Addis Ababa, November 3, 2026 (FMC) – Ethiopia’s banking sector remains safe and sound, with low non-performing loans and adequate capital, while the country’s economy is projected to sustain strong growth momentum in the 2026/27 fiscal year, National Bank of Ethiopia (NBE) Governor Eyob Tekalign said.
Briefing the media following the Monetary Policy Committee’s eighth meeting, Eyob said the banking industry continued to mobilize substantial resources during the first quarter of the fiscal year, with net deposits rising by 85.4% and outstanding credit expanding by 42.6%.
Despite the removal of the credit cap and significant deposit mobilization, the ratio of new loans disbursed to total resources mobilized remained broadly unchanged from the same period last year, he noted.
On the economic outlook, the Governor said the NBE’s composite indicators, which track high-frequency data across economic sectors, point to robust growth momentum in 2026/27.
He said ongoing macroeconomic reforms, alongside improvements in electricity generation, cement, iron and steel production, imports of capital and intermediate goods, and tax revenue collection, are expected to reinforce the growth trajectory.
Eyob also outlined developments in monetary conditions, noting that reserve money grew by 87.2% year-on-year in the first quarter, compared with 72.6% in the same period last year. Gold operations were a major contributor to base money growth, boosting net foreign assets and injecting corresponding local-currency liquidity into the banking system.
Broad money growth also accelerated to 40.2% from 33.2% a year earlier, exceeding projected nominal GDP growth. Unlike previous periods, when domestic credit was the main driver, the recent expansion was largely associated with the accumulation of net foreign assets.
On inflation, the Governor said the annual rate eased to 14.9% in September but remained above the central bank’s single-digit target. While headline inflation is projected to decline over the coming six months, it is expected to remain in double digits during the period.
He attributed much of the remaining inflationary pressure to supply-side factors, including higher energy costs, while noting that food inflation had eased from 15.1% in June to 14.8% in September. Non-food inflation, however, rose from 12.2% to 15.1%.
Eyob said prudent fiscal management had complemented the central bank’s tight monetary stance. The government refrained from taking direct advances from the NBE during the first quarter, extending a period of more than 27 months without such financing—the longest on record—which he said had contributed to price stability.
The Governor also noted that Ethiopia’s external position had improved substantially compared with the pre-reform period. Although the overall surplus declined during the quarter, growth in goods exports, particularly gold and coffee, together with private transfers and capital-account inflows, helped sustain a balance-of-payments surplus despite a wider trade deficit.
On the global outlook, he cited the International Monetary Fund’s October 2026 projections of 3.1% global growth in 2026 and 3.4% in 2027, while pointing to risks from geopolitical conflicts, elevated energy prices, trade tensions and financial vulnerabilities. Such pressures could raise production and transport costs, particularly for energy-importing economies, and complicate efforts to bring inflation down.
Against this backdrop, the Monetary Policy Committee recommended, and the NBE Board approved, maintaining the National Bank Rate at 16% and retaining the existing interest-rate corridor of plus or minus 300 basis points.
The committee also decided to continue applying targeted additional reserve requirements based on regular assessments of individual banks’ loan-to-deposit ratios if credit expansion threatens the inflation outlook, while using indirect monetary instruments—particularly open market operations—to absorb excess liquidity.
Eyob said maintaining a tight monetary stance remains essential to bringing inflation down to the single-digit target over the medium term. The committee’s next meeting is scheduled for the end of January 2027, or earlier if economic conditions warrant.