Ethiopia Maintains Single-Digit Inflation Amid Robust Economic Growth, NBE Says

Addis Ababa, March 31, 2026 (FMC) – Ethiopia’s economy continues to show resilience, with single-digit inflation sustained since December 2025 and robust growth across key sectors, the National Bank of Ethiopia (NBE) said in a statement following its 6th Monetary Policy Committee (MPC) meeting.

According to the central bank, the MPC, which convened on March 21, 2026, reviewed developments in the real economy, inflation, monetary and fiscal policy, financial and banking sectors, and global trends affecting Ethiopia. Based on this review and near-term outlooks, the Committee recommended monetary policy measures for endorsement by the NBE Board.

The NBE noted that Ethiopia’s headline inflation stood at 9.7 percent in February 2026, continuing a downward trajectory aligned with the bank’s single-digit target. Food inflation fell to 10.8 percent, down from 14.6 percent a year earlier, while non-food inflation eased to 8.1 percent, compared with 15.6 percent previously. Month-on-month inflation was 0.4 percent in February. The central bank attributed the decline to its tight monetary policy stance since August 2023, fiscal discipline, and supply-side measures. However, the MPC cautioned that geopolitical tensions in the Middle East could push global oil prices higher and disrupt supply chains, creating potential upward pressure on domestic inflation.

The NBE also reported that Ethiopia’s real GDP grew by 9.2 percent in FY 2024/25, exceeding the eight-year average of 7.5 percent. The services sector contributed 3.1 percent, agriculture 2.3 percent, and industry 3.7 percent, largely driven by mining and quarrying. Gold production alone rose from 0.1 percent to 1.0 percent of GDP. The NBE’s Composite Indicators of Economic Activity (CIEA), which tracks high-frequency economic data, signal continued growth momentum for FY 2025/26, supported by macroeconomic reforms and developments in manufacturing, industry, and services. According to the central bank, cement production, electricity generation, iron and steel output, tourism, and air transport were major contributors, while coffee and oilseed exports and raw material imports declined compared with last year.

Monetary aggregates, the NBE said, show broad money growing 39.3 percent year-on-year by February 2026, with base money increasing 43.2 percent. Bank credit expanded 45.3 percent year-on-year, largely driving broad money growth, while base money growth remained moderate due to sterilization measures through foreign exchange operations. Short-term market interest rates remained positive in real terms, the statement added. The 91-day Treasury Bill yield declined to 12.4 percent in February 2026 from 15.2 percent a year earlier, while the 7-day interbank rate rose to 17.9 percent, reflecting liquidity pressures in some private banks. Cumulative trading in the interbank money market reached Birr 1.97 trillion since its inception in October 2024, the bank said.

The central bank highlighted that the banking sector remains sound and well-capitalized, with low non-performing loans, although some banks face liquidity challenges due to high loan-to-deposit ratios. The introduction of an inter-bank money market and a Standing Lending Facility has helped ease short-term liquidity pressures, according to the MPC.

Fiscal policy, the NBE noted, remained prudent and disciplined, consistent with its tight monetary stance and broader reforms. Since July 2024, the government has refrained from taking direct advances from the NBE, helping control base money growth. During the first seven months of FY 2025/26, the budget deficit stood at 1.1 percent of GDP, despite a 65 percent year-on-year rise in revenue and 48 percent increase in spending. The T-bill market financed a net Birr 136.6 billion deficit during this period, the statement said.

The NBE further reported that Ethiopia’s balance of payments recorded a surplus in the first eight months of FY 2025/26, supported by coffee and gold exports, private transfers, net service trade, and capital inflows. The MPC said these developments reflect ongoing reforms aimed at strengthening external competitiveness and foreign exchange sustainability.

Globally, the International Monetary Fund projected growth at 3.3 percent in 2026 and 3.2 percent in 2027. However, the MPC cautioned that rising oil prices and Middle East tensions could dampen growth, particularly in oil-importing countries, according to the central bank.

To maintain single-digit inflation, the NBE reaffirmed a tight monetary policy stance, keeping the policy rate and annual credit growth caps at current levels. The Committee emphasized the need for frequent monitoring of macroeconomic developments amid global uncertainties and agreed to reconvene by late April, or earlier if necessary, to assess additional policy measures.