National Bank of Ethiopia

Governor’s Note

1. The Ethiopian economy registered 7.7 percent growth in 2017/18, slower than the 10.9
percent expansion recorded in the previous year. This growth was attributed to 12.2 percent
rise in industrial output, 8.8 percent expansion in service sector and 3.5 percent growth in
agriculture.

Consequently, the share of industry in GDP rose to 27 percent in 2017/18 from about 26
percent in 2016/17 while that of service increased slightly to 39.2 percent from 38.8 percent
in 2016/17. In contrast, the share of agriculture fell to 34.9 percent in 2017/18 from 36.3
percent during the same period. This gradual but steady shift in the structure of the economy
reflects the government’s policy direction of developing manufacturing sector and promoting
export-led growth while continuing to give due attention to modernizing the agriculture
sector which has dominated the country’s economic base for years.

2. The robust and sustained economic growth recorded over the last 15 years has led to
improvements in income inequality and poverty reduction. Accordingly, per capita income
has continuously increased and reached USD 883 in 2017/18. Poverty has declined to 22
percent from 38.7 percent in 2004/05. Investment to GDP ratio has increased to 34.1 percent
while that of domestic savings rose to 22.4 percent.

3. Despite the recent uptick, inflation has been kept within single digit level in 2017/18 largely
aided by tight monetary and prudent fiscal policy stance. Yet, the annual average headline
inflation rose to 13.1 percent in 2017/18 from 7.2 percent a year earlier due to the rise in both
food and non-food inflation. Similarly, annual headline inflation went up to 14.7 percent
from 8.8 percent owing to 6.7 percentage point and 4.9 percentage point increase in food
inflation and non-food inflation respectively.

4. Fiscal policy continued to focus on increasing tax revenue by strengthening tax

administration and enforcement, while covering a greater proportion of government
expenditures from domestic resources. These government expenditures have largely been
geared towards enhancing capital expenditure and pro-poor social spending programs and
promoting safety nets. Thus, domestic revenue recorded a 5.1 percent annual growth while

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general government expenditure showed a 7.6 percent increment resulting in a budget deficit
equivalent to 3 percent of GDP, higher than 2.8 percent of GDP target set in the GTP II plan.

5. The National Bank of Ethiopia (NBE) with a view of maintaining inflation at low and single
digit level, has kept the growth of reserve money within the target by closely monitoring
movements in domestic credit, including direct advance to the government. The Bank has
also ensured the stability and predictability of the interest rate by setting the minimum
deposit rate while allowing lending rate to be determined by market forces. This policy has
resulted in increased saving mobilization and investment activities throughout the fiscal year.

6. Ethiopia has maintained managed float exchange regime to ensure the competitiveness of the
local currency. Accordingly, the Birr was allowed to depreciate by 16.5 percent in nominal
terms against the US Dollar by end 2017/18. In contrast, the real effective exchange rate
appreciated by 5.9 percent largely due to 15 percent devaluation of the Birr against US dollar
in October 2017.

7. The Ethiopian financial sector has remained safe, sound, well capitalized and profitable. As
a result, commercial banks opened 500 new branches in 2017/18 alone which increased the
total number of branches to 4,757 from 4,257 a year ago. The banks also increased their
deposit mobilization by 23.6 percent, loan collection by 14.9 percent and loan disbursement
by 5.9 percent. Their non-performing loan was within the required ceiling of 5 percent.
Similarly, insurance companies and microfinance institutions have scaled up their services
by expanding their network and product diversification. Capital goods finance companies
have also stepped up their operations showing visible signs of improvement.

8. Moreover, the implementation of financial inclusion strategy has resulted not only in terms of
increased financial intermediation but also in enhancing the use of electronic money and new
financial products. This strategy is expected to further improve access to finance and
financial inclusion for a greater proportion of the society which is currently outside the reach
modern financial services. To mitigate potential risks associated with this process of
modernization, NBE has strengthened its monitoring and supervisory operation using
international standard toolkits.

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I. The overall Economic Performance

1.1 Economic Growth1
The Ethiopian economy which had showed The growth in real GDP was mainly
9.3 percent average annual growth during attributed to 8.8 percent growth in services,
2013/14 - 2017/18 fiscal years, recorded 7.7 3.5 percent in agriculture and 12.2 percent in
percent growth in 2017/18 fiscal year, industrial sectors (Table 1.1).
slower than the growth rate registered in the
Nominal GDP per capita rose to USD 883,
previous year owing to growth deceleration
depicting marginal improvement over the
in agriculture and industry sectors.
previous year.

The growth rate of real GDP was lower by

The Ethiopian economy is targeted to grow
3.4 percentage point than the base case
11 percent in 2018/19 fiscal year compared
scenario of GTP II target set for the fiscal
to 3.7 and 3.8 percent growth forecast of
year. Yet, it was significantly higher than
the IMF for world economy and Sub-
the 3.1 percent average growth estimated for
Saharan Africa (SSA), respectively (WEO,
Sub-Saharan Africa (World Economic
October 2018).
Outlook Update, October 2018).

1
The real values of the economic sectors in
2016/17and 2017/18 are computed based on the
2015/16 base year; while that of the earlier years are
based on 2010/11 base year. As a result, there will be
some adjustments when the rebasing of National
Accounts Statistics is finalized.

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Table 1.1: Sectoral Contributions to GDP and GDP Growth2

(In Billions of Birr)

Items 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Agriculture
238.8 251.8 267.8 544.1 580.4 600.9
Sector Industry
73.9 86.5 103.7 343.9 413.8 464.4
Services
259.0 292.0 325.0 575.9 619.3 673.9
Total
571.7 630.3 696.5 1,463.9 1,613.5 1,739.2
Less FISIM
3.0 4.0 4.0 14.5 17.0 19.8
Real GDP
568.0 627.0 692.0 1,449.4 1,596.5 1,719.5
Growth in Real GDP
9.9 10.3 10.4 8.0 10.1 7.7
Per capita GDP (USD) (Nominal) 559.0 640.0 725.0 815.0 876.0 883.0

Growth rate in Per capita GDP 6.8 14.4 13.4 9.5 7.5 0.9
Mid-year population(in millions)
84.8 87.0 89.1 91.2 93.4 95.5
Agriculture
42.0 40.2 38.7 37.5 36.3 34.9
Share in GDP Industry
(in %) 13.0 13.8 15.0 23.7 25.9 27.0
Services
45.5 46.6 47.0 39.7 38.8 39.2
Absolute Growth 7.1 5.4 6.4 2.3 6.7 3.5
Contribution to
Agriculture GDP growth 3.1 2.3 2.5 0.9 2.5 1.3
Contribution
in % 31.2 22.3 24.0 11.3 24.6 16.5
Absolute Growth 24.1 17.0 19.8 20.6 20.3 12.2
Contribution to
Industry GDP growth 2.8 2.2 2.7 3.1 4.8 3.1
Contribution
in % 27.9 21.4 26.0 38.8 43.8 40.7
Absolute Growth 9.0 13.0 11.2 8.7 7.5 8.8

Services Contribution to
GDP growth 4.1 5.8 5.2 4.0 3.0 3.4
Contribution
in % 41 56.3 50.0 50.0 27.2 43.9
Source: Planning and Development Commission

2
The real values of the economic sectors in 2016/17 and 2017/18 are computed based on the 2015/16 base year;
while that of the earlier years are based on 2010/11base year.

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Fig.I.1: Real GDP Growth by Major Sectors

25.0

20.0

15.0 Agriculture
Industry
10.0 Service
Real GDP

5.0

0.0
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Source: Planning and Development Commission

During 2017/18, agricultural output depicted production of pulses and oilseeds improved
3.5 percent growth which is lower from 6.7 by 5.8 and 1.9 percent respectively; due to
percent growth registered in the previous 3.1 and 5.1 percent expansion in cultivated
year. Similarly it is 4.4 percentage point land area respectively (Table1.2).
lower than the 7.9 percent target for the
The total cultivated land of crop production
fiscal year.
increased marginally by 0.8 percent to 12.7
million hectares, of which cultivated land of
The total grain production reached 306.1
cereals production covered 80.7 percent,
million quintals showing 5.4 percent
while pulses and oil seeds 12.6 and 6.7
increment over the previous year. Of which,
percent respectively (Table 1.2).
cereal production accounted for 87.5
percent, pulses 9.7 percent and oil seeds 2.8
percent. Cereals production went up by 5.5
percent over the preceding year owing to 0.1
percent increase in cultivated land area and
improvement in productivity. Similarly, the

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Table1.2: Estimates of Agricultural Production and Cultivated Areas of Major Grain

Crops for Private Peasant Holdings-Meher Season
[Area in thousands of Hectares and Production in thousands of quintals]

2014/15 2015/16 2016/17 2017/18

Agricultural Cultivated Total Cultivated Total Cultivated Total Cultivated Total
Production Area Production Area Production Area Production Area Production

Cereals 10,144 236,077 9,974 231,288 10,219 253,847 10,232 267,789

(Annual %
Change) 3.0 9.4 -1.7 -2.0 2.5 9.8 0.1 5.5

Pulses 1,558 26,718 1,653 27,693 1,550 28,146 1,598 29,785

(Annual %
Change) -10.6 -6.5 6.1 3.6 -6.2 1.6 3.1 5.8

Oilseeds 856 7,601 859.1 7,848.1 805 8,392 846 8,550

(Annual %
Change) 4.9 6.9 0.4 3.3 -6.3 6.9 5.1 1.9

Total 12,558 270,396 12,486 266,829 12,574 290,386 12,676 306,124

(Annual %
Change) 1.2 7.5 -0.6 -1.3 0.7 8.8 0.8 5.4
Source: Central Statistical Agency (CSA)

The share of agriculture in GDP declined to hunting and forestry rose by 0.6 and 3.5
34.9 percent in 2017/18 from 36.3 percent of percent, respectively (Table 1.3).
a year ago. This was marginally lower than
The industrial sector showed 12.2 percent
the 35.4 percent GTP II target set for the
output growth and registered 27 percent
fiscal year. Likewise, its contribution to
share in GDP. The sector contributed 40.7
GDP growth declined to 16.5 percent from
percent to the overall economic growth
24.6 percent (Table 1.1). The major output
during the fiscal year (Table1.1). Its
of the agricultural sector was crop
performance was lower than GTP II target
production, comprising 65.3 percent,
of 20.6 percent, while its share is higher than
followed by animal farming & hunting (25.6
the 19.4 percent share targeted for the same
percent) and forestry (8.8 percent). In terms
period.
of growth, crop production increased by 4.7
percent while that of animal farming &

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Manufacturing sector increased by 5.5

Service sector continued to dominate the
percent and constituted about 25.3 percent
economy as its share in GDP rose to 39.2
of the industrial output. Construction
percent while its contribution to the GDP
industry, on the other hand, accounted for
growth increased to 43.9 percent (Table
71.4 percent of the industrial output and
1.1). The sector showed 8.8 percent growth
expanded by 15.7 percent signifying the
largely owing to the expansion of wholesale
leading role of the construction sector in
& retail trade (12.3 percent), public
terms of roads, railways, dams and
administration & defense (8.9 percent),
residential houses expansion.
hotels & restaurants (6.5 percent), transport
& communication (6.4 percent) and real
Electricity & water and mining & quarrying
estate, renting & business activities (6.2
had 2.6 and 0.7 percent contribution to
percent) (Table 1.3).
industrial production, respectively (Table
1.3).

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Table 1.3: Growth and Percentage Distribution of Major Agricultural, Industrial and Service
Sub-sectors

Sectors 2013/14 2014/15 2015/16 2016/17 2017/18

Crop 6.6 7.2 3.4 8.2 4.7
Animal Farming and
Growth rate

Hunting 2.1 4.7 -1.5 4.2 0.6

Forestry 4.2 3.5 2.2 3.6 3.5
Fishing 32.5 30.6 0.1 0.5 11.3
Crop 70.6 71.1 63.6 64.5 65.3
Animal Farming and
Agriculture

Hunting 20.6 20.3 27.0 26.4 25.6

Share in

Forestry 8.7 8.4 9.1 8.8 8.8

Fishing 0.2 0.2 0.3 0.2 0.3
Mining and Quarrying (3.2) (25.6) (3.3) -29.8 -20.8
Growth rate

Manufacturing 16.6 18.2 18.4 24.7 5.5

Electricity and Water 6.8 4.5 15.0 4.9 3.3
Construction 23.9 31.6 25.0 20.7 15.7
Mining and Quarrying 9.1 5.7 1.8 1.0 0.7
Manufacturing 33.4 33.0 25.9 26.9 25.3
Industry
Share in

Electricity and Water 7.6 6.6 3.2 2.8 2.6

Construction 49.9 54.8 69.1 69.3 71.4
Whole Sale and Retail
Trade 17.7 12.3 8.2 6.5 12.3
Hotels and Restaurants 26.6 29.6 15.6 0.1 6.5
Transport and
Communications 12.7 13.3 13.7 15.1 6.4
Real Estate, Renting and
Growth rate

Business Activities 3.9 4.1 3.7 4.4 6.2

Public Administration and
Defense 11.0 6.0 7.4 13.2 8.9
Others* 8.1 7.3 7.5 6.4 6.8
Whole Sale and Retail
Trade 35.3 35.7 35.1 34.8 35.9
Hotels and Restaurants 9.7 11.3 7.2 6.7 6.6
Transport and
Communications 10.1 10.2 12.2 13.1 12.8
Share in Service

Real Estate, Renting and

Business Activities 16.9 15.8 11.6 11.3 11.0
Public Administration and
Defense 10.8 10.3 10.8 11.4 11.4
Others* 17.2 16.6 23.0 22.7 22.3
Source: Planning and Development Commission
* Includes: financial intermediation, education, health and social work, private households with employed persons and other
community, social and personal services.

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1.2. GDP by Expenditure Components

Total consumption expenditure (public and II target for the fiscal year (Table 1.4).
private) in percent of GDP declined to 75.7 While domestic saving accelerated by 30.7
percent in 2017/18 from 77.6 percent in the percent, total consumption expenditure
preceding year owing to 1.0 percentage increased by 17.2 percent during the fiscal
point in private consumption expenditure to year.
GDP ratio and 0.9 percentage point drop in
Meanwhile, gross capital formation to GDP
government final consumption expenditure
ratio stood at 34.1 percent depicting 4.3
to GDP ratio.
percentage point contraction over the
As a result, gross domestic saving to GDP previous year and domestic absorption to
ratio rose to 24.3 percent from 22.4 percent GDP ratio was 109.8 percent.
and slightly lower than the 24.6 percent GTP

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Table: 1.4: Expenditure on GDP and Gross Domestic Savings

(Percentage of GDP)

Domestic
Consumption Expenditure
Absorption
Gross Exports of Imports of Gross
Capital Resource Goods & Goods & Domestic
Year Total Govt. Pvt. Formation Balance Services Services Savings

2002/03 116.7 92.4 14.3 78.1 24.3 (14.2) 13.5 27.7 7.6

2003/04 113.9 84.9 14.0 70.9 29.0 (16.8) 15.1 31.9 15.1

2004/05 116.5 90.5 13.3 77.3 26.0 (20.6) 15.3 35.8 9.5

2005/06 119.3 91.7 13.1 78.7 27.6 (22.9) 14.0 36.9 8.3

2006/07 111.9 87.6 11.2 76.4 24.2 (19.5) 12.8 32.4 12.4

2007/08 115.3 90.8 10.5 80.3 24.5 (19.6) 11.5 31.1 9.2

2008/09 115.1 90.2 9.5 80.7 24.9 (18.4) 10.6 29.0 9.8

2009/10 117.7 90.7 9.2 81.5 27.0 (19.6) 13.8 33.3 9.3

2010/11 114.9 82.8 10.3 72.4 32.1 (14.9) 16.7 31.5 17.2

2011/12 117.9 80.8 8.3 72.5 37.1 (17.9) 13.8 31.6 19.2

2012/13 116.5 82.4 9.0 73.5 34.1 (16.5) 12.5 29.0 17.6

2013/14 117.5 79.5 9.2 70.2 38.0 (17.5) 11.6 29.1 20.5

2014/15 117.5 78.1 9.0 69.0 39.4 (20.9) 9.4 30.3 21.9

2015/16 115.0 77.6 11.1 66.5 37.3 (19.3) 7.8 27.1 22.4

2016/17 116.1 77.6 11.1 66.5 38.4 (15.8) 7.6 23.5 22.4

2017/18 109.8 75.7 10.2 65.5 34.1 (14.4) 8.4 22.8 24.3
Average
2013/14-
2017/18 115.2 77.7 10.1 67.5 37.5 (17.6) 9.0 26.6 22.3
Average
2008/09-
2017/18 115.7 81.2 9.7 71.4 34.5 (17.5) 11.0 28.5 18.8
Source: Planning and Development Commission

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1.3: Micro and Small-Scale Enterprises

During 2017/18 alone, a total of 144,107 enterprises received more than Birr 8.6
new micro and small scale enterprises billion in loans.
(MSEs) were established which employed
about 187.9 thousand people. These

Table 1.5: Numbers, Amount of Credit and Jobs Created through MSEs
(Credit in Millions of Birr)

Particulars 2015/16 2016/17 2017/18

No. of MSE's 190,587 157,768 144,107

Amount of credit 5,366.55 7,075.77 8,633.71

No of Total
employment 1,665,517 1,172,678 187,945

Source: Federal Urban Job Creation and Food Security Agency

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Table 1.6: Numbers, Amount of Credit and Jobs Created through MSEs by Region
(Credit in Millions of Birr)

Addis Dire Hara Benish

Ababa Oromia SNNPR Amhara Tigray Dawa ri angul Somali Gambela Afar Total

No. of
MSEs 9,564 34,886 23,374 40,674 31,556 917 348 568 1,600 547 73 144,107

Amount
of credit 1,855.0 1,005.6 1,004.9 2,479.1 1,497.1 143.1 44.6 52.3 499.8 21.7 30.5 8,633.7
No. of
total
Employm
ent
created by
MSEs 6,563 79,044 37,679 37,982 17,630 3,380 572 390 2,427 1,112 1,166 187,945

Regional Percentage Share

No. of
MSEs 6.6 24.2 16.2 28.2 21.9 0.6 0.2 0.4 1.1 0.4 0.1 100
Amount
of credit 21.5 11.6 11.6 28.7 17.3 1.7 0.5 0.6 5.8 0.3 0.4 100
No. of
total
Employm
ent
created by
MSEs 3.5 42.1 20.0 20.2 9.4 1.8 0.3 0.2 1.3 0.6 0.6 100
Source: FeUJCFSA

In terms of regional distribution, 28.2 Of the total jobs created by the newly
percent of the newly established MSEs established SMEs, about 42.1 percent was
were located in Amhara followed by in Oromia, 20.2 percent in Amhara, 20
Oromia (24.2 percent), Tigray (21.9 percent in SNNPR, 9.4 percent in Tigray
percent), SNNPR (16.2 percent) and Addis and 3.5 percent in Addis Ababa.
Ababa (6.6 percent). With respect to total
loans, SMEs in Amhara received 28.7
percent, Addis Ababa 21.5 percent, Tigray
17.3 percent, Oromia and SNNPR each
11.6 percent and Somalia 5.8 percent.

