Addis Ababa, November 3, 2026 (FMC) – Ethiopia continues to register strong economic growth, supported by expanding activity across key productive and service sectors, while increased gold exports and foreign asset accumulation contribute to improved external-sector performance, according to the National Bank of Ethiopia (NBE).
The assessment was presented following the eighth regular meeting of the Bank’s Monetary Policy Committee (MPC), which reviewed the country’s latest economic developments, inflation dynamics, monetary and financial conditions, fiscal performance, external-sector trends and the implications of global economic developments.
The Committee reported that the Bank’s Composite Indicators of Economic Activity (CIEA), which monitor high-frequency data across different sectors, signal robust economic growth momentum in the 2026/27 fiscal year.
The outlook is supported by improvements in electricity generation, cement and iron and steel production, tourist arrivals, banking-sector credit, air passenger traffic, gold exports, imports of capital and intermediate goods, and tax revenue mobilization.
The central bank said ongoing macroeconomic reforms are expected to reinforce this growth trajectory.
On the external front, the NBE reported substantial improvement compared with the pre-reform period, although the overall surplus declined during the first quarter of the current fiscal year. Gold and coffee exports registered positive growth, while merchandise imports also increased significantly. Encouraging developments in private transfers and capital accounts helped maintain an overall balance-of-payments surplus despite a widening trade deficit.
The Bank also highlighted the contribution of its gold operations to monetary developments, noting that they were a major driver of the acceleration in reserve money through increased net foreign assets and corresponding injections of local-currency liquidity into the banking system.
Annual reserve money growth reached 87.2% in the first quarter of 2026/27, up from 72.6% in the corresponding quarter of the previous fiscal year.
Broad money growth also accelerated to 40.2% year-on-year from 33.2% a year earlier, exceeding projected nominal GDP growth. The recent expansion was largely driven by net foreign asset accumulation, whereas domestic credit has historically been the main contributor to broad money growth.
The NBE further reported that Ethiopia’s banking sector remained sound during the review period, characterized by low non-performing loans and adequate capital. Commercial banks sustained strong resource mobilization, with net deposits increasing by 85.4% and outstanding credit growing by 42.6% compared with the same quarter of the previous fiscal year.
However, despite the removal of the credit cap and significant deposit mobilization, the ratio of new loan disbursements to total resources mobilized remained broadly unchanged from the corresponding period last year.
On fiscal developments, the Committee noted that the Government maintained prudent fiscal policy in support of the central bank’s tight monetary stance and the broader macroeconomic reform agenda.
The Government also continued to refrain from obtaining direct advances from the NBE, extending the period to more than 27 months—the longest such period on record. The Bank identified this commitment as a contributing factor to price stability.
Meanwhile, the Committee observed that inflation had begun easing from its supply-driven peak but remained elevated at 14.9% in September, above the Bank’s medium-term single-digit target. Food inflation declined slightly to 14.8% from 15.1% in June 2026, while non-food inflation increased to 15.1% from 12.2% over the same period.
Higher prices of bread and cereals, vegetables and pulses, and coffee beans contributed to food inflation. In the non-food category, electricity tariffs, kerosene and chopped firewood were among the major sources of upward pressure.
The Committee attributed persistent inflationary pressures predominantly to supply-side factors following the conflict in the Middle East. Although headline inflation is projected to decline over the next six months, it is expected to remain in double digits.
Regarding interest-rate developments, Treasury bill yields and interbank money market rates continued their declining trend and have remained negative in real terms since May 2026. Commercial banks’ lending and deposit rates, however, remained unchanged from the preceding quarter.
The NBE attributed the decline in short-term rates partly to substantial excess reserves held by commercial banks at the central bank.
The Committee also assessed the implications of the global economic environment for Ethiopia. Citing the International Monetary Fund’s October 2026 World Economic Outlook, it noted that global economic growth is projected at 3.1% in 2026 before recovering to 3.4% in 2027. Global headline inflation is forecast to rise to 4.7% in 2026 before easing to 4.1% in 2027.
The NBE cautioned that prolonged geopolitical conflicts, elevated energy prices, renewed trade tensions and financial vulnerabilities could undermine the global outlook. Continued disruptions to energy supplies could raise production and transportation costs for energy-importing economies, intensifying inflationary pressures and delaying disinflation.
The outlook will depend on the duration and intensity of geopolitical disruptions, the recovery of energy supplies and the extent to which higher costs feed into broader prices and inflation expectations.
Against this backdrop, the MPC emphasized that maintaining a tight monetary policy stance remains essential to achieving the Bank’s medium-term single-digit inflation objective. It recommended, and the Board approved, maintaining the National Bank Rate (NBR) at 16% and retaining the existing interest-rate corridor of ±300 basis points.
The Bank will also continue assessing individual commercial banks’ loan-to-deposit ratios and apply targeted additional reserve requirements if credit expansion threatens the inflation trajectory. In addition, it will use available indirect monetary policy instruments, particularly open market operations, to absorb excess liquidity from the financial system.
The Monetary Policy Committee is scheduled to hold its next meeting at the end of January 2027, or earlier if economic conditions warrant, to assess developments and determine whether further measures are necessary.