Ethiopia plans IMF-backed overhaul of macroeconomic forecasting model

Ethiopia is preparing to replace its existing macroeconomic forecasting framework with a model developed by the International Monetary Fund, with implementation expected by September 2026.

The Comprehensive Adaptive Expectations Model, or CAEM, is designed to help developing and emerging economies move from accounting-based projections to a dynamic framework that can test policy choices and economic shocks. The project followed a request from Ethiopian authorities, according to an IMF statement reported by The Reporter Ethiopia.

Officials from the Ministry of Finance, the Ministry of Planning and Development and the National Bank of Ethiopia have agreed to implement the model. The Ethiopian version is expected to be tailored to the country’s economic structure and linked to the IMF’s Debt Dynamics Tool.

The work is intended to improve baseline projections and analysis of policy measures, including changes linked to Ethiopia’s exchange-rate regime, monetary framework and debt sustainability. The IMF also recommended integrating nowcasting and near-term forecasting tools because national accounts and production data are generally available only annually.

Ethiopia requested technical assistance from the IMF’s Institute for Capacity Development in October 2024, shortly after approval of a four-year, $3.4 billion extended financing programme. The Japan-funded assistance includes an implementation plan and staff capacity-building, while a related programme is under way at the central bank.

The planned system is a forecasting and policy-analysis tool; its usefulness will depend on the quality and timeliness of the data supplied to it.