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BusinessNew central bank’s governor reveals priorities to get economy back on feet

New central bank’s governor reveals priorities to get economy back on feet

The newly appointed National Bank of Ethiopia (NBE) governor, Mamo Mihretu, has laid out his strategic priorities for mending Ethiopia’s economy, which has been devastated by years of civil war and growing global challenges.

Mamo, who was appointed by the Prime Minister on January 18, 2023, met with executives from financial institutions this week at the premise of Commercial Bank of Ethiopia’s (CBE) new headquarter. Mamo told attendees at the meeting that the regulatory body’s priority would be price and foreign currency stability, as well as guaranteeing a sound financial system.

“There will be two priorities for us. The first is to achieve price stability and stabilize the FX market via the use of various monetary mechanisms. The second priority is to achieve financial stability,” Mamo said.

Mamo’s appointment comes as the central bank struggles to contain inflationary pressures that have been around 30 percent for more than a year.

During his final appearance in parliament two months ago, his predecessor, Yinager Dessie, recognized the central bank’s inability to control inflation, calling the target of returning it to single digits “impossible.”

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Despite existing challenges affecting productivity across all sectors, such as inflation, which has increased the cost of manufacturing, Mamo is optimistic that the country will attain 7.3 percent economic growth this year, about one percentage point more than the previous fiscal year.

Mamo praised banks’ resolve to invest in treasury bills, which he said is helping to control the federal government’s budget deficit.

“Banks invested 158 billion birr on treasury bills in the past six months,” the governor added. “And it is steadily growing.”

The rising investments in Treasury bills did not prevent banks from expanding the amount of credit they extended to clients.

According to Mamo, the amount of fresh loans disbursed by commercial banks increased by 119 percent compared to the same time previous year.

“The removal of lending restrictions and the entry of new players into the banking industry are the primary causes for the dramatic increase in bank loans,” Mamo said.

Deposit also increased by 30 percent over the last six months. The outstanding bank deposits exceed 1.3 trillion birr. Given the increasing availability of cash outside of banks, Mamo anticipates a greater increase.

“Currency outside of banks surged by 27 percent to 189 billion birr at the end of the six-month period. This is perfect evidence that there is opportunity for more deposit mobilization,” Mamo said.

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