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Fig.I.1: Yearly Distribution of Numbers of MSEs during 2017/18

45000
40000
35000
30000
25000
20000
15000
10000
5000
0

Source: FeUJCFSA

Fig.I.2: Yearly Distribution of Amount of Credit during 2017/18

3000.0

2500.0
Millions of Birr

2000.0

1500.0

1000.0

500.0

0.0

Source: FeUJCFSA

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Fig.I.3: Yearly Distribution of Employment Created during 2017/18

90000
80000
70000
60000
50000
40000
30000
20000
10000
0

Source: FeUJCFSA

1.4. Access to Water Supply

GTP II has set potable water supply
During the review period, the proportion
coverage at national level for the fiscal
of people having access to potable water
year at 73 percent which is 2 percentage
supply improved by 5.1 percentage point
point higher than actual.
to 71 percent (74 percent rural and 60
percent urban population); relative to 66 In terms of percentage of people with

percent (68 percent rural and 55 percent access to potable water, Afar region had

urban people) coverage a year earlier 54 percent accessibility to potable water

(Table 1.7). In other words, rural areas registered the lowest percentage while

had relatively better access than the that of Amhara performed better with

urban areas due to difference in newly (82 percent) followed by Somali (77

depicted standards by the ministry of percent), Harari (67 percent), Gambella

water, Irrigation and Energy. (66 percent) and Oromia (64 percent
each). Except for Addis Ababa and
Against GTP II annual target for the year Tigiray access to potable water shows
2017/18, urban and rural potable water improvements in all regions.
supply coverage showed 5 and 1
percentage point shortfall respectively.

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In Addis Ababa accesses for potable percent), Oromia (62 percent). On the
water drops from 92 percent to 61 other hand, the least performers are Ben-
percent owing to the standards for gumuz (42 percent) followed by
computation shifts from 100 Gambella (43 percent) and Afar and
litter/capita/day to 110 litter/capita/day. Tigray (54 percent each).
In the same way, in Tigray it shows Despite some improvements in access to
downward movements by 6.1 percent the potable water in rural areas, Afar and
reason for annually decline is the size of SNNPR registered the lowest
population increases; while additional performance 54 and 55 percent
access for potable water is not show respectively.
improvement accordingly.
On the other hand, Dire Dawa and
In terms of access to potable water in Amhara saw the highest performance of
urban areas, SNNPR had the leading 84 percent each followed by Somali (77
share of 80 percent followed by Amhara percent), and Gambella (75 percent).
& Somali (74 percent each), Harari (65

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Table 1.7: Percentages of People with Access to Potable Water by Region

2016/17 2017/18
Regions
Rural Urban Total Rural Urban Total Change in percentage point
A B C D E F
D-A E-B F-C

Tigray 67 56 65 61 54 59 -6.4 -1.9 -6.1

Afar 45 48 46 54 54 54 8.5 6.1 8.0

Amhara 76 69 75 84 74 82 7.8 4.8 7.2

Oromia 61 51 59 64 62 64 3.0 11.2 4.8

SNNPR 51 75 52 55 80 58 3.6 5.1 5.6

Somali 67 65 66 77 74 77 10.0 9.0 11.0

B.Gumuz 60 50 58 66 42 61 6.4 -7.8 3.2

Gambella 74 41 64 75 43 66 0.9 2.1 8.8

Harar 65 66 66 68 65 67 3.0 -1.0 0.5

D. Dawa 78 0 0 84 0 6.4 0.0 0.0

AA 0 92 92 0 61 61 0.0 -31.0 -31.0

Total 68 55 66 74 60 71 5.9 5.2 5.1

Source: Ministry of Water, Irrigation and Energy and NBE Staff Computation
Fig.I.5: Access to water supply by Region

100

80

60
Rural
40 Urban
20 Total

Source: Ministry of Water, Irrigation and Energy; and NBE Staff Computation

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1.5 Road Sector Development

1.5.1 Road Network
In 2017/18, total road network reached During the review period, rural road
126,773 Km, showing a 5.5 percent network, administered by regional
annual expansion. The country’s total authorities, showed a 7.8 percent annual
road network was consisted of 56,732.4 growth and reached 35,985 Km while
Km (44.8 percent) Woreda road, 35,985 Woreda road stood at 56,732 Km (Table
Km (28.4 percent) rural road, 28,699 1.8).
Km (22.6 percent) federal road and
5,357 Km (4.2 percent) urban road. The
Federal road included 15,886 Km (55.4
percent) asphalt and 12,813 Km (44.6
percent) gravel.

Asphalt road network accounted for

about 12.5 percent of the road network
which was lower than 14.5 percent
GTPII target set for the fiscal year.

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Table 1.8: Classification of Road Network

(Length in km)
Federal Road

Rural road Woreda road * Urban Roads Total**

Year Asphalt Gravel Unpa
Paved Cobel ved
Length Growt Lengt Growth Lengt Growth Length Growth Length Length Lengt Length Growt
h rate h rate h rate rate h h rate

2004/05 4,972 7.3 13,640 (1.9) 18,406 2.5 NA NA NA NA 37,018 1.4

2005/06 5,002 0.6 14,311 4.9 20,164 9.6 NA NA NA NA 39,477 6.6

2006/07 5,452 9.0 14,628 2.2 22,349 10.8 57,764 - NA NA NA 42,429 7.5

2007/08 6,066 11.3 14,363 (1.8) 23,930 7.1 70,038 21.2 NA NA NA 44,359 4.5

2008/09 6,938 14.4 14,234 (0.9) 25,640 7.1 85,767 22.5 NA NA NA 46,812 5.5

2009/10 7,476 7.8 14,373 1.0 26,944 5.1 100,385 17.0 NA NA NA 48,793 4.2

2010/11 8,295 11.0 14,136 (1.6) 30,712 14.0 854 (99.1) NA NA NA 53,997 10.7

2011/12 9,875 19.0 14,675 3.8 31,550 2.7 6,983 717.7 NA NA NA 63,083 16.8

2012/13 11,301 14.4 14,455 (1.5) 32,582 3.3 27,628 295.6 NA NA NA 85,966 36.3

2013/14 12,640 11.8 14,217 (1.6) 33,609 3.2 39,056 41.4 NA NA NA 99,522 15.8

2014/15 13,551 7.2 14,055 (1.1) 30,641 (8.8) 46,810 19.9 1,693 850 2,814 110,414 10.9

2015/16 14,632 8.0 13,400 (4.7) 31,620 3.2 48,057 2.7 1,693 NA 3,664 113,066 2.4

2016/17 15,886 8.6 12,813 (4.4) 33,367 5.5 52,748 9.8 1,693 NA 3,664 120,171 6.3

2017/18 15,886 - 12,813 - 35,985 7.8 56,732 7.6 1,693 2,814 850 126,773 5.5
Source: Ethiopian Roads Authority
* Includes community road, which was replaced by woreda road and registered as new road in 2010/11
** Total road length does not include community road length till 2010/11as it is non-engineered road; but it includes
woreda road.

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1.5.2 Road Density

At the end of 2017/18, road density per Meanwhile, road density per 1,000
1,000 square Km increased to 115.2 km populations was 1.27 km which shows
from 109.2 km a year ago depicting a 5.5 slightly down ward movement by 1.6
percent improvement over the previous percent when compared with 1.29 km a
year. year ago.

Table 1.9: Road Densities

Road density /1000 sq.

Year Road Density /1000 person km

2004/05 0.50 33.70

2005/06 0.53 35.90

2006/07 0.55 38.60

2007/08 0.56 40.30

2008/09 0.57 42.60

2009/10 0.60 44.40

2010/11 0.65 48.30

2011/12 0.75 57.30

2012/13 1.00 78.20

2013/14 1.10 90.50

2014/15 1.20 100.40

2015/16 1.23 102.80

2016/17 1.29 109.20

2017/18 1.27 115.20

Growth rate -1.6 5.5

Source: Ethiopian Roads Authority

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1.5.3 Road Accessibility

In 2017/18, annual average distance Exclusively 73 percent of the asphalt
from all-weather roads declined by 6.5 road and 66 percent of the gravel road
percent from 4.6 km in 2016/17 to 4.3 were in good condition during 2017/18
km. Similarly, the proportion of area (Figure I.6).
more than 5km from all-weather roads
dropped to 31.6 percent from 33.5
percent last year (Table 1.10).

Table 1.10: Road Accessibility

Percentage
Indicator 2016/17 2017/18 change
Proportion of area more than
5Km from all-weather road
33.5 31.6 -5.7
Average distance from all-
weather roads
4.6 4.3 -6.5
Source: Ethiopian Roads Authority

Fig.I.6: Status of Road

80
70
60
50 Asphalt Roads in Good Condition
Percentage

40
Gravel Roads in Goods Condition
30
20 Rural Roads in Good Condition
10
Total Roads Network in Good
0 Condition
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Source: Ethiopian Roads Authority

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1.5.4 Road Sector Financing

Investment in the Federal road construction
Construction and maintenance of roads
and expansion accounted for 77.6 percent of
remained one of the key investments for the
the total road investment capital and reached
Ethiopian government over the past decade.
at Birr 25.6 billion, while regional roads
In 2017/18, total investment in road constituted 11.5 percent followed by
construction and expansion (excluding urban Woreda road (11 percent). There was no
road) declined by 2.4 percent to Birr 33.1 investment in urban road construction and
billion from Birr 33.9 billion a year earlier expansion during the period (Table 1.11)
(Table 1.11 and fig.I.7). and (Fig.1.7).

Table 1.11: Investments in the Road Sector

(In millions of Birr)

2016/17 2017/18
Share (In Share Percentage
Road type A %) B (In %) change

Federal roads 28,797.7 84.8 25,695.7 77.6 -10.8

Regional road 2,756.2 8.1 3,794.6 11.5 37.7

Woreda road 2,392.2 7.0 3,638.7 11.0 52.1

Urban road* NA - NA - -

Total 33,946.1 100.0 33,129.0 100.0 -2.4

Source: Ethiopian Roads Authority
* All municipalities’ maintenance.

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Fig.I.7፡ Investment in Road Construction and Expansion

100000
90000 Federal Road
80000
70000 Regional Road
In Millions of Birr

60000
50000 woreda Road
40000
30000 Urban Road
20000
10000 Total
0 Investment

Source: Ethiopian Roads Authority

1.7. Telecommunication

Telecommunication is one of the prime acquisition, customer satisfaction and

support services needed for rapid growth provision of quality services to
and modernization of various sectors of customers.
the economy. Expansion of infrastructure
development such as telecommunication
would have significant impact on During 2017/18 fiscal year, the number
attracting investment, creating market of mobile subscribers declined by 30.4
opportunities, enhance competitiveness percent to 40.4 million from 58 million
and boost regional economic integration. a year ago; the reason for the decline is
the decision to clear inactive1 customers
Cognizant of this fact, the Ethiopian for the long time; thus only active
government has made major investment customers of specified service are
for improving service quality, expansion included.
of service coverage and enhancing
institutional capacity in the telecom The lion share of mobile subscribers is
sector. As a result, Ethio Telecom has set from pre-paid subscribers comprising
ambitious targets to enhance customer 99.5 percent; while the remaining 0.5

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percent is post-paid mobile subscribers. On the other hand, the number of

Similarly, the numbers of fixed line internet subscribers surged by 8.4 percent
subscribers marginally declined by 1 and reached 17.8 million from 16.5
percent due to inactive customers are not million recorded in 2016/17 (Table 1.13).
included.
3
Table 1.13: Number of Subscribers

Percentage
Service Type 2016/17 2017/18 Change

I. Fixed line 1,169,625 1,157,779 -1.0

II. ALL MOBIL 58,080,626 40,409,751 -30.4

Total mobile pre-paid 57,784,164 40,213,723 -30.4

Total Mobile post-paid 296,462 196,028 -33.9

III. Total data and Internet 16,505,225 17,883,439 8.4

Broadband (EVDO,
WCDMA, ADSL) 6,902,902 8,920,159 29.2
Narrowband (1X, dialup,
ADSL*< 256K) 276,294 243,629 -11.8

GPRS 9,326,029 8,719,651 -6.5

Grand Total 59,899,089 117,744,159 96.6

Source: Ethio-Telecom
*CDMA (Code Division Multiple Access), GSM (Global System for Mobiles),GPRS (General Packet Radio
Service)and ADSL (Asymmetric Digital Subscriber Line)

Inactive customers imply those customers who didn’nt use their sim cards for two
consequative years or more.
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At the same time, the country’s inactive customers. While internet and
telecommunication penetration rate data density improved to 18.5 from 17.5
(telecom density) decreased from 63 a year ago. On the other hand, fixed line
percent in 2016/17 to 43 percent in density remains unchanged and stable at
2017/18; as well, mobile density moves 1.2 per 100 subscribers during 2017/18
downward to 41.8 percent in 2017/18 (Table 1.14).
from 61.6 percent a year ago the annually
decline was due to the exclusion of

Table 1.14: Telecom Density

Tele
Density/100
Subscribers* 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Fixed line 0.9 1 1 1.2 1.2 1.2

Mobile 27.6 33.3 43 49.8 61.6 41.8

Total 28.5 34.3 44 51 63.6 43.3

Internet and
data 5.2 7.3 10 14.7 17.5 18.5
Source: Ethio-Telecom
*Tele-density is mobile plus fixed telephone subscribers per 100 inhabitants

During the review period, international percent and reached 44.6 billion (Table
outgoing and incoming calls in number 1.15).
decreased by 8.2 and 37.6 percent
respectively. At same time, international
outgoing and incoming calls in minutes
lessen by 8.8 and 38 percent respectively.

The cause for annually decline is a

technical shift due to technological
advancement. However, the annual
traffic for local calls improved by 26.9

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Table 1.15: Annual Traffic for Local and International Calls

Percentage
Annual Traffic 2016/17 2017/18 Change

Mobile local traffic (In millions) 35,142 44,600 26.9

International Traffic

International outgoing calls (In number) 39,137,793 35,911,226 -8.2

International outgoing minutes 54,163,949 49,394,715 -8.8

International incoming calls (In number)

129,033,583 80,508,188 -37.6

International incoming minutes 473,617,783 293,524,005 -38.0

Source: Ethio-Telecom

Income of Ethio-telecom rose by 13.1 Consequently, Ethio – telecom earned a

percent to Birr 37.6 billion in 2017/18 vis-à- gross profit of Birr 27 billion in 2017/18
vis Birr 33.3 billion in 2016/17. At same which was 9 percent higher than the
time, its total expenses increased to Birr previous year (Table 1.16).
10.6 billion showing 25 percent annual
increment.

Table 1.16: Financial Performance and Asset of Ethio -Telecom

(In Millions of Birr)

Finance and Asset 2015/16 2016/17 2017/18 Percentage Change

A B C C/A C/B
Income
28,371.67 33,343.16 37,699 32.9 13.1
Expense
12,888.36 8,551.15 10,677 -17.2 24.9
Gross Profit
15,483.31 24,792.01 27,022 74.5 9.0
Assets 22,787.00 29,976.81 43,712.48 91.8 45.8
Fixed Gross
30,949.00 32,398.97 47,194 52.5 45.7
Depreciation
8,162.00 2,422.17 3,482 -57.3 43.8
Source: Ethio– Telecom

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II. Energy Production

2.1. Electric Power Generation

Ethiopia is estimated to have hydro-power Ethiopia is also identified as having a huge

potential of 45,000 MW, a geothermal solar energy potential due to its
potential of 10,000 MW and 1.3 million geographical location near the equator. In
MW potential from wind farm. The its bid to become a major power exporter
country’s generating capacity is largely in East Africa and green economy, the
based on hydropower reservoirs as nine of country is also building several
its major rivers are suitable for geothermal power plants.
hydroelectric power generation. The amount of electric power generated in
2017/18 was about 13.9 billion KWH,
Considering the increasing power demand
showing 11 percent annual expansion.
and capacity shortfall in the system and to
About 95.2 percent of the electric power
have a better power generation mix, the
was generated through hydropower, 3.7
country has been venturing to diversify its
percent from wind and 1 percent from
production of renewable energy to wind
thermal sources.
and geothermal sources.
The production of hydro power energy got
Adama II wind farm has a generating momentum as the total electric energy
capacity of 153 MW and combined with generated increased to 13.2 billion KWH
Adama I (51MW) and Ashegoda (120 from 11.7 billion KWH a year earlier
MW), the total energy production from showing 12.8 percent annual increase
wind has reached 324 MW. In addition, while energy production from wind
the construction of Aysha 300 MW wind sources showed a down ward movement
power project was under way. by 33.7 percent (Table 2.1).

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Table 2.1: Electric Power Generation in ICS and SCS

(I n ‘000 KWH)

2015/16 2016/17 2017/18 Percentage Change

Share Share Share
Source [A] (In %) [B] (In %) [C] (In %) [C/A] [C/B]
Hydro
Power 9,674,157.6 92.4 11,752,824.4 93.7 13,253,841.6 95.2 37.0 12.8
Thermal
Power 1,017.4 0.0 67.9 0.0 141,529.1 1.0 13,811.4 208,435.9
Geothermal - - -
ICS Wind 785,505.5 7.5 783,797.7 6.3 519,605.0 3.7 -33.9 -33.7
Sub
Total 10,460,680.5 100.0 12,536,690.0 100.0 13,914,975.8 100.0 33.0 11.0
Hydro
Power - - -
Thermal
SCS Power 4,259.1 0.0 2,837.8 0.0 2,819.0 0.0 -33.8 -0.7
Sub
Total 4,259.1 0.0 2,837.8 0.0 2,819.0 0.0 -33.8 -0.7
Hydro
Power 9,674,157.6 92.4 11,752,824.4 93.7 13,253,841.6 95.2 37.0 12.8
Thermal
Power 5,276.5 0.1 2,905.6 0.0 144,348.1 1.0 2,635.7 4,867.8
Geothermal - - -
Total Wind 785,505.5 7.5 783,797.7 6.3 519,605.0 3.7 -33.9 -33.7
Grand Total 10,464,939.6 100.0 12,539,527.8 100.0 13,917,794.7 100.0 33.0 11.0
Source: Ethiopian Electric Power

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2.2. Volume and Value of Petroleum Imports

During 2017/18, about 3.8 million metric On the other hand, the value of regular
tons of petroleum products worth Birr 58.6 gasoline surged by 72.8 percent followed by
billion were imported by the Ethiopian gas oil (64.4 percent), fuel oil (54.8 percent)
Petroleum Enterprise. As compared to and jet fuel (31.1 percent) (Table 2.2)
previous year, total value of petroleum (Fig.II.1 & Fig.II.2).
imports increased by 57 percent mainly due
higher international oil prices and 9.6
percent rise in volume of petroleum imports.
Import volume of regular gasoline increased
by 21.4 percent followed by gas oil (14
percent) and fuel oil (10.6 percent), while jet
fuel dropped by 7.8 percent.

