National Bank of Ethiopia Sees Inter-Bank Transactions Hit Birr 338.8B











On March 25, 2025, the Monetary Policy Committee (MPC) of the National Bank of Ethiopia (NBE) convened for its second meeting of the year. The meeting, in line with the NBE’s primary objective of maintaining price stability while supporting economic growth, focused on reviewing inflation dynamics, the financial sector, and global economic conditions.

Key Developments and Economic Outlook

Inflation, a major focus of the MPC, showed signs of improvement. The inflation rate for February 2025 stood at 15%, marking a decrease from the previous period. This positive trend was attributed to tight monetary policies, improved agricultural production, and controlled adjustments in administered prices. Notably, food inflation decreased significantly from 31% a year ago to 14.6%, while non-food inflation also declined to 15.6%. The month-on-month inflation rate of 0.5% in February signals an easing of price pressures.

Economic activity, as measured by the Composite Index of Economic Activity (CIEA), remains strong. Indicators from key sectors, including agriculture, industry, and services, point to sustained growth. A favorable rainy season has bolstered agricultural output, while easing foreign exchange constraints have supported industrial activity. The export sector, particularly in coffee and gold, continues to perform well, and services such as air transport and tourism have seen strong performance.

Monetary and Banking Sector Developments

The MPC also reviewed monetary aggregates, noting a significant increase in broad money and base money growth, which stood at 22.8% and 42.0%, respectively, as of January 2025. This growth reflects a moderate easing of credit policies and recent fiscal and external sector developments. Meanwhile, domestic credit growth remained stable at 19.8%.

In terms of interest rates, the MPC noted that short-term market rates have turned positive in real terms. The weighted average yield on 364-day T-bills rose to 17.7% in February 2025, up from 15.9% at the end of 2024. The inter-bank money market also showed growth, with transaction volumes reaching Birr 338.8 billion by the end of February.

The banking sector remains stable with low non-performing loans (NPLs) and adequate capital, although some institutions continue to face liquidity challenges. To address these, the NBE has introduced measures like the inter-bank money market and a Standing Lending Facility.

Fiscal and External Sector Performance

The fiscal stance remains prudent, with zero monetary financing of the deficit for the fiscal year. The external sector also saw improvements, marked by strong export growth, increased remittances, and higher capital inflows following exchange rate reforms in July 2024. These developments contributed to a current account surplus and boosted foreign exchange reserves.

Global Economic Conditions

Global growth projections for 2025 and 2026 are steady, at 3.3%, according to the IMF. Global inflation is expected to gradually decline, although geopolitical developments and trade uncertainties pose risks to global tariffs and trade flows. On the positive side, global commodity prices have been favorable for Ethiopia, with oil prices declining by 9% and the prices for key exports, including coffee and gold, remaining strong.

Monetary Policy Stance

Despite the progress in reducing inflation, the MPC acknowledged that inflation remains above the target. As such, the Committee decided to maintain a disinflationary stance in its monetary policy. To avoid any unintended loosening, the management of foreign exchange inflows will require careful attention. The MPC’s recommendations, which the NBE Board approved, include keeping the National Bank Rate (NBR) unchanged at 15%, maintaining the 18% cap on annual credit growth, and leaving existing rates for the Standing Deposit Facility and Standing Lending Facility unchanged.

The MPC will continue to monitor inflation trends and broader economic developments, with its next meeting scheduled for the end of June 2025.

For more details, refer to the official statement from the National Bank of Ethiopia.