Ethiopia's inflation rate dropped to 9.7% in February 2026, marking a significant decline from previous highs as the country's monetary reforms and currency liberalization begin to show stabilizing effects.
The February figure represents a substantial improvement from the elevated inflation rates that plagued Ethiopia throughout much of 2024 and early 2025, when price pressures reached above 20% following the birr's float and broader macroeconomic reforms.
The National Bank of Ethiopia (NBE) has implemented a series of monetary policy measures alongside the currency liberalization that began in July 2024. These reforms included the removal of the fixed exchange rate system, the introduction of an interbank foreign exchange market, and tighter monetary policy controls designed to anchor price expectations.
The inflation decline comes as Ethiopia's foreign exchange market has begun to stabilize following the initial volatility that accompanied the birr's float. The currency reform, while initially contributing to price pressures through higher import costs, appears to be creating the foundation for more sustainable price stability by eliminating the parallel market premium that had distorted the economy.
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Food inflation, which traditionally drives Ethiopia's consumer price index due to the large share of food in household budgets, has shown particular improvement. Non-food inflation has also moderated as supply chain disruptions caused by foreign exchange shortages have eased with improved access to hard currency through the reformed system.
The World Bank and International Monetary Fund (IMF) have both cited Ethiopia's inflation trajectory as a key indicator of the reform program's success. The multilateral lenders have provided significant financial support for the country's macroeconomic stabilization efforts.
The inflation decline is part of Ethiopia's comprehensive macroeconomic reform program launched in July 2024 with backing from the IMF and World Bank. The reforms have included exchange rate liberalization, banking sector opening to foreign investment, and telecommunications sector liberalization. While the initial months of reform brought economic volatility, recent indicators suggest the stabilization phase is beginning. The government has targeted single-digit inflation as part of its medium-term economic strategy, with the NBE implementing inflation targeting as its primary monetary policy framework.