Table 2.2፡ Volume and Value of Petroleum Imports

(Volume in MT and Value in '000 Birr)

2016/17 2017/18

Volume Value Volume Value Percentage Change

Petroleum
Products A B C D C/A D/B

Regular
Gasoline (MGR) 363,845.1 4,399,921.8 441,542.3 7,602,496.3 21.4 72.8

Jet Fuel 800,783.3 9,172,380.3 738,105.6 12,026,911.4 -7.8 31.1

Fuel Oil 75,283.6 657,563.3 83,268.52 1,017,928.6 10.6 54.8

Gas Oil (ADO) 2,199,354.6 23,098,209.4 2,507,672.5 37,966,651.2 14.0 64.4

Total 3,439,266.6 37,328,074.9 3,770,588.9 58,613,987.4 9.6 57.0

Source: Ethiopian Petroleum Enterprise

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Fig.II.1: Trends in Volume of Petroleum Imports (In ‘000)

3000

2500 MGR
Jet Fuel
2000
Volume in MT

Fuel Oil
1500 Gas Oil

1000

500

0
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Year

Source: Ethiopian Petroleum Enterprise

Fig.II.2: Trends in Value of Petroleum Imports (In ‘000)

40000000
35000000
30000000 MGR
25000000 Jet Fuel
Value in Birr

20000000 Fuel Oil

15000000 Gas Oil

10000000
5000000
0
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Year

Source: Ethiopian Petroleum Enterprise

In line with the increase in international oil kerosene (15.8 percent), gas oil (8.2
prices, domestic retail prices were also percent), regular gasoline (6.8 percent) and
adjusted up wards. Thus, retail prices of jet fuel oil (6.7 percent) (Table 2.3).
fuel increased by 37.8 percent followed by

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Table 2.3: Annual Retail Prices of Petroleum Products in Addis Ababa (Birr/liter)

Regular
Gasoline
Year Quarter (MGR) Fuel Oil Gas Oil Kerosene Jet fuel
Qtr.1 17.96 13.59 16.10 14.13 16.23
Qtr.2 17.96 13.59 16.10 14.13 15.14
Qtr.3 17.06 12.59 14.81 13.00 13.95
Qtr.4 16.61 12.10 14.16 12.43 12.34
17.40 12.97 15.29 13.42 14.41
2015/16 Average
Qtr.1 16.61 12.10 14.16 12.43 13.36
Qtr.2 16.61 12.10 14.16 12.43 14.03
Qtr.3 18.32 13.46 15.76 15.25 15.74
Qtr.4 18.77 13.69 16.35 16.35 15.70
17.58 12.84 15.11 14.12 14.71
2016/17 Average
Qtr.1 18.77 13.69 16.35 16.35 15.04
Qtr.2 18.77 13.69 16.35 16.35 19.06
Qtr.3 18.77 13.69 16.35 16.35 22.59
Qtr.4 18.77 13.69 16.35 16.35 24.37
Average 18.77 13.69 16.35 16.35 20.27
Annual percentage
2017/18 change 6.8 6.7 8.2 15.8 37.8

Source: Ethiopian Petroleum Enterprise

Fig.II.3: Trends in Average Fuel Price in Addis Ababa

25

20
MGR

15 Fuel Oil
Birr/Litre

Gas Oil
10
Kerosene

5 Jet Fuel

0
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Year

Source: Ethiopian Petroleum Enterprise.

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III. Price Developments

3.1. Developments in Consumer Price at National Level

The annual average headline inflation rose

to 13.1 percent in 2017/18, depicting 5.8 Likewise, headline inflation soared up to

percentage point increase over the 14.7 percent year-on-year from 8.8 percent

preceding year owing to 9.1 percentage in 2016/17 on account of 6.7 percentage

point rise in food & non-alcoholic points upsurge in food & non-alcoholic

beverages inflation and 2.1 percentage beverages inflation and 4.9 percentage

point increase in non-food inflation (Table points increase in non-food inflation.

3.1). Annualized food & non-alcoholic

beverages and non-food inflation scaled
In the review period, annual average food up to 17.9 percent and 11.0 percent from
& non-alcoholic beverages inflation 11.2 percent and 6.1 percent in 2015/16
accelerated to 16.5 percent from 7.4 respectively (Table 3.2 and Fig. III. 2).
percent in the previous year indicating a
9.1 percentage point annual increase due
to higher prices of bread &cereals,
vegetables, meat, fruit and food products
not elsewhere classified.

In the same period, the annual average

non-food inflation scaled up by 2.1
percentage point to 9.2 percent (Table 3.1
and Fig III.1).

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Table 3.1: Annual Average Inflation Rates (in percent)

Contribution to Change
Change in Headline Inflation
Items 2016/17 2017/18 (in %age Points) (%age points)
A B B-A C
General 7.2 13.1 5.8 5.8
Food &Non-alcoholic 7.4 16.5 9.1 4.8
beverages
Non-Food 7.1 9.2 2.1 1.0
Source: CSA and NBE Staff Computation

Fig III 1: Developments in National Inflation

25.0

20.0
Percent

15.0

10.0

5.0

0.0
April

January
January

June

April
August

January

June

April
August

June
May

October
September

May

October
September

May
March

December

December
July

March

July

March
February
February

November

February

November
2016 2017 2018

General Food & Non-alcoholic bevarages Non Food

Source: CSA and NBE Staff Computation

Table 3.2: Annual Inflation Rates (in percent)

Contribution to Change
Change in Headline Inflation
Items 2016/17 2017/18 (in %age Points) ( %age points)
A B B-A C
General 8.8 14.7 5.9 5.9
Food &Non-alcoholic 11.2 17.9 6.7 3.5
beverages
Non-Food 6.1 11.0 4.9 2.3
Source: CSA and NBE Staff Computation

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Fig III. 2: Developments in Inflation of Food, Non-Food & Non-alcholic beverages

25.0

20.0

15.0
Percent

10.0

5.0

0.0
April

January
January

June

January

April

June

April

June
May

August

August
October

May

October

May
September
March

December

September
July

March

December
July

March
February
February

November

February

November
2016 2017 2018
General Food & Non-alcoholic bevarages Non Food

Source: CSA and NBE Staff Computation

3.2 Consumer Price Developments in Regional States

During the review fiscal year, the The highest headline inflation (17.0
regional simple average general inflation percent) was revealed in Beneshangule
accelerated to 11.7 percent from 7.1 Gumz while the lowest (6.5 percent) was
percent in the previous year. registered in Tigray, depicting 10.5
Beneshangule Gumz, Amhara, SNNP, percentage point margin.
Somali and Oromia reginal states
registered higher headline inflation rates
than the regional average (Table 3.3).

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Table 3.3: Regional Annual Average Inflation (2017/18 FY)

2016/17 2017/18 Change
Food & Food & Food &
Non- Non- Non-
alcoholic Non- alcoholic Non- alcoholic Non-
General beverages food General beverages food General beverages food
Regions A B C D E F G=D-A H=E-B I=F-C
SNNP 8.6 13.2 4.9 14.3 20.7 8.9 5.7 7.4 4.0
Harari 6.6 9.0 4.0 9.9 9.8 10.1 3.3 0.8 6.1
Oromia 3.3 1.0 6.1 12.2 14.9 9.2 8.9 13.9 3.1
Tigray 10.0 8.9 10.9 6.5 12.1 1.6 -3.5 3.2 -9.3
Gambella 5.0 7.1 1.3 11.4 12.5 9.3 6.5 5.4 8.0
Addis Ababa 3.0 1.3 4.3 8.3 8.8 7.9 5.3 7.5 3.6
Dire Dawa 7.5 9.4 6.3 8.9 12.3 6.8 1.4 2.9 0.4
Ben. Gum 5.4 5.6 5.2 17.0 19.5 13.5 11.6 13.9 8.3
Somali 10.5 11.2 15.0 14.0 14.5 13.4 3.5 3.3 -1.5
Afar 7.8 1.0 15.8 11.4 11.7 11.2 3.6 10.7 -4.6
Amhara 10.9 12.2 9.7 15.2 18.3 12.0 4.3 6.1 2.3

Regions
Average 7.1 7.3 7.6 11.7 14.1 9.4
Standard
deviation 2.8 4.5 4.7 3.2 3.9 3.4
Coefficient of
variation 0.4 0.6 0.6 0.3 0.3 0.4
Sources: CSA and NBE’s staff computation

Fig III. 3: Variation in Regional Annual Average Headline Inflation

30.0

25.0

20.0
15.2
14.0
15.0 14.3
2017/18
6.5 17.0 11.4
9.9 8.9 2016/17
10.0 11.4
12.2
8.3
5.0 10.0 10.5 10.9
8.6 7.5 7.8
6.6 5.3
3.3 4.9
2.9
0.0

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In 2017/18, the regional simple average Food & non-alcoholic beverages inflation
food & non-alcoholic beverages inflation was registered highest in SNNP (20.7
rose to 14.1 percent from 7.3 percent percent) and the lowest in Addis Ababa
recorded in 2016/17. Food & non- (8.8 percent) resulting 11.9 percentage
alcoholic beverages inflation was higher in point margin between food & non-
SNNP, Beneshangule Gumz, Amhara, alcoholic beverages inflation rates
Oromia and Somali regional states than recorded in the two regional states.
the regional average (Table 3.3).

Fig III 4: Variation in Regional Annual Average Food & Non-alcoholic Beverages Inflation

35.0

30.0

25.0
20.7
18.3
20.0
14.5
2017/18
12.1 12.3 19.5
15.0 9.8 12.5 2016/17

10.0
14.9
13.3 11.7 12.2
8.8 11.2
5.0 9.0 8.9 9.4
7.1
5.4
1.0 1.3 1.0
0.0

Source: CSA and NBE Staff Computation

higher non-food inflation than the
In the meantime, the regional simple regional simple average (Table 3.3).
average non-food inflation increased to
9.4 percent from 7.6 percent last year. While Beneshangule Gumz recorded the

Beneshangule Gumz, Somali, Amhara, highest non-food inflation (13.5

Afar and Harari regional states recorded percent), Tigray enjoyed with the lowest

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2017/18 Annual Report
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non-food inflation (1.6 percent),

showing 11.9 percentage point margin.

Fig III 5: Variation in Regional Annual Average Non-food Inflation

18.0
15.8
16.0

14.0 13.5 13.4

12.0
12.0 10.9 11.2
10.1 9.9 9.7
10.0 9.2 9.3
8.9
7.9 2016/17
8.0 7.6
6.76.8
6.3 2017/18
6.0 4.9 5.2
4.0 4.2
4.0

2.0 1.6

0.0

Source: CSA and NBE Staff Computation

37
 National Bank of Ethiopia

IV. MONETARY AND FINANCIAL DEVELOPMENTS

4.1 Monetary Developments and Policy

Notwithstanding, tighter monetary policy the past eleven consecutive-months during

stance inflation has remained off-target for 2017/18 fiscal year.

4.1.1 Developments in Monetary

Aggregates

At the end of 2017/18, domestic liquidity, money rose by 29.7 percent due to the rise
as measured by broad money supply (M2), in demand deposits and currency outside
reached Birr 740.6 billion depicting 29.2 banks, reflecting the growth in economic
percent annual expansion. This is mainly activities and improvements in money
due to the surge in domestic credit by 24.3 demand for transaction purposes. Similarly,
percent. The high growth of domestic quasi-money that comprises savings and
credit is attributed to 19.4 and 25.1 percent time deposits rose by 28.8 percent and
increase in both credit to the central reached Birr 459.5 billion by the close of
government and credit to the non-central the fiscal year. This is attributed to the
government, respectively (Table 4.2). increased capacity of banks in deposit
mobilization driven by the opening of
In 2017/18, all components of broad
additional new branches (Table 4.1).
money has witnessed a surge. Narrow

38
 National Bank of Ethiopia

Table 4.1: Components of Broad Money

Year Ended June 30 Annual Percentage Change

2014/15 2015/16 2016/17 2017/18
Particulars (In Millions of Birr) 2015/16 2016/17 2017/18
Narrow Money Supply 154,706.3 178,609.7 216,794.6 281,154.7 15.5 21.4 29.7
. Currency Outside Banks 60,460.9 66686.2 73917.7 86417.3 10.3 10.8 16.9
. Demand Deposits (net) 94,245.4 111923.5 142876.5 194737.4 18.8 27.6 36.3
Quasi-Money 216,622.6 266,656.6 356,614.4 459,418.2 23.1 33.7 28.8
. Savings Deposits 174,632.0 217,034.3 293,431.7 382,549.4 24.3 35.2 30.4
. Time Deposits 41,990.6 49,622.3 63,182.7 76,868.8 18.2 27.3 21.7
Broad Money Supply 371,328.9 445,266.3 573,408.6 740,572.9 19.9 28.8 29.2
Source: National Bank of Ethiopia (NBE)

Fig V.1: Major Components of Broad Money

(2006/07 - 2017/18)

Broad Money
24,000
22,000
20,000
18,000
(In Millions of Birr)

16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18

Year

Currency Outside Banks Net Demand Deposit Quasi- Money

Source: NBE

39
 National Bank of Ethiopia

Table 4.2: Factors Influencing Broad Money

Year Ended June 30 Annual Percentage Change

2014/15 2015/16 2016/17 2017/18
Particulars (In Millions of Birr) 2015/16 2016/17 2017/18
External Assets (net) 37,570.9 21,524.2 38,034.8 39,376.2 -42.7 76.7 3.5
Domestic Credit 393,421.7 490,230.3 631156.2 784,633.1 24.6 28.7 24.3
. Claims on Central Gov't (net) 30,735.3 47,548.4 85,441.8 102,002.8 54.7 79.7 19.4
. Claims on Non-Central Gov't 362,686.5 442,682.0 545,714.4 682,630.3 22.1 23.3 25.1
Other Items (net) 59,663.8 66,488.3 100,721.6 83,436.4 11.4 51.5 -17.2
Broad Money (M2) 371,328.9 445,266.3 573,408.6 740,572.9 19.9 28.8 29.2
Source: NBE

Fig V.2: Major Determinants of Monetary Growth

Annual Percentage Growth

100.0 120.0

100.0
80.0

80.0
60.0
60.0

40.0
40.0

20.0 20.0

0.0
0.0

-20.0

-20.0
-40.0

-40.0 -60.0

Ethiopian Fiscal year

Credit to Central Gov't Credit to Non-Central Gov't

Broad Money Net Foreign Assets

Source: NBE

40
 National Bank of Ethiopia

4.1.2. Developments in Reserve Money and Monetary Ratios

In 2017/18, reserve money or base registered last year at the same period,
money witnessed an annual expansion of reflecting improvements in deposit
19.1 percent. As a result, reserve money mobilization by commercial banks
reached Birr 174.2 billion at the end of (Table 4.3).
the fiscal year. This growth is attributed
to 17.8 and 19.8 percent rise in deposits
of banks at NBE and currency in
circulation, respectively. In determinant
wise, the increment in reserve money
was the result of the rise in net domestic
credit by 26.6 percent and net foreign
assets 19.9 percent. Excess reserves of
commercial banks reached Birr 26.7
billion at the end of June 2017/18.

The ratio of M2 to GDP4, an indicator of

financial deepening, went up by 7.5
percent to reach 0.34 points in 2017/18,
partly indicating the prudent monetary
policy measures taken by the national
bank. Compared to last year same
period, the money multipliers defined as
narrow money to reserve money reached
1.61 from 1.48 registered last year same
period whereas ratio of broad money to
reserve money showed slight increments
and reached 4.25 from 3.92 position

4
The 2017/18 GDP is estimated by assuming
that 2016/17 GDP grew by an average GDP
growth rates of 2013/14-2016/17.
41
 National Bank of Ethiopia

Table 4.3: Reserve Money and Monetary Ratios

(In Millions of Birr, where applicable)

Year Ended June 30 Annual Percentage Change

Particulars 2014/15 2015/16 2016/17 2017/18 2015/16 2016/17 2017/18
Reserve Requirement (CB's) 18,250.4 21,745.4 28,280.8 36,385.8 19.2 30.1 28.7
Actual Reserve (CB's) 27,562.6 34,999.4 54,977.9 63,117.8 27.0 57.1 14.8
Excess Reserve (CB's) 9,312.2 13,253.9 26,697.1 26,732.0 42.3 101.4 0.1
Reserve Money 102,467.8 119,164.7 146,257.9 174,175.4 16.3 22.7 19.1
. Currency in Circulation 75,240.7 82,592.7 94,245.5 112,911.0 9.8 14.1 19.8
. Bank Deposits 27,227.1 36,572.0 52,012.4 61,264.5 34.3 42.2 17.8
Money Multiplier (Ratio):
. Narrow Money to Reserve Money 1.51 1.50 1.48 1.61 -0.73 -1.12 8.91
. Broad Money to Reserve Money 3.62 3.74 3.92 4.25 3.11 4.92 8.46
Other Monetary Ratios (%):
. Currency to Narrow Money 39.08 37.34 34.10 40.16 -4.46 -8.67 17.77
. Currency to Broad Money 16.28 14.98 12.89 15.25 -8.02 -13.92 18.27
. Narrow Money to Broad Money 41.66 40.11 37.81 37.96 -3.72 -5.75 0.42
. Quasi Money to Broad Money 58.34 59.89 62.19 62.04 2.66 3.85 -0.26
M2/GDP Ratio* 0.29 0.29 0.32 0.34 1.86 8.91 7.48
Source: National Bank of Ethiopia (NBE)
* M2/GDP ratio for 2017/18 is calculated on the basis of estimated nominal GDP for
the same year.

Fig. V.3: Reserve Money

160000
140000
Value in Millions of Birr

120000
100000
80000
60000
40000
20000
0

year

Reserve Requirement (CB's) Actual Reserve (CB's) Excess Reserve (CB's) Reserve Money

Source: NBE

42
2017/18 Annual Report
 National Bank of Ethiopia

4.2. Developments in Interest Rate

Due to the policy measure taken by the time and demand deposits show a slight
national bank of Ethiopia in October 2017, adjustment and reached 8.09 and 0.04
minimum and maximum deposit interest percent respectively.
rates raised to 7.0 and 9.0 percent in 2017/18 However, all real interest rates were negative
fiscal year from 5.0 and 5.75 percent as head line inflation was higher than the
registered last year same period, interest rates. The annual headline inflation
respectively. Consequently, average interest rose to 14.7 percent at the end of 2017/18
rate on savings deposit registered to be 8.0 from 8.8 percent in 2016/17. Consequently,
percent at the end of the fiscal year. the average real interest rate were negative at
Similarly, simple average lending interest 6.7 percent for saving deposit, 6.6 percent
rate reached 13.5 percent from 12.75 percent for time deposit and 1.2 percent for lending
registered in 2016/17 fiscal year. Whereas interest rate (Table 4.4).
weighted annual average interest rates on

43
2017/18 Annual Report
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Table 4.4: Interest Rate Structure of Commercial Banks

(In percent per annum)
Rates 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
1. Deposit Rate
1.1 Savings Deposit (Simple
Average) 5.38 5.38 5.38 5.38 5.38 5.38 8.00
Minimum
5.00 5.00 5.00 5.00 5.00 5.00 7.00
Maximum
5.75 5.75 5.75 5.75 5.75 5.75 9.00
1.2 Time deposit (Weighted
Average) 5.55 5.66 5.66 5.77 5.59 5.54 8.09
Up to 1 year
5.48 5.57 5.55 5.71 5.53 5.43 8.05
1 -2 years
5.57 5.68 5.68 5.78 5.60 5.57 8.10
Over 2 years
5.61 5.74 5.74 5.81 5.64 5.63 8.13
1.3 Demand Deposit (Weighted
Average) 0.02 0.03 0.03 0.04 0.04 0.04 0.04
2. Lending Rate (Average) 11.88 11.88 11.88 11.88 12.75 12.75 13.50
Minimum
7.50 7.50 7.50 7.50 7.50 7.50 7.00
Maximum
16.25 16.25 16.25 16.25 18.00 18.00 20.00
3. T-bills (Nominal) 1.25 1.86 1.59 1.43 1.44 1.42 1.39
4. Headline Inflation (Year-onYear) 20.8 7.4 22.4 10.4 7.5 8.8 14.7
5. Real Rate of Interest on:
5.1 SavingDeposit (1.1 - 4)
-15.43 -2.03 -17.07 -5.03 -2.13 -3.43 -6.70
5.2 Time Deposit (1.2 - 4)
-15.25 -1.74 -16.79 -4.64 -1.91 -3.26 -6.61
5.3 Lending (2 - 4)
-8.93 4.47 -10.57 1.47 5.25 3.95 -1.20
Source: NBE

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2017/18 Annual Report
 National Bank of Ethiopia

15.00 Fig. V.4: Interest Rate Structure of Commercial Banks

10.00

5.00
Value in %

0.00

-5.00

-10.00

-15.00

-20.00
Years

Average Saving Deposit Rate Average Time Deposit Rate Average Lending Rate

Source: NBE

4.3 Developments in Financial Sector

Banks, insurance companies and micro- Major branch expansion was undertaken by
finance institutions were the major financial Wegagen bank (69 branches), followed by
institutions operating in Ethiopia. The number Dashen Bank (66 branches), Commercial Bank
of banks still remained 18, of which 16 are of Ethiopia (65 branches), Lion International
private and 2 are state-owned. Bank (52 braches), Cooperative Bank of
Oromiya (45 branches), Awash International
In 2017/18, banks opened 500 new branches,
Bank (43 branches), Buna International Bank
raising the total number of branches to 4757
(33 branches) and Abyssinia Bank (31
from 4257 in the previous year. As a result,
branches). The share of private banks in total
bank branch to population ratio stood at
branch network rose to 68.8 percent from 66.6
1:20,286.55 people in 2017/18. About 35.3
percent last year signifying the steady growth
percent of the total bank branches were located
in private banks branch (Table 4.5).
in Addis Ababa.

