Ethiopia’s central bank kept its benchmark interest rate at 15% on Tuesday, emphasizing that a restrictive monetary policy is critical to curbing inflation below 10%. The decision aligns with a two-year-old macroeconomic reform plan tied to an IMF-backed financing program, aimed at stabilizing the economy after hyperinflationary crises.

Middle East turmoil is complicating efforts, as geopolitical tensions and supply chain disruptions threaten to reignite inflationary pressures. The National Bank of Ethiopia warned that prolonged instability could undermine progress, though officials noted that government measures—such as releasing fuel reserves and subsidizing essentials—have temporarily eased consumer strain. Police reported a surge in fuel theft incidents, highlighting public frustration over long queues at gas stations.

Despite easing inflation from a peak of 37% in 2022, policymakers remain cautious. The central bank’s statement stressed that tight monetary policy must persist to anchor expectations, even as global shocks persist. Analysts note that balancing inflation control with economic growth remains a high-wire act for Ethiopia’s leadership.

Fuel shortages and energy insecurity underscore the fragility of Ethiopia’s recovery. While subsidies and emergency measures offer short-term relief, experts question whether they address deeper structural issues. For now, the central bank’s unwavering focus on inflation aligns with its mandate to stabilize the currency and attract foreign investment.