Ethiopia has been temporarily excluded from the World Bank’s 2026 global income classification due to inconsistencies in its foreign exchange rates, potentially jeopardizing the country’s access to concessional loans and development assistance.
The World Bank confirmed that the decision was made after difficulties in calculating a reliable average exchange rate for the country. The classification, which relies heavily on Gross National Income (GNI) per capita in US dollars, uses official exchange rates to standardize data across countries.
However, in Ethiopia’s case, a wide and persistent gap between official and parallel forex market rates has led to a suspension — a move that also affects Venezuela and marks the first time Ethiopia has been absent from the rankings since the Bank began publishing the data in 1987.
“In the case of Ethiopia, there has been an active parallel market for several years, and the spread between the official and parallel market rates was significant and had reached above 100 percent prior to the launch of the economic reform program in July 2024,” the World Bank Ethiopia office said in an email to The Reporter.
According to the World Bank, such distortions in the exchange rate compromise the accuracy of macroeconomic indicators used to determine a country’s development level.
While the Ethiopian government floated the birr in mid-2024, leading to a convergence between the official and parallel market rates, the data preceding the reform created inconsistencies too significant to overlook.
“Thus, to allow more time to determine a suitable exchange rate and to carefully examine the implications of the reforms on the exchange rate, Ethiopia has been temporarily suspended from the income classification,” the statement added.
The classification system, which divides economies into low-, lower-middle-, upper-middle-, and high-income brackets, plays a crucial role in shaping countries’ eligibility for foreign financing, including grants, concessional loans, and other international aid.
The World Bank warns that such a suspension could affect the country’s development trajectory, particularly if donors and institutions rely on this benchmark to allocate resources.
The World Bank’s 2026 update noted broader global trends: low-income countries have decreased from 33% in 1987 to 12% in 2024, while high-income countries now make up 40% of the list — a sharp rise from 25% four decades ago.
Sub-Saharan Africa has also seen progress, with only half of its countries now classified as low-income, down from 75%.
Ethiopia’s economic reforms remain under scrutiny as stakeholders await clarity on whether the World Bank will reinstate the country in the next classification cycle.
Until then, questions loom over how this suspension might impact foreign investment, development funding, and the broader credibility of Ethiopia’s financial reforms.
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