5
Total population is 96,503,000 as CSA estimation for
2018
45
2017/18 Annual Report
 National Bank of Ethiopia

Total capital of the banking industry increased insurance branches were situated in Addis
by 10 percent and reached Birr 85.8 billion by Ababa and 84 percent of the total branches
the end of June 2018 (Table 4.5). were private owned. Insurance companies
increased their total capital by 26.4 percent to
Although, the number of insurance companies
Birr 5.5 billion of which the share of private
remained at 17, their branches increased to 532
insurance companies was 72.1 percent and that
following the opening of 40 new branches in
of public insurance company was 27.9 percent
2017/18 alone. About 53.6 percent of
(Table 4.6).

Fig.IV.5: Branch Network and Capital of Banking System (2014/15-2017/18)

Fig.IV.5: Branch Network (BN) and Capital (C) of Banking System (2014/15-2017/18)
100%
90%
Percentage share from total

80% 35.6 39.9

51.1
70% 58.1 62.0 57.9
66.6 68.8
60%
50%
40%
30% 64.4 60.1
48.9
20% 41.9 38.0 42.1
33.4 31.2
10%
0%

To tal Private Ban ks Total Public B anks

Source: Commercial Banks including DBE & Staff Computation

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2017/18 Annual Report
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Table.4.5: Branch Network and Capital of the Banking System at the Close of June 30, 2018
(Branch in Number and Capital in Millions of Birr)
Branch Network Capital

Banks 2016/17 2017/18 2016/17 2017/18

Addis % Addis % Total % Total %
Regions Total Regions Total
Ababa Share Ababa Share Capital Share Capital Share
1. Public Banks
Commercial Bank of Ethiopia 1028 282 1310 30.8 1051 324 1375 28.9 42,579.6 54.6 43,851.8 51.1
Development Bank of Ethiopia 106 4 110 2.6 103 4 107 2.2 7,595.1 9.7 7,676.5 9.0
Total Public Banks 1134 286 1420 33.4 1154 328 1482 31.2 50174.7 64.4 51,528.3 60.1
2. Private Banks
Awash International Bank 186 153 339 8.0 213 169 382 8.0 3,807.6 4.9 4,210.0 4.9
Dashen Bank 184 131 315 7.4 238 143 381 8.0 3,420.9 4.4 3,725.6 4.3
Abyssinia Bank 140 113 253 5.9 144 140 284 6.0 2,371.0 3.0 3,265.8 3.8
Wegagen Bank 139 84 223 5.2 174 118 292 6.1 2,824.5 3.6 3,195.7 3.7
United Bank 111 93 204 4.8 116 117 233 4.9 2,221.0 2.8 2,579.9 3.0
Nib International Bank 92 111 203 4.8 101 127 228 4.8 2,570.2 3.3 2,991.4 3.5
Cooperative Bank of Oromiya 232 55 287 6.7 270 62 332 7.0 1,281.7 1.6 1,924.6 2.2
Lion International Bank 110 48 158 3.7 145 65 210 4.4 1,163.5 1.5 1,479.7 1.7
Oromia International Bank 164 73 237 5.6 171 89 260 5.5 1,378.3 1.8 1,890.0 2.2
Zemen Bank 15 7 22 0.5 12 13 25 0.5 1,050.7 1.3 1,391.8 1.6
Buna International Bank 74 69 143 3.4 96 80 176 3.7 1,152.3 1.5 1,667.7 1.9
Berhan International Bank 114 63 177 4.2 76 92 168 3.5 1,536.3 2.0 1,936.5 2.3
Abay Bank 112 40 152 3.6 109 53 162 3.4 1,139.3 1.5 1,514.7 1.8
Addis International Bank 21 32 53 1.2 24 35 59 1.2 688.4 0.9 789.6 0.9
Debub Global Bank 19 19 38 0.9 22 21 43 0.9 373.1 0.5 614.3 0.7
Enat Bank 10 23 33 0.8 15 25 40 0.8 809.3 1.0 1,045.4 1.2
Total Private Banks 1,723 1,114 2,837 66.6 1,926 1,349 3,275 68.8 27,788.1 35.6 34,222.8 39.9
3.Grand Total Banks 2857 1400 4257 100 3,080 1677 4757 100.0 77,962.7 100.0 85,751.2 100.0
Source: Commercial Banks

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Table.4.6: Branch Network & Capital of Insurance Companies as at June 30, 2018
(Branch in Number and Capital in Millions of Birr)

Branch Capital
%
2016/17 2017/18 2016/17 2017/18
Change
No. Insurance Companies A.A Regions Total A.A Regions Total A B B/A
1 Ethiopian Ins. Cor. 20 55 75 25 60 85 1,056.0 1,530.0 44.9
2 Awash Ins.Com.S.C. 26 15 41 27 17 44 400.0 439.0 9.7
3 Africa Ins.Com S.C. 14 13 27 15 13 28 271.0 294.0 8.5
4 National Ins. Co. of Eth. 19 15 34 19 15 34 111.0 166.0 49.5
5 United Ins.Com. S.C 20 11 31 25 12 37 334.0 368.0 10.2
6 Global Ins. Com.S.C 8 7 15 8 8 16 128.0 148.0 15.6
7 Nile Ins.Com.S.C 19 20 39 20 20 40 320.0 436.0 36.3
8 Nyala Ins.Com.S.C 15 15 30 15 16 31 391.0 516.0 32.0
9 Nib Ins. Com.S.C 24 13 37 26 13 39 328.0 313.0 -4.6
10 Lion Ins. Com.S.C 16 15 31 16 15 31 83.0 131.0 57.8
11 Ethio-Life Ins.Com.S.c 15 4 19 15 5 20 100.0 112.0 12.0
12 Oromia Ins.Com.S.c 18 19 37 18 20 38 215.0 295.0 37.2
13 Abay Insurance 12 11 23 13 12 25 217.0 260.0 19.8
14 Berhan insurance S.C 9 2 11 9 4 13 91.0 112.0 23.1
15 Tsehay Insurance S.C 10 5 15 12 7 19 98.0 119.0 21.4
16 Lucy 7 4 11 11 4 15 116.0 129.0 11.2
17 Bunna Insurance S.C. 11 5 16 11 6 17 73.0 108.0 47.9
Total 263 229 492 285 247 532 4,332 5,476 26.4
Source: Insurance Companies
Note: A.A=Addis Ababa

Fig.IV.6: Branch Network and Capital of Insurance Companies (2014/15-2017/18)

Fig .IV.6: Branch Network (BN) and Capital (C) of Insurance Companies (2014/15-2017/18)
100%
Percentage Share from total

90%
80%
70%
60% 77.6 76.7 75.6 72.1
82.5 83.6 84.8 84.0
50%
40%
30%
20%
10% 22.4 23.3 24.4 27.9
17.5 16.4 15.2 16.0
0%

Public I nsu rances Private Insuran ces

Source: Insurance Companies& Staff Computation

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2017/18 Annual Report
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Table 4.7: Microfinance Institutions Performance as of June 30, 2018 (In Thousands of Birr)
Particulars 2016/17 2017/18 % Change
A B B/A
Total Capital 10,720,058.6 13,772,435.9 28.5
Saving 26,323,896.4 33,213,124.6 26.2
Credit 32,398,857.4 44,987,229.9 38.9
Total Assets 49,551,770.7 67,261,994.6 35.7
Source:MFIs

4.3.1. Resource Mobilization

Total resources mobilized by the banking

system in the form of deposit, borrowing Raising funds through borrowing by the
and loan collection increased by 27.7 banking industry was not an important
percent and reached Birr 298.2 billion at source of resource mobilization in
the end of 2017/18 (Table 4.8). Aided by Ethiopia as most of the banks were
remarkable branch expansion, deposit sufficiently liquid due to increased
liabilities of the banking system topped deposit mobilization and collection of
Birr 730.3 billion, reflecting 28.4 percent loans. However, total outstanding
annual growth rate. Saving deposits grew borrowing at the end of the fiscal year
by 30.4 percent followed by demand was Birr 65 billion up from Birr 39.8
deposits (27.6 percent) and time deposits billion a year earlier due to borrowing by
(21.7 percent). Of the total deposits, Development Bank of Ethiopia. Of the
saving deposits accounted for 52.4 total borrowing, domestic sources
percent, demand deposits 37.1 percent accounted for 89.5 percent and foreign
and time deposit (10.5 percent) (Table sources 10.5 percent (Table 4.9).
4.9).
On the other hand, banks’ loan collection
reached Birr 111.6 billion, showing a
The share of private banks in deposit
14.9 percent annual increment, of which
mobilization increased to 37.8 percent
58.8 percent was collected by private
from 35.5 percent last year due to the
banks (Table 4.8).
opening of 435 new branches. CBE alone
mobilized 62 percent of the total deposits
due to its extensive branch network.

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2017/18 Annual Report
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Table 4.8: Annual Resource Mobilization & Disbursing Activities of Commercial Banks and DBE (Specialized Bank) as at June 30, 2018
(In Millions of Birr)
2015/16 2016/17 2017/18 Percent Change

Particulars Public Banks Private Banks Total (A) Public Banks Private Banks Total (B) Public Banks Private Banks Total (C) C/A C/B
1. Deposits (net change) 41,941.1 28,816.2 70,757.3 76,058.3 54,607.7 130,666.0 87,120.9 74,318.1 161,439.0 128.2 23.6
Demand 12,897.7 7,670.4 20,568.0 27,103.6 13,959.0 41,062.6 39,481.4 19,106.5 58,587.9 184.8 42.7
Savings 25,960.6 16,374.8 42,335.4 44,423.5 31,979.6 76,403.1 42,937.9 46,194.7 89,132.6 110.5 16.7
Time 3,082.8 4,771.0 7,853.8 4,531.2 8,669.1 13,200.3 4,701.6 9,016.9 13,718.5 74.7 3.9
2. Borrowing (net change) 2,551.8 - 2,551.8 5,751.5 - 5,751.5 25,167.5 - 25,167.5 886.3 337.6
Local 1,855.9 - 1,855.9 5,656.1 - 5,656.1 23,140.7 - 23,140.7 1,146.8 309.1
Foreign 695.8 - 695.8 95.4 - 95.4 2,026.9 - 2,026.9 191.3 2,024.9
3. Collection of Loans 33,722.8 43,463.9 77,186.7 42,899.1 54,270.0 97,169.1 45,965.7 65,648.9 111,614.5 44.6 14.9
4. Total Resources Mobilized (1+2+3) 78,215.6 72,280.1 150,495.8 124,708.9 108,877.7 233,586.6 158,254.1 139,967.0 298,221.1 98.2 27.7
5. Disbursement 49,626.3 38,396.8 88,023.1 48,386.6 60,624.6 109,011.2 48,230.1 67,168.0 115,398.1 31.1 5.9
6. Change in Liquidity (4-5) 28,589.4 33,883.3 62,472.6 76,322.3 48,253.1 124,575.5 110,024.0 72,799.0 182,823.0 192.6 46.8
Memorandum Item:
7. Outstanding Credit 170,719.9 93,181.7 263,901.6 188,366.8 134,640.5 323,007.4 212,449.7 182,105.8 394,555.5 49.5 22.2
Source: Commercial Banks & Staff Computation
Table 4.9: Deposits and Borrowings of Commercial Banks and Specialized Bank as at June 30, 2018
(In Millions of Birr)
2015/16 2016/17 2017/18 S/R T/S
R S T
A. Deposits
-Demand 171,019.5 212,082.1 270,670.0 24.0 27.6
-Savings 217,047.8 293,450.9 382,583.5 35.2 30.4
-Time 50,085.5 63,285.8 77,004.3 26.4 21.7
Total 438,152.7 568,818.7 730,257.7 29.8 28.4
B. Borrowings
-Local 29,328.4 34,984.4 58,125.1 19.3 66.1
-Foreign 4,726.8 4,822.2 6,849.1 2.0 42.0
Total 34,055.2 39,806.6 64,974.2 16.9 63.2
Source: Commercial Banks & Staff Computation

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2017/18 Annual Report
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Table.4.10: Loans and Advances by Lenders 1/ (In Millions of Birr)

2016/17 2017/18 Percentage
D* C* O/S* D* C* O/S* Change
Lenders A B C D E F D/A E/B F/C
A.Public Banks
1.Commercial Bank of Ethiopia 42817.6 38126.6 154,164.0 41281.6 41414.6 173,294.4 -3.6 8.6 12.4
2.Development Bank of Ethiopia 5569.0 4772.5 34,202.8 6948.5 4551.1 39,155.4 24.8 -4.6 14.5
Sub-Total 48,386.6 42,899.1 188,366.8 48,230.1 45,965.7 212,449.7 -0.3 7.1 12.8
B. Private Banks
3 Awash International Bank 6642.8 6975.0 22576.3 4860.5 8333.5 31209.1 -26.8 19.5 38.2
4. Dashen Bank 8694.1 7877.7 18078.9 9953.7 8392.3 23069.4 14.5 6.5 27.6
5. Bank of Abyssinia 5384.3 2881.2 14105.4 4681.4 3795.2 18023.5 -13.1 31.7 27.8
6. Wegagen Bank 3945.0 5595.1 10367.5 6194.8 6021.5 15038.5 57.0 7.6 45.1
7. United Bank 4961.6 5989.5 11996.3 4825.5 7230.3 14715.0 -2.7 20.7 22.7
8. Nib International Bank 6725.2 4555.4 10888.4 6197.2 4926.9 13692.7 -7.9 8.2 25.8
9. Cooperative Bank of Oromia 7360.3 4647.1 9995.5 8980.3 6587.9 15117.4 22.0 41.8 51.2
10. Lion Interenational Bank 2663.4 2513.9 5598.3 2998.0 3223.7 7560.3 12.6 28.2 35.0
11. Oromia International Bank 1817.2 2103.4 4160.1 2095.7 2158.8 5182.3 15.3 2.6 24.6
12. Zemen Bank 3294.9 2882.3 7175.5 5103.6 4535.3 11596.3 54.9 57.4 61.6
13.Berhan International Bank 2741.1 2675.8 5366.7 3550.1 3558.5 7144.3 29.5 33.0 33.1
14.Bunna International Bank 2264.7 1491.6 5202.8 2781.0 1811.9 6915.1 22.8 21.5 32.9
15.Abay Bank 1902.3 1722.3 4274.3 1827.9 2231.1 5854.7 -3.9 29.5 37.0
16. Addis International Bank 425.1 552.2 1581.3 543.1 541.5 2053.6 27.8 -1.9 29.9
17. Debub Global Bank 654.6 617.5 794.3 1345.7 706.5 1584.2 0.0 0.0 0.0
18. Enat Bank 1148.2 1190.0 2479.1 1229.4 1594.0 3349.6 0.0 0.0 0.0
Sub-Total 60,624.6 54,270.0 134,640.5 67,168.0 65,648.9 182,105.8 10.8 21.0 35.3
Grand Total 109,011.2 97,169.1 323,007.4 115,398.1 111,614.5 394,555.5 5.9 14.9 22.2
Source: Commercial Banks
1/ Outstanding Credit excludes central government borrowing
D*=Disbursement, C*=Collection, O/S*= Outstanding Credit

51
2017/18 Annual Report
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4.3.2 New Lending Activities

Commercial Banks and Development About 26.4 percent of the loans went to
Bank of Ethiopia (DBE) disbursed Birr industry followed by domestic trade (17.3
115.4 billion in fresh loans which was 5.9 percent), international trade (16.1
percent higher than a year ago. Of the percent), other sectors (11 percent),
total new loans, about 58.2 percent was housing and construction (10.6 percent)
provided by private banks and 41.8 and agriculture (9.9 percent) while the
percent by the two public banks (Table remaining balance went to other
4.10). economic sectors (Table 4.12).

