Ethiopia is set to lift its long-standing cap on bank lending, a major reform aimed at boosting credit availability and stimulating economic growth

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  • Ethiopia will remove the long-standing cap on bank lending that limited annual credit growth to 18%.

  • The reform will inject 1.3 trillion birr (US$21.9 billion) into the economy.

  • The new lending volume marks a 500 billion birr increase compared to the previous year.

  • Finance Minister Eyob Tekalign stressed the importance of balancing credit expansion with inflation control.

  • Ethiopia has been facing persistent double-digit inflation, driven by food price increases and currency depreciation.

  • Analysts caution that while expanded credit can drive investment, it also risks fueling demand-side inflation.

  • The Ministry of Finance and National Bank of Ethiopia (NBE) are coordinating to manage risks.

  • Safeguards include:

    • Stricter reserve requirements.

    • Market-based interest rate adjustments.

    • Enhanced supervision of lending practices.

  • Credit expansion is expected to unlock financing for priority sectors: manufacturing, construction, and agriculture.

  • Households could benefit from improved access to mortgages and consumer loans, though regulators remain wary of over-leveraging.

  • The reform represents a shift from quota-based controls to a market-driven framework for credit allocation.

  • NBE plans to anchor lending on interest rates, liquidity management, and fiscal coordination, in line with IMF recommendations.

  • Ethiopia’s central bank has kept its policy rate at 15% while moving government financing to auction-based Treasury bills.

  • This ensures that lending decisions are guided by market pricing rather than quotas.




Ethiopia to Remove Long-Standing Lift Bank Lending Cap


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