IMF Staff Completes 2019 Article IV Mission to Eritrea

IMF News, May 22, 2019

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Mission led by Bhaswar Mukhopadhyay held discussions in Asmara from May 13–22, 2019 on the Article IV Consultation with Eritrea, the first such discussions in 10 years.
End-of-Mission press release (Press Release No. 19/179) conveys preliminary findings of IMF staff; views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
IMF Communications Department contact: PRESS OFFICER: Gediminas Vilkas; Phone: +1 202 623-7100; Email: MEDIA@IMF.org.

Eritrea has just emerged from twenty years of conflict with Ethiopia and a decade of sanctions imposed by the international community.
The peace agreement with Ethiopia and lifting of international sanctions provide a welcome opportunity for Eritrea to build an impetus for economic development and to begin implementing much needed reforms.
The mission met with the Minister of Finance, Minister of Health, Minister of Tourism, the Minister of National Development, the Minister of Agriculture, the Acting Central Bank Governor and other senior government officials as well as representatives of the banking sector and international partners.

The information base of economic developments in Eritrea has deteriorated, and the conditions prevailing in the country have given rise to data and capacity constraints.
Nonetheless, the mission received useful information to better understand the macroeconomic situation and capacity development needs in Eritrea.
Data estimates show that GDP fell sharply in 2017, driven by the regional drought. Real GDP growth is expected to have recovered in 2018.

Eritrea’s economy is dominated by agriculture and mining and is highly vulnerable to shocks.
Most of its population is engaged in rain-fed subsistence agriculture, which is exposed to repeated droughts.

A sustained period of high fiscal deficits—reversed over the past three years—has led to a heavy public debt burden.
The banking sector is vulnerable and foreign exchange is scarce.

Notwithstanding economic pressures, the Eritrean authorities have made remarkable progress on some development goals, notably in the health and education sector, and prioritized public investment in the earlier years.

Near-term outlook for real GDP growth is challenging due to the tight fiscal situation and existing restrictions on economic activity.
Over the medium-term prospects for a pick-up in growth are promising, including due to new mining projects coming on stream.
Policy priorities highlighted by the mission:
- Restore the health of the fiscal and financial sectors to ensure macroeconomic stability.
- Implement broader economic reforms to deliver inclusive development.
- Use the opportunity from the peace agreement and lifting of sanctions to build impetus for economic development.

The IMF stands ready to support economic reforms through policy advice, technical assistance and training to help achieve macroeconomic stability and inclusive growth.
The IMF stands ready to assist the authorities in the implementation of their economic policies, including through the provision of technical assistance, and looks forward to continuing the policy dialogue.

IMF Press Release No. 19/179, May 22, 2019.