Fig.IV.7: Development in Deposit Mobilization, Lending and Loan Collection Activities of the Banking
System (2010/11-2017/18)

Fig IV.7: Development in Deposit Mobilization, Lending and Loan Collection Activities of Banking System
(2010/11-2017/18)

100000
Value in Millions of Birr

90000
80000
70000
60000
50000
40000
30000
20000
10000
0

Year & Bank Ownership

Net Deposit Lending Loan collection

Source: Commercial Banks and DBE

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2017/18 Annual Report
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Table 4.11: Percentage Share of Loans and Advances by Lenders

2016/17 2017/18
D* C* O/S* D* C* O/S* Percentage change
Lenders A B C D E F D/A E/B F/C
A.Public Banks
1.Commercial Bank of Ethiopia 39.278 39.2 47.7 35.8 37.1 43.9 -8.9 -5.4 -8.0
2.Development Bank of Ethiopia 5.109 4.9 10.6 6.0 4.1 9.9 17.9 -17.0 -6.3
Sub-Total 44.4 44.1 58.3 41.8 41.2 53.8 -5.8 -6.7 -7.7
B.Private Banks
3 Awash International Bank 6.1 7.2 7.0 4.2 7.5 7.9 -30.9 4.0 13.2
4. Dashen Bank 8.0 8.1 5.6 8.6 7.5 5.8 8.2 -7.3 4.5
5. Bank of Abyssinia 4.9 3.0 4.4 4.1 3.4 4.6 -17.9 14.7 4.6
6. Wegagen Bank 3.6 5.8 3.2 5.4 5.4 3.8 48.3 -6.3 18.8
7. United Bank 4.6 6.2 3.7 4.2 6.5 3.7 -8.1 5.1 0.4
8. Nib International Bank 6.2 4.7 3.4 5.4 4.4 3.5 -13.0 -5.8 3.0
9. Cooperative Bank of Oromia 6.8 4.8 3.1 7.8 5.9 3.8 15.3 23.4 23.8
10. Lion Interenational Bank 2.4 2.6 1.7 2.6 2.9 1.9 6.3 11.6 10.6
11. Oromia International Bank 1.7 2.2 1.3 1.8 1.9 1.3 8.9 -10.6 2.0
12. Zemen Bank 3.0 3.0 2.2 4.4 4.1 2.9 46.3 37.0 32.3
13.Berhan International Bank 2.5 2.8 1.7 3.1 3.2 1.8 22.3 15.8 9.0
14.Bunna International Bank 2.1 1.5 1.6 2.4 1.6 1.8 16.0 5.7 8.8
15. Abay Bank 1.7 1.8 1.3 1.6 2.0 1.5 -9.2 12.8 12.1
16. Addis International Bank 0.4 0.6 0.5 0.5 0.5 0.5 20.7 -14.6 6.3
17. Debub Global Bank 0.6 0.6 0.2 1.2 0.6 0.4 0.0 0.0 0.0
18. Enat Bank 1.1 1.2 0.8 1.1 1.4 0.8 0.0 0.0 0.0
Sub-Total 55.6 55.9 41.7 58.2 58.8 46.2 4.7 5.3 10.7
Grand Total 100.0 100.0 100.0 100.0 100.0 100.0 0.0 0.0 0.0
Source: Commercial Banks
D*=Disbursement, C*=Collection, O/S*= Outstanding Credit

4.3.3 Outstanding Loans

Total outstanding credit of the banking percent), others sectors (5.8 percent) and
system including to the central agriculture (4.9 percent) (Table 4.12).
government increased by 22.8 percent
and reached Birr 449 billion at the end of
The share of private sector in outstanding
June 2018. Excluding central
credit was Birr 284.5 billion (or 63.4
government, credit to industry accounted
percent) reflecting a 23 percent year-on-
for 39.3 percent followed by international
year growth (Table 4.13).
trade (19.8 percent), domestic trade (11.4
percent), housing and construction (11

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Table 4.12: Loans & Advances by Economic Sectors (In Millions of Birr)
2016/17 2017/18 Percentage Change
Economic Sectors D* C* O/S* D* C* O/S* D* C* O/S*
A B C D E F D/A E/B F/C
Government Deficit Financing 0 0 42,593.8 0 0 54,398.5 - - 27.7
Agriculture 13,133.7 13,962.6 20,041.8 11,401.9 14,073.7 19,511.8 (13.2) 0.8 (2.6)
Industry 25,035.6 20,942.8 129,977.7 30,503.0 24,413.5 154,904.4 21.8 16.6 19.2
Domestic Trade 23,608.9 18,399.2 41,830.1 19,935.9 21,336.8 44,945.3 (15.6) 16.0 7.4
International Trade 13,494.8 20,993.9 52,207.7 18,606.2 23,135.2 77,976.5 37.9 10.2 49.4
Export 6,062.2 10,478.0 30,017.5 11,603.2 13,375.1 47,774.1 91.4 27.6 59.2
Import 7,432.7 10,515.9 22,190.2 7,003.0 9,760.1 30,202.5 (5.8) (7.2) 36.1
Hotels and Tourism 2,213.4 2,390.9 5,852.8 2,197.9 2,629.0 9,856.6 (0.7) 10.0 68.4
Transport and Communication 6,924.9 4,901.9 14,275.4 4,525.6 5,644.1 13,826.9 (34.6) 15.1 (3.1)
Housing and Construction 13,583.6 10,521.0 37,970.6 12,281.4 12,434.2 43,572.6 (9.6) 18.2 14.8
Mines, Power and Water resource 363.4 179.8 225.1 319.5 142.1 221.9 (12.1) (21.0) (1.5)
Others 8,452.9 3,938.9 16,373.4 12,674.1 6,353.8 23,044.3 49.9 61.3 40.7
Personal 2,199.8 938.1 4,252.8 2,952.6 1,452.1 6,695.2 34.2 54.8 57.4
Total 109,011.2 97,169.2 365,601.2 115,398.1 111,614.5 448,954.1 5.9 14.9 22.8
Source: Commercial Banks & Staff Computation
D*=Disbursement, C*=Collection, O/S*= Outstanding Credit

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Fig.IV.8: Sectoral Breakdown of Bank Credit (2006/07-2017/18)

400,000.0

350,000.0
In Millions of Birr

300,000.0

250,000.0

200,000.0

150,000.0

100,000.0

50,000.0

-
2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Fiscal Years

Agriculture Others Housing & Construction

International Trade Domestic Trade & Services Industry

Table 4.13: Loans and Advances by Borrowers (In Millions of Birr)

2014/15 2015/16 2016/17 2017/18

Percentage change
Borrowing Sector
O/S* O/S* O/S* D* C* O/S*

A B C E F G G/B G/C

Central Government 15,514.4 16,471.6 42,593.8 - 0.0 54,398.5 230.3 27.7

Public Enterprises 69,841.6 84,675.6 91,771.6 18,093.4 13,631.0 110,092.5 30.0 20.0

Cooperatives 13,850.7 13,704.4 13,477.1 12,261.4 13,756.7 16,724.6 22.0 24.1

Private & Individuals 133,618.1 165,467.4 217,758.7 85,043.2 84,226.8 267,738.5 61.8 23.0

Total 232,824.8 280,319.0 365,601.2 115,398.0 111,614.5 448,954.0 60.2 22.8

Source: Commercial Banks & Staff Computation
D*=Disbursement, C*=Collection, O/S*= Outstanding Credit

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4.4. Financial Activities of NBE

As of June 2018, gross claims of NBE on amounted birr 81.6 billion as a result of
the central government reached Birr 8.3 percent growth in deposits in
160.1 billion which was 18.1 percent financial institutions and 4.7 percent rise
higher than a year earlier. Of the total in government deposit (Table 4.14).
credit to the central government, direct
advance accounted for 95.1 percent and
that of bond 4.9 percent.

Similarly, NBE’s outstanding claim on

DBE was birr 47.3 billion showing 77.7
percent increase over the preceding year.

On the liability side, total deposits at

NBE increased by 7.4 percent and

Table 4.14: Financial Activities of National Bank of Ethiopia at the Close of June 30, 2018
( In Millions of Birr)

2015/16 2016/17 2017/18 % Change

Particulars
A B C B/A C/B

Loans and Advances (1+2) 134,687.4 162,247.8 207,421.6 20.5 27.8

1.Claims on Central Gov’t 109,080.4 135,640.8 160,128.8 24.3 18.1

1.1 Direct Advance 100,764.9 127,764.9 152,264.9 26.8 19.2

1.2 Bonds 8,315.5 7,875.9 7,863.9 -5.3 -0.2

2. Claims on DBE 25,607.0 26,607.0 47,292.7 3.9 77.7

3. Deposit Liabilities 51,697.0 75,987.7 81,596.5 47.0 7.4

3.1 Government 14,042.3 19,031.5 19,922.0 35.5 4.7

3.2 Financial Institutions 37,654.7 56,956.2 61,674.5 51.3 8.3

Source: NBE and Staff Computation

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4.5 Developments in Financial Markets

Although there is no secondary market in expenditures and/or to absorb
Ethiopia, government bonds are excess liquidity in the banking
occasionally issued to finance government system.

4.5.1. Treasury Bills Market

The amount offered and demanded in the The dominance of non-bank
Treasury-bill market showed a similar institutions in the T-bill market
development. The amount of Treasury-bills continued in the review year.
offered registered 36.2 percent rise and Accordingly, the Non-bank
reached Birr 286.5 billion in 2017/18. institution constituted the entire
Similarly, the amount of T-bills demanded amount of the total outstanding T-
in the weekly auction market exhibited 43.8 bills (Table 4.15).
percent growth and stood at Birr 324.0
billion.
The average weighted yield of the
The amount of T-bills sold during the year four types of bills declined slightly
stood at Birr 324.0 billion indicating the to 1.416 from 1.424 percent, a
market was oversubscribed by Birr 37.5 mere 0.567 percent down from last
billion (6.14 percent). year (Table 4.15).

At the end of 2017/18, the total outstanding The highest yield was recorded for
T-bills went up by 51.8 percent and stood at the 364-day T-bill while the lowest
Birr 111.2 billion. yield was for 182-day T-bill with a
corresponding rate of 3.000 and
0.622 percent, respectively.

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Table 4.15: Results of Treasury Bills Auction

Percentage
2015/16 2016/17 2017/18 Change
Particulars A B C C/A C/B

Num ber of Bidders 217 200 192.00 -11.5 -4.0

Am ount Dem anded (Mn.Birr) 161,575.240 225,321.240 323,991.240 100.5 43.8
28-day bill 1,040.000 1,040.000 1,040.000 0.0 0.0
91-day bill 140,517.240 208,663.240 290,633.240 106.8 39.3
182-day bill 6,802.000 2,402.000 2,102.000 -69.1 -12.5
364-day bill 13,216.000 13,216.000 30,216.000 128.6 128.6

Am ount Supplied (Mn.Birr) 147,579.435 210,382.240 286,494.240 94.1 36.2

28-day bill 1,040.0 1,060.0 1,060.0 1.9 0.0
91-day bill 125,921.4 193,204.2 269,791.2 114.3 39.6
182-day bill 7,502.0 2,902.0 2,427.0 -67.6 -16.4
364-day bill 13,116.0 13,216.0 13,216.0 0.8 0.0

Am ount Sold (Mn.Birr) 161,475.240 225,321.240 323,991.240 100.6 43.8

Banks 0.0 0.0 0.0 0.0 -
Non-Banks 161,475.2 225,321.2 323,991.2 100.6 43.8

Average Weighted Price for Successful 99.088 99.100 99.106 0.018 0.006
bids(Birr)
28-day bill 99.940 99.937 99.936 -0.004 -0.001
91-day bill 99.702 99.701 99.701 -0.001 0.000
182-day bill 99.616 99.666 99.691 0.075 0.025
364-day bill 97.095 97.095 97.095 0.000 0.000

-2.996 -0.567
Average Weighted Yeild for Successful bids(%) 1.438 1.424 1.416
28-day bill 0.783 0.821 0.839 7.181 2.147
91-day bill 1.198 1.203 1.203 0.422 -0.008
182-day bill 0.773 0.672 0.622 -19.584 -7.413
364-day bill 3.000 3.000 3.000 -0.001 -0.001
Share Share Share
Outstanding bills at the end of period(Mn.Br.) 57,252.560 % 73,271.560 % 111,213.560 % 94.251 51.783
Banks 0.00 0.00 0.00 0.00 0.00 0.000 0.000
Non-Banks 57,252.56 100.00 73,271.56 100.00 111,213.56 100.00 94.251 51.783
Public Servants Social Security Agency 30,566.56 53.39 41,015.56 55.98 54,915.56 49.38 79.659 33.890
Development Bank of Ethiopia 13,216.00 23.08 13,216.00 18.04 30,216.00 27.17 128.632 128.632
Private Organizations’ Employees Social Security Agency 11,182.00 19.53 16,604.00 22.66 23,346.00 20.99 108.782 40.605
Other Public Non-Bank Institutions 2,288.00 4.00 2,436.00 3.32 2,736.00 2.46 19.580 12.315
Source: NBE

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Fig IV.9: Treasury Bills Auction Result

350,000.00 3.00

300,000.00
Value in Millions of Birr

2.50

Annual weighted yield

250,000.00
2.00
200,000.00
1.50
150,000.00
1.00
100,000.00

50,000.00 0.50

- 0.00

Year
Demand Supply Average Weighted Yield

Source: NBE

4.5.2 NBE Bill Market

On April 4, 2011, NBE has introduced Following the introduction of the NBE
NBE-Bill market so as to mobilize Bill market, the total NBE bill purchased
resource from private banks for financing by the banking sector reached Birr 21.01
of priority sectors which are identified as billion at the end of 2017/18.
the driving forces of the economy.

4.5.3. Bonds Market

During 2017/18 FY, corporate bond purchase million, Birr 50.0 million, and Birr
of CBE showed 19.8 percent annual increase 36.5 million showing 36.7 percent
and reached to Birr 57.4 billion. annual decline, 894.5 percent
increase, 100 percent rise and 51.2
In the same year, corporate bond redeemed by
percent decline respectively (Table
City Government of Addis Ababa, Railway
4.16). As a result, total outstanding
Corporation, EEPCO and regional
bond holdings, registered 22.6
government reached Birr 2.94 billion, 781.4
percent annual growth and amounted
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2017/18 Annual Report
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to Birr 291.4 billion. Of the outstanding

corporate bond, EEPCO accounted for 74.2
percent, City government of Addis Ababa
15.5 percent, Railway Corporation 10 percent
and Regional governments 0.2 percent.

Table 4.16: Disbursement, Redemption and Outstanding of Coupon and Corporate Bond of CBE
(In Millions of Birr)

Annual Annual Percentage

Change
Particulars
2015/16 2016/17 2017/18
Actual A B B/A
1. Corporate Bond Purchases by
holders 43,023.9 47,951.1 57,448.9 19.8
EEPCO 28,000.0 32,100.0 37,100.00 15.6
Regional governments - - -
Development Bank of Ethiopia - - - -
City Government of Addis Ababa 12,575.0 12,300.0 9,300.00 (24.39)
Railway Corporation 2,448.9 3,551.1 11,048.91 311.14
Private Sector - 0.0 - -
2. Redemption of Bonds by Clients 6,963.4 4,801.1 3,808.6 -20.7
EEPCO - 0.0 50.00 -
Regional governments 380.6 74.7 36.49 -51.2
Development Bank of Ethiopia 43.4 0.0 -
City Government of Addis Ababa 6,539.4 4,647.80 2,940.70 -36.73
Railway Corporation - 78.6 781.36 894.47
Private Sector - - - -
3. Outstanding Bonds by Clients 188,749.7 237,784.6 291,425.0 22.6
EEPCO 143,100.0 179,300.0 216,350.0 20.7
Regional governments 700.8 625.4 589.0 -5.8
Development Bank of Ethiopia - - - -
City Government of Addis Ababa 29,500.0 38,937.8 45,297.1 16.3
Railway Corporation 15,448.9 18,921.4 29,189.0 54.3

Private Sector - - - -
Source: Commercial Bank of Ethiopia

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4.5.4. Inter-bank Money Market

The interbank money market remained 1998, merely twenty three transactions
inactive in Ethiopia due to the existence worth Birr 259.2 million were transacted
of excess reserves in the banking system. with interest rates ranging between 7 to
Accordingly, there was no transaction in 11 percent per year. The maturity period
the inter-bank money market after April of these loans widely spanned from
2008. Since its introduction in September overnight to 5 years (Table 4.17).

Table 4.17: Interbank Money Market Transactions up to June 30, 2012

Amount
Borrowed (In Interest Rate Date of Maturity
Borrower Lender Thousand Birr) % Transaction Period
Nib International Bank Awash International Bank 7,000.0 11 16/11/00 Overnight
Wegagen Bank Commercial Bank of Ethiopia 10,000.0 8 3/1/2001 5 years
Nib International Bank ,, 10,000.0 8 3/31/2001 3 months
Wegagen Bank ,, 10,000.0 8 3/22/2001 1 year
Nib International Bank ,, 3,600.0 8 5/31/2001 6 months
Nib International Bank ,, 3,700.0 8 06/31/01 6 months
Nib International Bank ,, 778.0 8 30-11-2001 6 months
Nib International Bank Bank of Abyssinia 28,999.8 7 31/12/02 3.5 months
Nib International Bank Bank of Abyssinia 19,046.9 7 31/01/03 3.5 months
Nib International Bank Bank of Abyssinia 20,310.0 7 28/02/03 3.5 months
Nib International Bank Bank of Abyssinia 28,987.0 7 31/03/03 3.5 months
Nib International Bank Commercial Bank of Ethiopia 25,000.0 7.5 7/7/2003 5.2 months
Nib International Bank Bank of Abyssinia 50.1 7.5 26/03/2005 open
Nib International Bank Bank of Abyssinia 50.5 7.5 26/03/2005 open
Wegagen Bank Awash International Bank 19,744.6 7.5 December, 2006 21/05/07
Wegagen Bank Awash International Bank 19,870.4 7.5 January, 2007 21/05/07
Wegagen Bank Awash International Bank 10,937.2 7.5 February, 2007 21/05/07
Awash International Bank Nib International Bank 30,000.0 7.5 February, 2007 18/08/07
Wegagen Bank Awash International Bank 10,931.4 7.5 March, 2007 21/05/07
Nib International Bank Awash International Bank 142.0 8.5 January, 2008 25/4/08
Nib International Bank Awash International Bank 7.0 8.5 February, 2008 25/04/08
Nib International Bank Awash International Bank 3.0 8.5 March, 2008 25/04/08
Nib International Bank Awash International Bank 17.0 8.5 April,2008 25/04/08
Total/Average - 259,174.8 7.87 - -

Source: NBE

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V. DEVELOPMENTS IN EXTERNAL SECTOR

5.1 Overall Balance of Payments

During 2017/18, the overall balance of registered USD 140.2 million deficit,
payments recorded USD 201.6 million showing strong improvement compared to
deficit against the USD 658.6 million the USD 557.6 million deficit recorded
surplus in the previous year. This was last year. At the same time, net private
mainly due to 14.1 and 7.2 percent decline transfer increased by 10.7 percent. As a
in net official transfers and net capital result, current account deficit (including
account, respectively. official transfers) narrowed to USD 5.3
billion from USD 6.5 billion and its share
However, merchandise trade deficit
in the 2017/18 GDP projection stood at 5.7
narrowed by 3.7 percent. Net services
percent.

