Inflation Declines in First Quarter of Ethiopian Budget Year: NBE Governor

Addis Ababa, November 29/2023 (ENA)   National Bank of Ethiopia (NBE) Governor Mamo Mihretu said inflation has declined from 29.3 percent by the end of last June to 27.7 percent during the first quarter of the current Ethiopian budget year.

Presenting the quarterly performance of NBE to the HPR Plan, Budget and Finance Affairs Standing Committee today, the Governor said inflation has been declining during the past six months.

 

In September, inflation fell to 27.7 percent from 35 percent in March, 2023, the Governor affirmed. 

Last August, the National Bank of Ethiopia announced monetary policy measures to reduce inflation in a significant manner.

NBE targets to reduce inflation to below 20 percent by June 2024 and below 10 percent by June 2025.

Among the measures undertaken by NBE for this fiscal year ending June 30, 2024, credit growth is to be limited to 14 percent, and all commercial banks are instructed to limit their loan to be consistent with this aggregate credit ceiling. 

According to the Governor, NBE has also sharply reduced Direct Advances to the Government this fiscal year and limited such lending to just one-third of the prior-year levels. 

The interest rate at NBE’s Emergency Lending facility, which banks utilize when they face liquidity problems, is increased from 16 percent to 18 percent, it was learned. 

Despite encouraging achievements registered during the first quarter of the ongoing budget year, reducing inflation significantly is still a priority in NBE’s macro-economic stability initiatives, Mamo pointed out. 

Regarding the financial sector growth, he said the financial sector has been booming especially during the last few years following the reform as bank branches grew from over 4,000 in 2010 in E.C to more than 11,000. 

Deposit of commercial banks also increased three times, from 7000 billion in June 2010 E.C., to 2.3 trillion birr as of now.  

The Ethiopian payment system has been also booming, the Governor stated. The digital payment system reached 4.76 trillion birr, by doubling to the previous year

The standing committee members acknowledged the encouraging achievements registered by NBE in creating healthy financial system, reducing inflation, and the increase in digital payment system, among others. 

Despite the recent decline, they stressed that coordinated efforts are needed to meaningfully reduce inflation by implementing the necessary directives and policy measures.