Ethiopia’s Central Banker Bows Out: Reformist Exit Raises More Questions Than Answers

The sudden resignation of Mamo Esmelealem Mihretu leaves Ethiopia’s monetary policy at a crossroads, with three potential successors offering starkly different visions for the country’s economic future

By E Frashie, Ethiopian Tribune Correspondent

The resignation of Ethiopia’s central bank governor has sent shockwaves through Addis Ababa’s financial district and beyond, leaving one of Africa’s most ambitious economic reform programmes hanging in the balance. Mamo Esmelealem Mihretu’s departure from the National Bank of Ethiopia (NBE) after two and a half years marks the end of an era characterised by bold monetary reforms and mounting domestic resistance.

His exit comes at a particularly delicate moment for Ethiopia’s economy, which remains caught between the demands of international creditors and the growing impatience of domestic stakeholders weary of tight monetary policies. The appointment of his successor will not merely determine Ethiopia’s monetary trajectory but could fundamentally reshape the country’s relationship with the International Monetary Fund and its ongoing debt restructuring efforts.

When Mamo assumed the governorship in January 2023, he inherited an economy in crisis. Inflation was spiralling above 30%, foreign currency shortages were crippling importers, and the government faced mounting pressure from international lenders to implement structural reforms. His response was characteristically bold: the introduction of a Monetary Policy Committee with transparent decision-making processes, plans for inflation targeting, and perhaps most controversially, moves towards liberalising Ethiopia’s tightly controlled foreign exchange market.

These reforms, whilst applauded by international financial institutions, created significant friction domestically. Commercial banks found themselves constrained by tightening liquidity rules, whilst businesses struggled to access foreign currency through official channels, forcing many to turn to parallel markets at considerable cost.

“The governor faced an impossible task,” observed a senior economist at one of Ethiopia’s leading universities. “International creditors demanded rapid liberalisation, whilst domestic political economy realities required a more gradual approach. Something had to give.”

The succession battle has crystallised around three candidates, each representing a distinctly different vision for Ethiopia’s monetary future. Currently serving as Vice-Governor and Chief Economist, Dr Fikadu Digafe represents the safest option for international partners. His deep institutional knowledge and technocratic credentials suggest he would maintain the reform trajectory established under Mamo. Inflation-fighting measures would likely remain in place, with continued tight monetary policy and gradual steps towards foreign exchange liberalisation.

However, his appointment would also signal a continuation of policies that have proven deeply unpopular with domestic businesses and commercial banks. Whilst international observers would welcome such continuity, the risk remains that without significant political weight, he may struggle to resist pressure from ministries and vested interests demanding policy reversals.

“Fikadu knows where all the bodies are buried,” remarked a senior executive at one of Ethiopia’s largest private banks, speaking on condition of anonymity. “But he also knows how much resistance there is to reform. The question is whether he has the political capital to push through when the going gets tough.”

Dr Eyob Tekalign’s candidacy represents a more politically astute approach to monetary governance. As State Minister of Finance with strong ties to Prime Minister Abiy Ahmed’s administration, he would bring considerable political backing to the role. His international experience and negotiating credentials could prove invaluable in securing continued IMF support and accelerating disbursements.

Under his leadership, reforms could proceed more aggressively, potentially including the long-awaited entry of foreign banks and a faster transition to a floating birr. However, his close political connections raise concerns about central bank independence, a cornerstone of credible monetary policy.

“Eyob has the Prime Minister’s ear, which could be a double-edged sword,” noted a Western diplomat familiar with Ethiopia’s reform programme. “Whilst it might ease implementation challenges, it could also politicise monetary policy in ways that undermine long-term credibility.”

The third potential candidate, Solomon Desta, represents a markedly different approach. His appointment would likely signal a slowing of the reform pace, with greater emphasis on balancing stability against change. Liquidity management might be relaxed, offering relief to commercial banks and state-owned enterprises that have borne the brunt of tightening policies. Whilst such an approach might be welcomed by domestic stakeholders, it risks undermining Ethiopia’s reform credibility with international partners. The IMF and donor community would likely view his appointment with scepticism, potentially jeopardising debt relief negotiations and delaying crucial financial support.

Ethiopia’s central banking succession comes at a moment when the country faces multiple economic headwinds. Inflation remains stubbornly in double digits, parallel market pressures on the birr persist, and the success of ongoing debt restructuring talks hangs in the balance. The new governor will need to project authority not merely in technical monetary policy but also in the delicate art of political negotiation.

The international dimension cannot be understated. Ethiopia’s ongoing IMF programme, worth $3.4 billion, depends on credible reform implementation. Any signal that the country might backslide on its commitments could jeopardise not only this support but also broader donor confidence in Ethiopia’s economic trajectory.

“The next governor cannot simply be an economist,” observed a former NBE official now working in the private banking sector. “They must be a diplomat in a technocrat’s chair, capable of managing not just inflation and exchange rates but also the complex political economy of reform.”

The succession debate reflects broader tensions within Ethiopian society about the pace and direction of economic liberalisation. A small business owner who imports pharmaceutical products articulates the frustration felt by many entrepreneurs: “For two years I struggled to access dollars through official channels. The black market became the only option, at huge cost. A new governor must make foreign exchange available fairly.”

Commercial banks, meanwhile, have chafed under tight liquidity rules that have constrained their lending capacity. “We respect the former governor’s vision,” noted a senior executive at one of Ethiopia’s largest private banks, “but his policies often felt detached from the daily realities of business. What we need now is pragmatism, reforms paced to the market’s capacity.”

International observers strike a more cautious tone. An IMF mission official, speaking on condition of anonymity, emphasised: “Central banking is inherently political. Whoever follows must balance technical credibility with political resilience. We will judge continuity of policy direction, not personality.”

The coming weeks will prove crucial in determining Ethiopia’s economic trajectory. Swift appointment of a credible successor will be essential to maintaining market confidence and reassuring international partners. Equally important will be clear signals about policy continuity, particularly regarding the Monetary Policy Committee calendar and ongoing foreign exchange reforms.

For Ethiopia, the stakes extend far beyond monetary policy. The country’s ambitious development agenda, its relationship with international creditors, and its ability to attract foreign investment all depend on maintaining economic credibility whilst managing domestic political pressures.

As a European diplomat noted: “Ethiopia stands at a crossroads. The choice of central bank governor will signal whether the country remains committed to the difficult path of economic modernisation or retreats into the comfort of the status quo. For a country with Ethiopia’s ambitions, there really is only one viable choice.”

The resignation of Mamo Esmelealem Mihretu thus represents more than a simple changing of the guard. It is a moment of reckoning for Ethiopia’s economic reform programme and a test of the government’s commitment to the sometimes painful process of economic transformation. The decision ahead will resonate far beyond the corridors of the National Bank of Ethiopia, shaping the country’s economic future for years to come.

E Frashie is a correspondent for the Ethiopian Tribune, covering economic affairs and monetary policy from Addis Ababa