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Table 5.1: Balance of Payments1 (In Millions of USD)

2015/16 2016/17* 2017/18 Percentage Change

S/N Particulars A B C B/A C/B
1 Exports, f.o.b. 2,867.7 2,907.5 2,839.8 1.4 -2.3
Coffee 722.7 883.2 839.0 22.2 -5.0
Other 2,145.0 2,024.3 2,000.8 -5.6 -1.2
2 Imports 16,725.2 15,802.6 15,253.4 -5.5 -3.5
Fuel 1,339.0 1,823.6 2,317.3 36.2 27.1
Cereals 1,032.7 554.1 771.7 -46.3 39.3
Aircraft 162.9 150.3 282.3 -7.7 87.8
Imports excl. fuel, cereals, aircraft 14,190.6 13,274.5 11,882.1 -6.5 -10.5
3 Trade Balance (1-2) -13,857.5 -12,895.1 -12,413.5 -6.9 -3.7
4 Services, net -621.5 -557.6 -140.2 -10.3 -74.9
Non-factor services, net -245.3 -61.3 237.1 -75.0 -486.5
Exports of non-factor services 3,196.4 3,331.1 4,219.5 4.2 26.7
Imports of non-factor services 3,441.8 3,392.5 3,982.5 -1.4 17.4
Income, net -376.1 -496.3 -377.3 31.9 -24.0
O/w Gross official int. payment 377.2 465.9 417.5 23.5 -10.4
Dividend, net -12.1 -48.9 -0.1 303.7 -99.9
5 Private transfers, net 6,428.6 5,485.3 6,074.8 -14.7 10.7
o/w: Private Individuals 4,420.3 4,427.5 5,121.4 0.2 15.7
6 Current account balance excluding off. Transfers (3+4+5) -8,050.41 -7,967.5 -6,479.0 -1.0 -18.7
7 Official transfers, net 1,391.1 1,428.3 1,226.3 2.7 -14.1
8 Current account balance including official transfers(6+7) -6,659.3 -6,539.1 -5,252.6 -1.8 -19.7
9 Capital account 6,577.7 6,895.1 6,397.4 4.8 -7.2
Off. Long-term Cap., net 1,631.4 1,418.0 1,631.6 -13.1 15.1
Disbursements 1,733.8 1,534.5 1,794.7 -11.5 17.0
Amortization 102.4 116.6 163.1 13.8 39.9
Other pub. long-term cap. 1,116.8 673.5 937.0 -39.7 39.1
Private sector, long term 450.8 502.8 250.7 11.5 -50.1
Foreign Direct Investment(net) 3,268.69 4,170.80 3,723.44 27.60 -10.7
Sort term Capital 110.0 130.0 -145.2 18.2 -211.7
10 Errors and omissions -749.3 302.7 -1,346.4
11 Overall balance (8+9+10) -830.9 658.6 -201.6
12 Financing 830.9 -658.6 201.6
13 Reserves [ Increase(-), Decrease (+)] 830.9 -658.6 201.6
14 Central Bank (NFA) 975.6 -555.7 -17.3
Asset -152.6 204.7 349.8
Liabilities 1,128.2 -760.4 -367.1
15 Commercial banks (NFA) -144.7 -103.0 218.9
16 Debt Relief
Principal
Interest
Source: NBE Staff Compilation
1 2017/18 data are Preliminary
*Some items are revised

2017/18 Annual Report

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 National Bank of Ethiopia

Table 5.2: Components of Current Account as Percentage of GDP

Percentage
2015/16 2016/17 2017/18* Change
Particulars A B C B/A C/B

Exports 3.9 3.6 3.1 -8.1 -14.0

Imports 22.9 19.6 16.7 -14.4 -15.0

Trade Balance -19.0 -16.0 -13.6 -15.7 -15.3

Net Services -0.9 -0.7 -0.2 -18.7 -77.9

Net Private Transfers 8.8 6.8 6.6 -22.7 -2.5

Current Account Deficit (excluding official transfers) -11.0 -9.9 -7.1 -10.3 -28.4

Current Account Deficit (including official transfers) -9.1 -8.1 -5.7 -11.0 -29.3
Source: NBE Staff Compilation
*GDP is a forecast

Fig. V.1 Trends in Components of Current Account

10000

5000

0
In Million of USD

-5000

-10000

-15000
Net Services Trade Balance
Private Transfers, net Official Transfers, net

Source: NBE Staff Computations

2017/18 Annual Report

64
 National Bank of Ethiopia

5.2. Developments in Merchandise Trade

5.2.1 Balance of Trade

Merchandise trade deficit in 2017/18 bills. As a result, merchandise trade
amounted USD 12.4 billion, depicting deficit to GDP ratio declined by 2.4
3.7 percent improvement over the percentage point and stood at 13.6
preceding fiscal year. This was mainly percent.
attributed to the reduction of import

5.2.2 Merchandise Export

Total merchandise export earnings Earnings from pulses export also
declined by 2.3 percent over last year decreased by 3.7 percent to USD 269.5
due to lower earnings from export of million solely due to 13.7 percent fall in
coffee (5.0 percent), pulses (3.7 percent), international price despite 11.5 percent
gold (52.0 percent), live-animals (9.6 growth in export volume. Hence, the
percent), chat (3.6 percent) and other share of pulses in total merchandise
export items (2.9 percent). Hence, the export earnings stood at 9.5 percent
ratio of merchandise export to GDP compared to 9.6 percent share a year
declined to 3.1 percent from 3.6 percent earlier.
a year ago.
Similarly, the revenue from export of
Specifically, earnings from export of gold showed 52 percent reduction and
coffee dropped by 5.0 percent wholly amounted USD 100.2 million, driven
due to 10.1 percent decline in its wholly by 52.8 percent contraction in
international price despite 5.7 percent volume of export despite a 1.6 percent
increase in its export volume. As a rise in international price. Thus, the
result, the share of coffee in total share of gold in total merchandise export
merchandise export slightly contracted shrunk to 3.5 percent from 7.2 percent.
to 29.5 percent from 30.4 percent
recorded last year. Chat export earnings declined by 3.6
percent and amounted USD 263.2
million. This was wholly due to 3.7
2017/18 Annual Report
65
 National Bank of Ethiopia

percent drop in volume of export. Yet, export revenue marginally improved to

its share in total merchandise export 4.7 percent from 3.9 percent.
stood 9.3 percent compared to 9.4
percent share recorded last year. Likewise, earning from export of flower
showed 4.6 percent increment over last
The proceeds from export of live- year. This was attributed to
animals showed 9.6 percent reduction improvements in both export volume
resulting from 11.4 percent contraction (1.5 percent) and international price (3.1
in export volume against 2.1 percent rise percent). As a result, the share of flower
in world price. Hence, the revenue from in total export earnings marginally rose
live-animals accounted for 2.2 percent of to 8.0 percent from 7.5 percent last year.
the total merchandise export compared
to 2.3 percent share a year ago. Receipts from meat & meat products
grew by 3.1 percent on account of 1.0
On the other hand, export revenue from percent increase in global price and 2.0
oilseeds increased by 20.6 percent and percent growth in volume of exports. As
reached USD 423.5 million aided by a result, export of meat & meat products
15.4 and 4.5 percent rise in international constituted 3.6 percent of the total
price and export volume, respectively. merchandise export earnings.
Hence, the share of oilseeds in total
merchandise export improved to 14.9 Export earnings from fruits and
percent from 12.1 percent recorded last vegetables increased by 9.5 percent vis-
year. à-vis last year driven by 5.8 percent
expansion in export volume and 3.5
Similarly, earning from export of leather percent improvement in international
& leather products registered 16.1 price. Thus, the share of fruits and
percent increment owing to 8.7 percent vegetables in total merchandise export
expansion in export volume and 6.9 earnings rose to 2.2 percent from 1.9
percent rise in international price. percent last year.
Consequently, the share of leather &
leather products in total merchandise

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Finally, earnings from electricity export the total merchandise export earnings
increased by 14.9 percent vis-à-vis last compared to 2.5 percent share last year.
year owing to 16.1 percent growth in
export volume despite a 1.1 percent fall
in international price. As a result, export
of electricity accounted for 3 percent of

Table 5.3 Values of Major Export Items

(In millions of USD)

Percentage
2015/16 2016/17 2017/18
Particulars Change
A %share B %share C %share B/A C/B
Coffee 722.7 25.2 883.2 30.4 839.0 29.5 22.2 -5.0
Oilseeds 477.2 16.6 351.0 12.1 423.5 14.9 -26.4 20.6
Leather and Leather products 115.3 4.0 114.0 3.9 132.4 4.7 -1.1 16.1
Pulses 232.4 8.1 279.9 9.6 269.5 9.5 20.5 -3.7
Meat & Meat Products 96.4 3.4 98.7 3.4 101.7 3.6 2.3 3.1
Fruits & Vegetables 53.7 1.9 56.1 1.9 61.4 2.2 4.5 9.5
Live Animals 147.8 5.2 67.6 2.3 61.1 2.2 -54.2 -9.6
Chat 262.5 9.2 273.0 9.4 263.2 9.3 4.0 -3.6
Gold 290.7 10.1 208.8 7.2 100.2 3.5 -28.2 -52.0
Flower 225.3 7.9 218.5 7.5 228.6 8.0 -3.0 4.6
Electricity 31.5 1.1 73.4 2.5 84.3 3.0 133.0 14.9
Others 212.3 7.4 283.2 9.7 275.0 9.7 33.4 -2.9
Total Export 2867.7 100.0 2907.5 100.0 2839.8 100.0 1.4 -2.3
Total Export Excluding
2836.3 2834.1 2755.6 -0.1 -2.8
Electricity
Source: Ethiopian Revenue and Customs Authority and Ethiopian Electric Power

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Fig.V.2. Foreign Exchange Earnings from Selected Export

1000
Items
800
In Mill. of USD

600
400
200
0

Coffee Oil Seeds Leather and Leather Products Pulses Flower Chat Gold

Source: NBE Staff Computation

Fig.V.3 Export Share of Selected Commodities

Gold others
3.5% 9.7%

Coffee
29.5%
Chat
9.3%

Flower
8%

Pulses Oil Seeds

9.5% 14.9%
Leather and Leather
products
4.7%
Source: NBE Staff Computation

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Table 5.4: Volume of Major Exports

(In millions of kg unless stated otherwise)

2015/16 2016/17 2017/18 Percentage Change

Particulars
B/A*100- C/B*100-
A B C
100 100
Coffee 198.7 225.7 238.6 13.6 5.7
Oilseeds 436.6 333.5 348.5 -23.6 4.5
Leather and Leather
6.0 5.9 6.4 -1.6 8.7
products
Pulses 375.4 392.7 438.1 4.6 11.5
Meat & Meat Products 19.0 19.6 20.0 3.2 2.0
Fruits & Vegetables 167.1 178.6 189.0 6.9 5.8
Live Animals 77.8 36.1 31.9 -53.6 -11.4
Chat 47.0 48.8 47.0 3.9 -3.7
Gold(in mill of grams) 8.6 6.0 2.8 -30.4 -52.8
Flower 50.6 49.4 50.1 -2.5 1.5
Electricity(in mill of
511.3 1305.5 1516.2 155.3 16.1
kwh)
Source: Ethiopian Revenue and Customs Authority and Ethiopian Electric Power

500 Fig.V. 4. Export Volume of Selected Commodities

450
400
350
In Mn of Kg

300
250
200
150
100
50
0

Coffee Oil Seeds Leather and Leather Products Pulses Flower Chat Gold

Source: NBE Staff Computation

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Table 5.5: Unit Value of Major Export Items

(In USD/kg unless stated otherwise)

2015/16 2016/17 2017/18 Percentage Change

Particulars
A B C B/A*100-100 C/B*100-100
Coffee 3.6 3.9 3.5 7.5 -10.1
Oilseeds 1.1 1.1 1.2 -3.7 15.4
Leather and Leather products 19.3 19.4 20.7 0.5 6.9
Pulses 0.6 0.7 0.6 15.1 -13.7
Meat & Meat Products 5.1 5.0 5.1 -0.8 1.0
Fruits & Vegetables 0.3 0.3 0.3 -2.2 3.5
Live Animals 1.9 1.9 1.9 -1.3 2.1
Chat 5.6 5.6 5.6 0.1 0.1
Gold 33.9 35.0 35.5 3.2 1.6
Flower 4.5 4.4 4.6 -0.5 3.1
Electricity 0.1 0.1 0.1 -8.8 -1.1
Source: Ethiopian Revenue and Customs Authority

60
Fig.V. 5. Unit Value of Selected Export Commodities
USD/kg, for Gold in USD/gm

50

40

30

20

10

Coffee Oil Seeds Leather and Leather Products Pulses Chat Gold

Source: NBE Staff Computation

5.2.3. Import of Goods result, total import to GDP ratio shrunk to

Total merchandise import bills amounted 16.7 percent from 19.6 percent last year.

to USD 15.3 billion depicting 3.5 percent

Import bills of capital goods dropped by
annual decline. This was mainly on
12.7 percent driven by lower import of
account of lower import of capital,
transport goods (20.9 percent),
consumer and semi-finished goods. As a
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agricultural goods (32.1 percent) and at 16.6 percent. However, import of

industrial goods (9.7 percent). Thus, the fertilizer, increased by 30.0 percent over
share of capital goods in total last year.
merchandise import bills fell to 34.5
On the other hand, import of raw
percent from 38.2 percent a year ago.
materials increased by 9.8 percent
relative to the preceding year and
Import bills of consumer goods amounted
accounted for 0.9 percent of the total
to USD 4.7 billion showing 3.9 percent
merchandise import.
deceleration over last year owing to lower
import of durable consumer goods (20.9
Fuel import bills also surged by 27.1
percent) against the increase in non-
percent and amounted to USD 2.3 billion.
durable consumer goods (5.2 percent). As
This was attributed to the increase in both
a result, the share of consumer goods in
international price (16.1 percent) and
total merchandise import bills remained
import volume (9.5 percent). As a result,
nearly at 31 percent.
fuel import accounted for 15.2 percent of
Similarly, semi-finished goods import the total merchandise import compared to
slowed down by 3.5 percent to USD 2.5 11.5 percent last year same period.
billion and its share in the total
merchandize import remained unchanged

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Table 5.6: Value of Imports by End Use

(In Millions of USD)

2015/16 2016/17 2017/18 Percentage change

Categories A % share B % share C % share B/A C/B

Raw Materials 149.3 0.9 125.6 0.8 138.0 0.9 -15.8 9.8
Semi-finished Goods 2,895.5 17.3 2,620.6 16.6 2,527.8 16.6 -9.5 -3.5
Fertilizers 430.0 2.6 367.9 2.3 478.5 3.1 -14.4 30.0
Fuel 1,339.0 8.0 1,823.7 11.5 2,317.3 15.2 36.2 27.1
Petroleum Products 1,280.1 7.7 1,743.7 11.0 2,225.3 14.6 36.2 27.6
Others 58.9 0.4 79.9 0.5 92.0 0.6 35.7 15.1
Capital Goods 6,829.4 40.8 6,032.1 38.2 5,269.1 34.5 -11.7 -12.7
Transport 1,535.6 9.2 1,429.7 9.0 1,130.9 7.4 -6.9 -20.9
Agricultural 83.4 0.5 75.8 0.5 51.5 0.3 -9.1 -32.1
Industrial 5,210.4 31.2 4,526.7 28.6 4,086.7 26.8 -13.1 -9.7
Consumer Goods 5,264.3 31.5 4,898.3 31.0 4,707.0 30.9 -7.0 -3.9
Durables 1,567.3 9.4 1,707.8 10.8 1,351.7 8.9 9.0 -20.9
Non-durables 3,697.0 22.1 3,190.5 20.2 3,355.3 22.0 -13.7 5.2
Miscellaneous 247.8 1.5 302.3 1.9 294.2 1.9 22.0 -2.7
Total Imports 16,725.2 100.0 15,802.7 100.0 15,253.4 100.0 -5.5 -3.5
Source: Ethiopian Revenue and Customs
Authority and Ethiopian petroleum Enterprise

5.2.4 Direction of Trade

5.2.4.1 Export of Goods

The major export destinations for percent), Japan (8.0 percent), India (5.5
Ethiopian goods were Asia, Europe and percent), South Korea (4.1 percent),
Africa. Asia accounted for 39.8 percent Yemen (4.1 percent), Indonesia (3.4
of the total exports. China, mainland was percent) and Hong Kong (1.5 percent).
the largest market for Ethiopia’s export All these countries accounted for 83.1
with a 21.3 percent share in total export percent of Ethiopia’s total export to
earnings from Asia, followed by Saudi Asia.
Arabia (16.8 percent), United Arab
Emirates (9.8 percent), Israel (8.6
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Europe accounted for 28.7 percent of (38.5 percent), Djibouti (21.1 percent),
Ethiopia’s total export revenue, Sudan (17.4 percent), Kenya (7.0
Netherlands taking a 23.5 percent share, percent), Nigeria (2.4 percent), Egypt
followed by Germany (22.2 percent), (1.7 percent) and South Africa (1.4
Switzerland (12.4 percent), Belgium (8.9 percent) which altogether accounted for
percent), Italy (7.0 percent), Turkey (5.9 89.6 percent of the total exports to
percent), United Kingdom (5.5 percent), Africa.
France (3.9 percent) and Russia (2.2
percent). These countries together had a America accounted for 9.9 percent of
91.6 percent share of Ethiopia’s total Ethiopia’s total export earning, of which
exports to Europe. 90.1 percent was from exports to the
United States and 6.2 percent to Canada.
On the other hand, about 20.9 percent of
Ethiopia’s export earnings originated
from markets in Africa, mainly Somalia

Fig.V.6 Export by Destination

0.8%

20.9%
Africa
39.8% Europe
America
Asia
Oceania
28.7%

9.9%

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Source: NBE Staff Compilation

5.2.4.2 Import of Goods

During 2017/18, Asia accounted for 64.2 (3.0 percent), these countries jointly
percent of the total imports of Ethiopia. The accounted for 83.3 percent of Ethiopia’s total
major imports from Asia originated from imports from Europe.
China (39.3 percent), Kuwait (12.6 percent), Imports from America accounted for 9.4
India (10.1 percent), U.A.E (5.4 percent), percent of the total import bill, of which the
Japan (5.3 percent), Saudi-Arabia (3.6 share of United States was 83.7 percent
percent), Malaysia (3.3 percent), South Korea followed by Brazil and Canada by 9.8 percent
(2.4 percent), Indonesia (2.3 percent) and and 5.1 percent, respectively.
Thailand (1.8 percent) whose combined share
was 86.3 percent. Africa accounted for about 7.0 percent of
Imports from Europe accounted for 19.3 Ethiopia’s total merchandise import. The
percent of Ethiopia’s total imports with the major countries of origin were Egypt (27.6
major countries, namely Turkey (20.1 percent), Morocco (27.1 percent), South
percent), Italy (17.5 percent), Germany (9.4 Africa (27.0 percent), Sudan (8.8 percent)
percent), United Kingdom (7.9 percent), Nigeria (3.6 percent) and Kenya (3.2 percent),
Netherlands (7.8 percent), France (6.2 which altogether constituted 97.2 percent of
percent), Ukraine (4.3 percent), Belgium (3.9 the total imports from the continent.
percent), Russia (3.1 percent) and Rumania

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Fig: V.7. Import by Origin

0.09% 7.0 %
Africa
9.4%
Asia
Europe
19.3%
America
Oceania
64.2%

Source: NBE Staff Compilation

5.3 Services and Transfers

5.3.1 Services
In 2017/18, net services account recorded year, higher surplus in transport services
USD 140.2 million deficit, which was (35.2 percent), coupled with
narrower than the USD 557.6 million improvements in the deficits of other
deficit recorded a year ago. services and investment income.
This was largely due to the surplus in net
travel against the deficit recorded last

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Table 5.7 Services Accounts (In Millions of USD)

2015/16 2016/17 2017/18

Particulars A B C D=B/A E=C/B
1 Investment Income (2+5) -376.1 -496.3 -377.3 31.9 -24.0
2 Interest, net (3-4) -364.0 -447.4 -377.2 22.9 -15.7
3 Credit 13.1 18.5 40.3 41.1 117.4
4 Debit 377.2 465.9 417.5 23.5 -10.4
5 Dividend, net -12.1 -48.9 -0.1 303.7 -99.9
6 NON-FACTOR SERVICES, net (7-8) -245.3 -61.3 237.1 -75.0 -486.5

7 Exports of non-factor services 3,196.4 3,331.1 4,219.5 4.2 26.7

Travel 376.8 340.4 749.0 -9.7 120.0

Transport 1 2,228.6 2,304.0 2919.6 3.4 26.7

Gov't 2 418.2 460.3 295.3 10.1 -35.9
Other 3 172.8 226.4 255.6 31.0 12.9

8 Imports of non-factor services 3,441.8 3,392.5 3,982.5 -1.4 17.4

Travel 442.5 382.9 475.3 -13.5 24.1
Transport 1 1697.5 1921.7 2402.8 13.2 25.0
2
Gov't 58.1 75.5 79.2 29.9 4.9
3
Other 1243.6 1012.4 1025.3 -18.6 1.3
9 Net Services (10+11+12+13+14) -621.5 -557.6 -140.2 -10.3 -74.9
10 Travel -65.7 -42.5 273.7 -35.4 -744.7
11 Transport 531.1 382.3 516.9 -28.0 35.2
12 Gov't 360.1 384.8 216.1 6.9 -43.8
13 Other -1070.8 -786.0 -769.6 -26.6 -2.1
14 Investment Income -376.1 -496.3 -377.3 31.9 -24.0
Source: MoFEC, Transport and Telecommunication Companies, NBE- FEMEMD and Staff Compilation.
1/ Includes Ethiopian Airlines receipts and payments
2/ Includes transactions with Embassies and international organizations such as UN-ECA, AU, EU, IMF and WB
3/ Includes communication, construction, insurance, financial, information, other business

5.3.2 Unrequited Transfers

During 2017/18, net transfers showed
5.6 percent annual increment wholly
driven by 10.7 percent increase in net
private transfers. However, net official
transfers dropped by 14.1 percent during
the same year.

