The National Bank of Ethiopia (NBE) published a one-year review of its macroeconomic reform package launched on 29 July 2024, summarising changes to monetary policy operations, the exchange rate and foreign exchange (FX) regime, and financial sector regulation and supervision, alongside early reported outcomes and priorities for the year ahead. On monetary policy, NBE reaffirmed inflation control as its primary objective and highlighted the establishment of a Monetary Policy Committee (MPC) with quarterly statements, the introduction of a central bank policy rate (NBR), the launch of Open Market Operations, and new standing deposit and lending facilities and an Emergency Liquidity Assistance facility. It also reported repealing mandatory bank purchases of Treasury bonds, eliminating direct central bank credit to government for the first time in 12 years, and setting up an electronic inter-bank money market, with over ETB 850bn in inter-bank lending executed by end-June 2025; inflation was reported at 13.9% in June 2025 versus 20% a year earlier. On the external side, NBE reported moving to market-based exchange rate determination, removing FX surrender requirements on banks and easing most current account restrictions, introducing FX bureaus and inter-bank FX dealing, easing external borrowing for banks and businesses, and allowing foreign portfolio inflows; it reported overall FX inflows up 33% to USD 32bn over the first year and higher FX supply to businesses, with average daily bank FX sales of USD 25mn versus USD 11mn at the start of reform. Financial sector changes cited included new central bank and banking sector proclamations, new banking directives on areas such as credit appraisal, related party lending, single borrower exposures and governance, opening the banking sector to foreign bank entry, and recapitalisation of the largest systemic bank; NBE reported deposits of ETB 3.5tn (up 41%), domestic credit of ETB 3.4tn (up 22%), and stability ratios within regulatory limits including an NPL ratio of 3.9%, capital adequacy ratio of 17.3% and liquidity ratio of 24.9%. For 2025-26, NBE set priorities to reduce inflation to single-digit levels, move to a fully interest-based monetary policy framework, deepen the FX market towards a unified market with improved accessibility, and increase remittance inflows via collaborative arrangements with banks and remittance service providers. It also flagged steps to facilitate foreign bank entry, advance initiatives across insurance, microfinance, interest-free banking, agricultural finance and housing finance, intensify supervision and enforcement in areas including credit administration, FX operations, consumer protection, digital payments and governance, and strengthen Centralized Securities Depository functions including dematerialisation of public and private securities over 2025-26, alongside implementing NBE’s new organisational structure and establishing a financial training and education centre of excellence.

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