Ethiopia celebrated the first anniversary of its macroeconomic reform program on Tuesday, July 29, highlighting substantial progress in foreign exchange (FX) inflows, enhanced business access to FX, and a stronger balance of payments, according to the National Bank of Ethiopia (NBE).
During the first year of the reforms, banks’ monthly FX sales to businesses averaged half a billion dollars. The NBE reported that these exchange rate reforms resulted in a 33% increase in FX inflows, totaling a record USD 32 billion this year. This figure includes USD 8.3 billion from goods exports, USD 8.5 billion from service exports, USD 7.1 billion in private transfers and remittances, USD 1.9 billion in official grants, USD 2.7 billion in new loans (excluding IMF), USD 3.9 billion in foreign direct investment (FDI), and USD 0.2 billion in non-FDI private capital inflows.
The rise in FX inflows has supported USD 19 billion in goods imports, USD 6.7 billion in service imports, and USD 1.4 billion in debt service payments, as announced by the NBE.
Furthermore, the reforms have resulted in a threefold increase in FX reserves at the NBE and a doubling of FX assets at commercial banks, enhancing Ethiopia’s financial stability.
For businesses, FX availability has doubled, with banks’ average daily FX sales to the private sector increasing from USD 11 million to USD 25 million. Monthly FX sales to businesses have also surged, averaging USD 500 million compared to USD 258 million a year ago.
The new FX Directive has enabled the private sector to secure USD 445 million in new foreign borrowing and suppliers’ credits, more than double the USD 204 million obtained the previous year.
Additionally, the reforms have led to the establishment of nearly ten new FX bureaus, efficiently addressing the cash needs of personal and business travelers.
The financial sector has experienced robust growth, with deposits rising by 41% to Birr 3.5 trillion and domestic credit expanding by 22% to Birr 3.4 trillion. Stability indicators remain strong, with a non-performing loan (NPL) ratio of 3.9%, a capital adequacy ratio of 17.3%, and a liquidity ratio of 24.9%, all within regulatory limits. The sector has also embraced product innovation and widespread digitization.