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Table 5.8 Unrequited Transfers

(In Millions of USD)

Percentage
2015/16 2016/17 2017/18 Change
%
S/N Particulars A % share B % share C share B/A C/B

1 Private Transfers 6,428.6 82.2 5,485.3 79.3 6,074.8 83.2 -14.7 10.7

1.1 Receipts 6,459.6 82.0 5,544.8 79.1 6,150.9 83.1 -14.2 10.9

NGO's 2,039.2 25.9 1,117.2 15.9 1,029.5 13.9 -45.2 -7.9

Cash 1,207.7 15.3 922.4 13.2 775.5 10.5 -23.6 -15.9

Food 831.5 10.6 194.8 2.8 254.0 3.4 -76.6 30.4

Other

Private individuals 4,420.3 56.1 4,427.5 63.1 5,121.4 69.2 0.2 15.7

1.2 Payments 31.0 56.5 59.5 60.9 76.2 76.2 91.6 28.1

2 Official Transfers 1,391.1 17.8 1,428.3 20.7 1,226.3 16.8 2.7 -14.1

2.1 Receipts 1,415.0 18.0 1,466.5 20.9 1,250.1 16.9 3.6 -14.8

Cash 1,159.4 14.7 920.0 13.1 1,160.0 15.7 -20.6 26.1

Food

Other 255.6 546.5 90.1 113.8 -83.5

2.2 Payments 23.9 43.5 38.1 39.1 23.8 23.8 59.4 -37.6

Total Receipts 7,874.6 100.0 7,011.2 100.0 7,401.1 100.0 -11.0 5.6

Total Payments 55.0 100.0 97.6 100.0 100.0 100.0 77.6 2.4

3 Net Transfers 7,819.6 100.0 6,913.6 100.0 7,301.1 100.0 -11.6 5.6
Source: National Disaster Risk Management
Commission, MoFEC and NBE

5.4. Current Account

The deficit in current account balance year, due to the improvement in trade
including official transfers narrowed to balance, in net services deficit and strong
USD 5.3 billion from USD 6.5 billion last increment in net private transfers.

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5.5 Capital Account

The capital account registered USD 6.4 capital from surplus to deficit. However,
billion surplus which is 7.2 percent lower official long term net capital and other
than that of last year, owing to the public long term capital surged by 15.1 and
reduction in private sector long term capital 39.1 percent, respectively.
(50.1 percent) and foreign direct investment
(10.7 percent) together with short term

5.6 Changes in Reserve Position

Net foreign assets of the banking system USD 17.3 million increase in net foreign
recorded a reserve decline of USD 201.6 asset of National Bank of Ethiopia. Thus,
million, due to USD 218.9 million draw the gross international reserves sufficiently
down in net foreign assets of the covered 2.1 months of imports of goods
commercial banks. This was more than the and non-factor services.

5.7 External Debt

Ethiopia’s external debt stock reached reached USD 7.3 billion, showing a 13.7
USD 26.4 billion in 2017/18, depicting percent annual increase and constituted
11.3 percent annual growth largely due to 27.7 percent of the total debt stock. Of the
higher debt owed to multilateral and total debt stock, 39.7 percent was owed to
commercial creditors. As a result, the multilateral and 32.6 percent to bilateral
country’s external debt stock to GDP ratio creditors. The country’s external debt
stood at 28.9 percent. Its ratio to total burden as measured by debt services to
receipts from export of goods and non- export of goods and non-factor services
factor services slightly decline to 3.7 from ratio marginally declined to 18.4 percent
3.8 a year ago. Commercial debt stock from 20.6 percent a year earlier.

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Table 5.9: External Public Debt* (In Millions of USD)

Percentage
2015/16 2016/17 2017/18 Change

Particulars A B C D=B/A E=C/B

Annual Debt 3,523.7 2,946.4 3,483.4 -16.4 18.2

Debt Stock 21,665.2 23,740.9 26,428.0 9.6 11.3

Multilateral 7,719.2 9,104.9 10,490.1 18.0 15.2

Bilateral 7,473.1 8,207.5 8,626.6 9.8 5.1

Commercial 6,472.9 6,428.5 7,311.3 -0.7 13.7

Debt Service 1,134.0 1,288.1 1,301.4 13.6 1.0

Principal repayments 775.5 854.6 914.8 10.2 7.0

Interest Payments 358.5 433.5 386.5 20.9 -10.8

Debt Stock to GDP Ratio (in %)1 29.7 29.5 28.9 -0.7 -2.0
Debt stock to export of goods and non-
factor services 3.6 3.8 3.7 6.5 -1.6

Receipt from Goods & Non-factor Services 6,064.2 6,238.6 7,059.4 2.9 13.2

Debt service ratio (In percent )2 18.7 20.6 18.4 10.4 -10.7

Arears
Principal
Interest
Relief
Principal
Interest
Source: MoFEC and NBE
1/ GDP is a forecast
2/ Ratio of debt service to receipts from export of goods and non-factor services
*2015/16 and 2016/17 data are revised according to MoFEC statistics 2017/18 data are Preliminary

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5.8. Developments in Foreign Exchange Markets

5.8.1. Developments in Nominal Exchange Rate

During 2017/18, the weighted average

exchange rate of Birr in the inter-bank
foreign exchange market depreciated by
16.5 percent on annual bases and reached
Birr 26.1082/USD (Table 5.10).

Table 5.10 Inter-Bank Exchange Rates of Birr per USD

Amount Traded in millions of
USD Number of Trades
Average
Weighted o/w Among o/w Among
Period Rate Total CBs Total CBs
2015/16 21.1059 12.65 0.0 253.0 0.0
Qtr. I 20.6965 3.15 0.00 63.00 0.00
Qtr. II 20.9497 3.25 0.00 65.00 0.00
Qtr. III 21.2059 3.10 0.00 62.00 0.00
Qtr. IV 21.5713 3.15 0.00 63.00 0.00
2016/17 22.4137 12.55 0.0 251.0 0.0
Qtr. I 21.9262 3.10 0.0 62.0 0.0
Qtr. II 22.2228 3.25 0.0 65.0 0.0
Qtr. III 22.5832 3.15 0.0 63.0 0.0
Qtr. IV 22.9225 3.05 0.0 61.0 0.0
2017/18 26.1082 12.50 0.00 250.0 0.0
Qtr. I 23.2488 3.10 0.00 62.00 0.00
Qtr. II 26.7099 3.20 0.00 64.00 0.00
Qtr. III 27.2250 3.15 0.00 63.00 0.00
Qtr. IV 27.2493 3.05 0.00 61.00 0.00
Source: NBE, Foreign Exchange Monitoring & Reserve Management Directorate and staff compilation

In the retail foreign exchange market, the 16.7 percent and 16.6 percent,
average buying and selling rates of the respectively, with spread margin of 1.91
Birr at forex bureaus both depreciated by percent.

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Table 5.11: End Period Mid-Market Rates (USD per Unit of Foreign Currency)

2015/16 2016/17 2017/18 Percentage Change

Currency A B C B/A C/B
Pound Sterling 1.3433 1.2965 1.4065 -3.48 8.48
Swedish Kroner 0.1175 0.1173 0.1196 -0.17 1.97
Djibouti Franc 0.0056 0.0056 0.0056 0.00 0.19
Swiss Franc 1.0198 1.0429 1.0457 2.27 0.27
Saudi Riyal 0.2666 0.2666 0.2667 0.00 0.02
UAE Dirhams 0.2723 0.2722 0.2722 -0.04 0.01
Canadian Dollar 0.7696 0.8106 0.7744 5.33 -4.47
Japanese Yen 0.0097 0.0089 0.0094 -8.25 5.52
Euro 1.1083 1.1405 1.2313 2.91 7.96
SDR 1.3954 1.3876 1.4576 -0.56 5.04
Source: Staff Compilation

In 2017/18, the end period mid-market Franc (0.3 percent), Djibouti Franc (0.2
exchange rate of the US dollar percent), Saudi Riyal (0.02 percent) and
depreciated against Pound Sterling (8.5 UAE Dirham’s (0.01 percent), whereas it
percent), Euro (8.0 percent), Japanese appreciated against Canadian Dollar (4.5
Yen (5.5 percent), SDR (5.0 percent), percent). (Table 5.11)
Swedish Kroner (2.0 percent), Swiss

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Table 5.12: End Period Mid-Market Rates (Birr per Unit of Foreign Currency)

2015/16 2016/17 2017/18 Percentage Change

Currency A B C B/A C/B
USD 21.9094 23.2237 27.3761 6.00 17.88
Pound 29.4309 30.1095 38.5045 2.31 27.88
Swedish Kroner 2.5751 2.7248 3.2746 5.81 20.18
Djibouti Franc 0.1229 0.1303 0.1536 6.02 17.88
Swiss Franc 22.3429 24.2191 28.6271 8.40 18.20
Saudi Riyal 5.8416 6.1923 7.2999 6.00 17.89
UAE Dirhams 5.9650 6.3222 7.4525 5.99 17.88
Canadian Dollar 16.8612 18.8260 21.1988 11.65 12.60
Japanese Yen 0.2135 0.2061 0.2571 -3.47 24.75
Euro 24.2822 26.4866 33.7082 9.08 27.27
SDR 21.9094 32.2251 39.9034 47.08 23.83
Source: Staff Compilation

The Birr also depreciated vis-à-vis most addition, the Birr depreciated by 17.9
international currencies, particularly, percent against USD, Djibouti Franc,
Pound Sterling (27.9 percent), Euro (27.3 Saudi Riyal and UAE Dirham. (Table 5.
percent), Japanese Yen (24.8 percent), 12)
SDR (23.8 percent), Swedish Kroner
(20.2 percent), Swiss Franc (18.2 percent)
and Canadian Dollar (12.6 percent). In

5.8.2. Movements in Real Effective Exchange Rate

The real effective exchange rate (REER) percent due to the devaluation measure
of the Birr has been appreciating since taken in October 2017. (Table 5.13)
2010/11 as a result of higher domestic
Similarly, the nominal effective exchange
inflation relative to that of the country’s
rate (NEER) of the Birr has been
major trading partners. During 2017/18,
depreciated by 10.9 percent on annual
the REER however, depreciated by 5.9
basis.

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Table 5.13: Trends in Real and Nominal Effective Exchange Rates

Percentage Change
Fiscal Year REERI NEERI REERI NEERI
2010/11 122.8 42.9 1.33 -23.5
2011/12 139.4 43.2 13.49 0.7
2012/13 140.2 42 0.59 -2.7
2013/14 140.8 40.7 0.44 -3.3
2014/15 157.6 42.3 11.93 4
2015/16 159.3 41.2 1.1 -2.7
2016/17 171.9 41.8 7.9 1.6
2017/18 161.8 37.2 -5.9 -10.9
Source:NBE Staff Compilation

An increase in REERI and NEERI indicates appreciation and vice versa.

Where: REERI = Real Effective Exchange Rate Index
NEERI = Nominal Effective Exchange Rate Index

5.8.3. Foreign Exchange Transactions

During 2017/18, USD 12.5 million was Meanwhile, forex bureaus of commercial
traded in the inter-bank foreign exchange banks purchased foreign exchange to the
market which was 0.4 percent lower than tune of USD 320.0 million showing a 0.6
last year. All the foreign exchange traded percent marginal increase over the
in the inter-bank market was supplied by preceding year. Their foreign exchange
National Bank of Ethiopia (Table 5.10). sales rose by 40.2 percent to USD 270.2
million (Table 5.14).

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Table 5.14: Foreign Exchange Transactions by Forex Bureaus of Commercial Banks

(In Millions of USD)

2015/16 2016/17 2017/18 Percentage Change

A B C D E F E/C F/D

Name of Forex Bureau Purchases Sales Purchases Sales Purchases Sales Purchases Sales
Commercial Bank of Ethiopia 262.02 93.50 242.05 84.48 239.76 151.52 -0.95 79.36
Bank of Abyssinia 5.06 9.64 6.32 11.32 2.89 14.69 -54.24 29.75
Dashen Bank 16.87 30.34 12.97 20.59 14.12 20.77 8.88 0.89
Awash International Bank 6.28 10.71 4.85 16.70 5.44 16.31 12.16 -2.34
Construction & Business Bank 3.09 1.72 0.00 0.00 0.00 0.00
Wegagen Bank 3.77 5.99 4.16 5.61 11.44 8.30 175.11 47.98
United Bank 9.96 14.50 6.03 13.10 10.00 16.15 65.76 23.27
Development Bank 0.03 0.37 0.00 0.28 0.00 0.33 17.34
Nib International Bank 1.40 5.27 1.35 7.60 2.29 4.83 69.43 -36.46
Lion International Bank 19.04 4.77 25.59 5.61 8.32 3.73 -67.50 -33.58
Oromia International Bank 9.01 5.09 3.46 5.02 6.50 7.40 87.92 47.47
Zemen Bank 0.65 6.19 0.72 11.74 0.37 8.41 -48.85 -28.34
Cooperative Bank of Oromia 0.67 1.67 0.75 2.17 0.95 5.19 26.57 139.16
Buna International Bank 0.54 1.17 4.25 2.39 8.99 3.09 111.58 29.29
Birhan International Bank 0.14 0.47 0.68 2.38 0.98 4.34 43.44 82.25
Abay Bank 0.07 1.00 1.38 1.34 1.82 1.30 32.18 -2.99
Addis International Bank 0.78 1.55 3.20 1.55 4.37 1.90 36.63 22.62
Debub Global Bank 0.16 0.36 0.07 0.29 0.17 0.24 141.39 -18.60
Enat Bank 0.32 0.25 0.25 0.52 1.62 1.70 547.96 226.77

Total 339.86 194.57 318.09 192.67 320.0 270.2 0.6 40.2

Average Exchange Rate 21.091 21.5044 22.41 22.85 26.1 26.6 16.7 16.6
Source: Staff Compilation

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VI.GENERAL GOVERNMENT FINANCE

6.1. General
During 2017/18 F.Y, the overall fiscal decreased to 12.2 percent when
operation of the general government compared with 14.2 percent of last year
resulted in a deficit of Birr 66.6 billion. (Table 6.1).
It was greater than Birr 60.1 billion Meanwhile, General government
(including grants) recorded in last year expenditure reached Birr 354.2 billion
(Table 6.4). and went up by 7.6 percent compared to
Total revenue (including grants) was a year ago due to rose in current
Birr 287.5 billion and depicted a 6.9 expenditure (Table 6.3). Hence, the ratio
percent annual growth. Its performance of expenditure to GDP reached 16.1
was 85 percent of the annual plan (Table percent compared with 18.2 percent a
6.2). However, revenue to GDP ratio year earlier (Table 6.1).

Table 6.1 Measuring Fiscal Sustainability(In Percent)

Fiscal
Year PD/GDP IP/RR Debt/GDP R(Debt) R(GDP) Exp/GDP Rev/GDP R(OR)
2004/05 -4.5 6.5 38.2 29.4 22.9 23.5 14.7 11.1
2005/06 -4.7 5.4 37.8 22.3 23.6 22.5 15.0 26.3
2006/07 -3.7 5.5 36.3 25.5 30.6 20.9 12.8 11.6
2007/08 -2.9 3.8 32.5 29.3 44.4 19.1 12.1 36.7
2008/09 -0.9 3.2 26.9 11.5 35.1 17.4 12.1 34.8
2009/10 -1.3 2.9 27.5 17.1 14.2 18.8 14.2 34.1
2010/11 -1.6 2.8 26.8 29.8 33.4 18.6 13.7 28.3
2011/12 -1.2 2.2 25.6 39.5 46.1 16.8 13.9 48.8
2012/13 -2.0 2.4 27.4 23.4 15.5 18.1 14.6 20.6
2013/14 -2.6 2.6 28.6 28.4 21.1 17.5 13.8 17.8
2014/15 -2.5 2.9 31.8 31.1 16.6 18.6 15.1 27.7
2015/16 -1.9 3.1 32.1 24.6 23.6 17.9 15.1 23.6
2016/17 -3.3 3.2 34.9 28.7 18.2 18.2 14.2 11.3
2017/18 3.0 4.3 35.6 24.3 21.9 16.1 12.2 5.1
Source: Staff Computation
PD = Primary Deficit
IP/RR = Share of interest payments in Recurrent revenue
Debt/GDP = Ratio of Domestic Debt to GDP
R(Debt) = Growth rate of Domestic Debt
R(GDP) = Growth rate of GDP at current market price
Exp/GDP = Ratio of General Government Expenditure to GDP
Rev/GDP = Ratio of General Government Revenue to GDP
R(OR) = Growth rate of ordinary Revenue

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6.2. Revenue and Grants

In the review year, Birr 287.5 billion 41.5 percent of total tax revenue while
total revenue and grants collected. It was indirect tax was 58.5 percent.
85 percent of annual budget. Its GDP
ratio was 13.1 percent relative to 14.9 Non-tax revenue during the review
percent in 2016/17. period was Birr 34.4 billion and showed
a down ward movement by a 26 percent
About 87.2 percent of the total revenue over last year same period due to decline
was generated through taxes which in reimbursement & property sales,
surged by 11.9 percent and was Birr government investment and others
235.2 billion. The rose was due to (Table 6.2).
improved income from direct and
Grants were Birr 17.9 billion and 43.6
indirect taxes by 19.9 and 6.9 percent
percent higher than a year earlier.
respectively. Direct taxes contributed

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Fig. VI.1 Trend of General Government Revenue by Component

300000

250000

200000

150000
In million Birr

100000

50000

Fiscal Year

Total Revenue and Grants Tax Revenue Direct tax revenue

Indirect tax revenue Non-tax revenue Grants

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Table 6. 2: Summary of General Government Revenue by Component (In Millions of Birr)

Percentage
2016/17 2017/18 Change Performance
[A] [B] [C] Rate
Revised
Particulars Pre. Act Revenue Plan Pre. Act [C/A] [C/B]

Total Revenue and Grants 269,105.9 338,280.0 287,562.1 6.9 85.0

Total Revenue 1/ 256,629.0 321,103.3 269,648.2 5.1 84.0
Tax Revenue 210,135.9 266,609.4 235,229.5 11.9 88.2
1. Direct Tax Revenue 81,410.4 101,768.6 97,646.0 19.9 95.9

1.1 Income and Profit Taxes 78,321.7 98,632.1 94,837.3 21.1 96.2
Personal 26,577.5 30,896.0 34,810.6 31.0 112.7
Business 42,260.2 52,146.7 44,732.7 5.9 85.8
Others 2/ 9,484.0 15,589.3 15,294.1 61.3 98.1
1.2 Rural Land Use Fee 410.9 486.1 376.3 (8.4) 77.4
1.3 Urban Land Use Fee 2,677.8 2,650.4 2,432.4 (9.2) 91.8
2. Indirect Taxes 128,725.4 164,840.7 137,583.5 6.9 83.5
2.1 Domestic Taxes 62,523.1 78,503.1 67,172.4 7.4 85.6
2.2 Foreign Trade Taxes 66,202.4 86,337.7 70,411.0 6.4 81.6
Import 66,202.4 86,337.7 70,411.0 6.4 81.6
3. Non-Tax Revenue 46,493.2 54,493.9 34,418.7 (26.0) 63.2
3.1 Charges and Fees 3,567.8 2,697.3 4,182.5 17.2 155.1
3.2 Govt. Invt. Income 3/ 14,746.0 17,210.9 12,222.8 (17.1) 71.0
3.3 Reimb. And Property
Sales 145.9 9,986.6 121.2 (16.9) 1.2
3.4 Sales of Goods &
Services 4,956.9 5,679.5 5,282.4 6.6 93.0
3.5 Others 4/ 23,076.6 18,919.7 12,609.8 (45.4) 66.6
4. Grants 12,476.9 17,176.7 17,913.9 43.6 104.3
Source: Ministry of Finance and Economy
1/ It does not include privatization proceeds
2/ others include rental income tax, withholding income tax on imports, interest income tax, capital gains tax,
agricultural income and other income
3/ Government investment income includes: residual surplus, capital charge, interest payments and state
dividend.
4/other extraordinary, miscellaneous and pension contribution

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6.3. Expenditure
Total general government expenditure
reached Birr 354.2 billion and was 7.6
percent higher than a year ago as a result
of rose in current expenditure by 19.1
percent (Table 6.3).

