of the year, reaching a low of 9.4% in March 2026 before reaccelerating to 13.9% in June and 15.1% in August 2026. The renewed increase was driven in part by external shocks stemming from the US–Iran conflict, which contributed to higher fuel and import prices, alongside supply disruptions. This highlights the continued vulnerability of domestic prices to external shocks and imported cost pressures.