Current expenditure stood at Birr 210.5

billion and Its share in total expenditure
became 59.4 percent.
Capital expenditure was Birr 143.7
billion and depicted 5.8 percent annual
decrease and its share in total
expenditure was 40.6 percent.
In summary, the performance of general
government expenditure was 85.1
percent of the annual budget.

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Table 6.3: Summary of General Government Expenditure (In Millions of Birr)

Percentage
2016/17 2017/18 Change Performance
[A] [B] [C] Rate
Revised
Particulars Pre. Act Expenditure Plan Pre. Act [C/A] [C/B]
Total Expenditure 329,286.8 416,120.8 354,205.3 7.6 85.1
1. Current Expenditure 176,703.0 227,108.0 210,470.2 19.1 92.7
General Services 53,697.4 54,203.3 62,715.7 16.8 115.7
Economic Services 23,536.3 30,787.4 26,503.3 12.6 86.1
Social Services 86,659.4 92,624.3 9,7845.8 12.9 105.6
Interest and Charges 8,248.1 12,051.4 11,570.7 40.3 96.0
Others (miscellaneous) 4,561.9 37,441.5 11,834.9 159.4 31.6
2. Capital Expenditure 152,583.8 189,012.8 143,735.1 (5.8) 76.0
Economic Development 98,781.3 119,557.6 89,717.1 (9.2) 75.0
Social Development 39,869.0 45,711.1 37,477.1 (6.0) 82.0
General Development 13,933.6 23,744.1 16,540.9 18.7 69.7
3. Special programs
Source: Ministry of Finance and Economy
Note: 1/ Includes mapping, science and technology, public buildings, etc

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Fig. VI.2: Trends in General Government Expenditure by Component

350000

300000

250000

200000

150000

100000

50000

0
2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Total Expenditure Current Expenditure Capital Expenditure

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Fig.VI.3 Trends in General Government Expenditure and Revenue (% of GDP)

30.0

25.0

20.0
In Percent of GDP

15.0

Expenditure/GDP
10.0 Revenue/GDP

5.0

0.0
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
Fiscal Year

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6.4 Deficit Financing

General government budgetary operation
including grants resulted in a fiscal
deficit of Birr 66.6 billion during
2017/18.
It was 10.7 percent higher than a year
earlier.
Primary deficit as percentage of GDP
was 3.0 percent and was financed by net
external borrowing, net domestic
borrowing, privatization receipts and
others & residuals while there was
repayment to the banking System.

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Table 6.4 Summary of General Government Finance (In Millions of Birr)

Percenta
ge
2016/17 2017/18 Change Performance
[A] [B] [C] Rate
Revised
Particulars Pre. Act Budget Pre. Act [C/A] [C/B]
Revenue and Grants 269,105.9 338,280.0 287,562.1 6.9 85.0

Revenue 256,629.0 321,103.3 269648.2 5.1 84.0

Grants 12,476.9 17,176.7 17913.9 43.6 104.3
Total Expenditure 329,286.8 416,120.8 354,205.3 7.6 85.1
Current Expenditure 176,703.0 227,108.0 210470.2 19.1 92.7
Capital Expenditure 152,583.8 189,012.8 143735.1 (5.8) 76.0
Overall Surplus/ Deficit
(Including Grants) (60,180.9) (77,840.8) (66,643.2) 10.7 85.6
(Excluding Grants) (72,657.8) (95,017.5) (84,557.1) 16.4 89.0
Total Financing 60,180.9 77,841.0 66,643.2 10.7 85.6
Net External Borrowings 28,952.5 24,557.2 28134.7 (2.8) 114.6
Gross Borrowing 31,621.5 28,878.5 32449.7 2.6 112.4
o/w Special Programs
Amortization Paid 2,668.9 4,321.4 4315.1 61.7 99.9
HIPC Relief
Net Domestic Borrowings 34,629.5 53,283.8 14871.2 (57.1) 27.9
Banking System 18,651.6 (23423.8) (225.6)
Non-Banking Systems 15,977.9 38295.0 139.7
Privatization Receipts 10,883.3 9349.1 (14.1)
Others and Residuals 14,284.4) 14288.3 (200.0)
Source: Ministry of Finance and Economy

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VII. Investment
During 2017/18 fiscal year, 1,550 projects The average capital per project for domestic
become operational under Ethiopian investors was Birr 13.8 million and that of
Investment Commission and regional foreign investors Birr 95.9 million,
investment offices; which were 231.2 signifying that foreign investment projects
percent higher than a year earlier. All of were more of capital intensive than domestic
which were private and at operational stage. ones.
These projects command investment capital
Birr 25.9 billion; showing 190.8 percent It is estimated that these investment projects
annual growth. have created job opportunities for about
332,003 permanent and 36,214 casual
Of the total investment projects, 1,496 (96.5
workers; showing 1,502.9 and 270.5 percent
percent) were domestic with a capital of Birr
expansion respectively compared with the
20.7 billion (80 percent); and 54 projects
previous year (Table 7.1).
were foreign having Birr 5.2 billion capital.

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Table 7.1: Number of Projects, Capital and Jobs Created by Operational Investment
(Capital in millions of Birr)

2015/16 2016/17 2017/18 Percentage change

A B C Share C/A C/B

1. Total
Investment Number 852 468 1,550 100.0 81.9 231.2
Capital 6,708.6 8,896.9 25,876.3 100.0 285.7 190.8
Permanent
Workers 12,724 20,712 332,003 100.0 2,509.3 1,502.9
Temporary
Workers 12,710 9,775 36,214 100.0 184.9 270.5
1.1. Total
Private Number 852 467 1,550 100.0 81.9 231.9
Capital 6,708.6 3,896.9 25,876.3 100.0 285.7 564.0
Permanent
Workers 12,724 20,692 332,003 100.0 2,509.3 1,504.5
Temporary
Workers 12,710 9,775 36,214 100.0 184.9 270.5
1.1.1.
Domestic Number 772 424 1,496 96.5 93.8 252.8
Capital 5,463.7 3,295.0 20,698.2 80.0 278.8 528.2
Permanent
Workers 5,869 17,810 233,115 70.2 3,872.0 1,208.9
Temporary
Workers 8,993 9,051 14,044 38.8 56.2 55.2
1.1.2.
Foreign Number 80 43 54 3.5 (32.5) 25.6
Capital 1,244.9 602.0 5,178.1 20.0 316.0 760.2
Permanent
Workers 6,855 2,882 98,888 29.8 1,342.6 3,331.2
Temporary
Workers 3,717 724 22,170 61.2 496.4 2,962.2
1.2.Public
Number 1

Capital 5,000.0
Permanent
Workers 20
Temporary
Workers
Source: Ethiopian Investment Commission

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Fig.VII.1: Number of Operational Investment Projects by Type

1600

1400

1200
Number of projects

1000

800 Domestic
Foreign
600
Public
400

200

0
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Year

Source: Ethiopian Investment Commission.

Fig.VII.2: Capital of Operational Investment Projects by Type

25000

20000
Millions of Birr

15000
Domestic
10000
Foreign
Public
5000

0
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Year

Source: Ethiopian Investment Commission

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7.1 Investment by Sector

Of the total investment projects, about 37.3 As for investment capital, manufacturing
percent were in manufacturing, followed by constituted 56 percent followed by real
real estate, renting & business activities (32 estate, renting & business activities (27.8
percent), and construction (22.2 percent) and percent), construction (11.6 percent),
agriculture, hunting & forestry (2.7 percent). agriculture, hunting & forestry (1.2 percent)
The rest of the sectors attracted about 5.8 and the remaining sectors 3.3 percent (Table
percent of total investment projects. 7.2).

Fig.VII.3: Distribution of Operational Investment capital by Sector in 2017/18

Real estate,
Construction
renting and
12% Others
Business activities
3%
28%
Agriculture,
hunting and
forestry
1%

Manufacturing
56%

Source: Ethiopian Investment Commission.

Others*: hotel & restaurant, education, health & social work, tour operation, transport & communication, mining &
quarrying, others and other community, social and personal service activities.

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Table: 7.2: Numbers and Capital of Operational Investment Projects by Sector

(Capital in millions of Birr)

2015/16 2016/17 2017/18 Percentage share

No. of Investment No. of Investment No. of Investment No. of Investment

Sectors Projects Capital Projects Capital Projects Capital Projects Capital
Manufacturing 85 2,539.5 149 1,888.0 578 14,494.8 37.3 56.0
Agriculture, hunting
and forestry 35 66.0 14 119.6 42 322.8 2.7 1.2
Real estate, renting
and Business
activities 637 3,550.7 81 5,737.4 496 7,204.8 32.0 27.8
Hotel and
restaurants 3 10.8 2 9.5 5 57.8 0.3 0.2
Education 3 7.1 4 6.1 7 67.8 0.5 0.3
Health and social
work 3 13.7 15 276.4 1.0 1.1
Construction 75 506.7 199 1,081.9 344 3,002.1 22.2 11.6
Tour operation,
transport and
communication 5 10.7 3 14.7 5 11.4 0.3 0.0
Whole sale, retail
trade and repair
service 1 2.0 0.1 0.0
Mining and
quarrying 6 12.1 8 18.7 7 81.0 0.5 0.3
Electricity, gas,
steam and water
supply 1 100.0 0.1 0.4
Other community,
social and personal
service activities 2 0.9 4 5.2 46 245.8 3.0 0.9

Others 1 4.0 1 1.9 3 9.5 0.2 0.0

Grand Total 852 6,708.6 468 8,896.9 1550 25,876.2 100.0 100.0
Source: Ethiopian Investment Commission.

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7.2 Distribution by Region

Of the total 1,550 investment projects that 1 project with investment capital of Birr 2.5
went in to operation in 2017/18, about 1,362 million in SNNPR. There was no
projects (87.9 percent) with Birr 19.9 billion operational investment project in Oromia,
capital (76.7 percent) were located in Addis Somali, Gambella, Harari and Diredawa
Ababa, followed by 66 projects (4.3 percent) during 2017/18 fiscal year (Table 7.3).
with Birr 395.5 million capital were in While, there is 59 projects or 3.8 percent of
Tigray region. Similarly there were 46 total projects, with Birr 5.2 billion capital
projects (3 percent) with investment capital went to operation in multiregional projects
of Birr 380 million in Afar; 15 projects (1 in 2017/18 fiscal year.
percent) with Birr 39.7 million capitals in
Amhara, 1 project (0.1 percent) with Birr 2
million capitals in Benishangul-Gumuz and

Table 7.3: Number and Capital of Operational Projects by Region

(Capital in millions of Birr)

2015/16 2016/17 2017/18 Percentage share

No. of Investment No. of Investment No. of Investment No. of Investment
Regions projects Capital projects Capital projects Capital projects Capital
Tigray 49 207.3 21 65.9 66 395.3 4.3 1.5
Afar 15 97.5 46 380.0 3.0 1.5
Amhara 4 10.0 42 104.5 15 39.7 1.0 0.2
Oromia 304 1,398.4 19 335.6 0.0 0.0
Somali 0 0 0.0 0.0
Benishangu
l-Gumuz 0 0 1 2.0 0.1 0.0
SNNPR 1 13.8 10 83.5 1 2.5 0.1 0.0
Gambella 0 0 0.0 0.0
Harari 3 27 0.0 0.0
Addis
Ababa 31 2,381.5 376 8,307.5 1,362 19,839.3 87.9 76.7
Dire Dawa 0 0 0.0 0.0
Multiregion
al Projects 0 0 59 5,217.5 3.8 20.2
Grand
Total 407 4,135.0 468 8,896.9 1,550 25,876.2 100.0 100.0
Source: Ethiopian Investment Commission.

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VIII. International Developments

8.1. International Economic Developments
with business investment expected to remain
8.1.1. Overview of the World Economy
weak in light of heightened uncertainty
about post-Brexit arrangements. The
Global growth strengthened and marked
medium-term growth forecast is also
improvements in 2017 to 3.7 percent, due to
broadly unchanged at 1.6 percent, due to the
recovery in investment in advanced
likely effect of higher barriers to trade and
economies and continued strong growth in
lower foreign direct investment following
emerging Asia and signs of recovery in
Brexit.
several commodity exporters. Economic
activity in both advanced economies and
In the euro area growth is projected to
emerging & developing economies is
slightly moderate to 2.2 percent in 2018
forecast to accelerate in 2018, to 2.4 percent
from 2.4 percent in 2017, before slowing
and 4.9 percent, respectively, with global
further to 1.9 percent in 2019. Medium-term
growth projected to be 3.9 percent.
growth in the euro area is projected at 1.4
percent, held back by low productivity amid
In the United States, growth is expected to
weak reform efforts and unfavorable
rise from 2.3 percent in 2017 to 2.9 percent
demographics.
in 2018, before moderating slightly to 2.7
percent in 2019.
Growth in emerging market and developing
In Japan, economic growth is projected to economies is expected to increase further—
moderate to 1.0 percent in 2018 (from a from 4.7 percent in 2017 to 4.9 percent in
strong above trend outturn of 1.7 percent in 2018 and 5.1 percent in 2019. Although the
2017 before slowing further to 0.9 percent in high growth rate reflects primarily continued
2019. strong economic performance in emerging
Asia, the projected pickup in growth reflects
improved prospects for commodity
Growth in the United Kingdom is projected
exporters after three years of very weak
to slow from 1.7 percent in 2017 to 1.4
economic activity. Beyond 2019, growth in
percent in 2018 and 1.5 percent in 2019,
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emerging market and developing economies confidence due to the change in the political
is projected to stabilize at about 5 percent leadership are expected to have positive
over the medium term. China’s growth is effects, growth prospects however, remain
projected to soften slightly from 6.9 percent weighed down by structural bottlenecks. In
in 2017 to 6.6 percent in 2018 and 6.4 Nigeria, the economy is projected to grow
percent in 2019. Over the medium term, the 2.1 percent in 2018 and 2.3 percent in 2019
economy is projected to continue (up from 0.8 percent in 2017), reflecting
rebalancing away from investment toward improved oil prices, revenue, and production
private consumption and from industry to and recently introduced foreign exchange
services. measures that contribute to better foreign
exchange availability.
Growth in the Middle East, North Africa,
Afghanistan, and Pakistan region is also
expected to pick up 3.5 percent in 2018 and
3.9 percent in 2019. Stronger oil prices are
expected to help recovery in domestic
demand in oil exporters, including Saudi
Arabia.

Growth in Sub-Saharan Africa is also

projected to rise gradually during 2018–19
to 3.4 percent and 3.8 percent, respectively,
as the challenging outlook in commodity
exporters gradually improve. Growth in
South Africa is expected to strengthen from
1.3 percent in 2017 to 1.5 percent in 2018
and 1.7 percent in 2019. Though the likely
effects of improvement in business

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Table 8.1: Overview of World Economic Outlook and Projection

(Annual Percentage Change)

Projection
Particulars 2016 2017 2018 2019
World Output 3.2 3.7 3.9 3.9
Advanced Economies 1.7 2.4 2.4 2.2
United States 1.5 2.3 2.9 2.7
Euro Area 1.8 2.4 2.2 1.9
Japan 1.0 1.7 1.0 0.9
United Kingdom 1.8 1.7 1.4 1.5
Emerging Market & Developing Economies 4.4 4.7 4.9 5.1
Middle East, North Africa, Afghanistan and Pakistan 5.0 2.2 3.5 3.9
Sub-Saharan Africa 1.5 2.8 3.4 3.8
Nigeria -1.6 0.8 2.1 2.3
South Africa 0.6 1.3 1.5 1.7
World Trade Volume (goods & services) * 2.3 4.9 5.1 4.7

Imports
Advanced Economies 2.7 4.0 5.1 4.5
Emerging Market and Developing Economies 1.8 6.4 6.0 5.6
Exports
Advanced Economies 2.0 4.2 4.5 3.9
Emerging Market and Developing Economies 2.6 6.4 5.1 5.3
Commodity Prices (U.S. dollars)
Oil -15.7 23.3 33.0 -1.8
Non- oil -1.5 6.8 6.0 0.5
Consumer Prices*
Advanced Economies 0.8 1.7 2.0 1.9
United States 1.3 2.1 2.5 2.4
Euro Area 0.2 1.5 1.5 1.6
United Kingdom 0.7 2.7 2.7 2.2
Japan -0.1 0.5 1.1 1.1
Emerging Market & Developing Economies 4.3 4.0 4.6 4.3
China 2.0 1.6 2.5 2.6
Mexico 2.8 6.0 4.4 3.1
Turkey 7.8 11.1 11.4 10.5
Brazil 8.7 3.4 3.5 4.2
Russia 7.1 3.7 2.8 3.7
Sub-Saharan Africa 11.3 11.0 9.5 8.9
Angola 32.4 31.7 27.9 17.0
Nigeria 15.7 16.5 14.0 14.8
Ghana 17.5 12.4 8.7 8.0
Source: IMF, World Economic Outlook, July, 2018
*IMF, World Economic Outlook, April, 2018

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8.1. 2 World Trade

Global volume of world trade growth of developing economies forecasted to grow by

goods and services in 2017 is estimated to 6.0 percent and 5.6 percent in 2018 and
have grown by 4.9 percent in volume terms. 2019, respectively. Likewise, export of
It is estimated to expand by 5.1 percent in goods and services from advanced
2018 and is projected to increase by 4.7 economies and emerging and developing
percent in 2019. Imports of goods and economies is forecasted to expand by 4.5
services by advanced economies rise by 5.1 percent and 5.1 percent in 2018,
percent in 2018 and by 4.5 percent in 2019. respectively.
Similarly, imports by emerging market and

8.1.3 Inflation and Commodity Prices

Global headline inflation is picking up as a In the United States, headline consumer

result of a strengthening global outlook, price inflation is expected to increase from
narrowing output gaps, supply effects 2.1 percent in 2017 to 2.5 percent in 2018
together with stronger demand. As wage before declining to 2.4 percent in 2019.
dynamics start reflecting tighter labor
markets, core inflation is also expected to In Euro area headline inflation is expected to

rise. In advanced economies, head line remain at about 1.5 percent in 2018 and it is

inflation rate is forecasted to be 2.0 percent expected to increase to 1.6 percent in 2019.

in 2018 and 1.9 percent in 2019, up from 1.7

In the United Kingdom, headline inflation in
percent in 2017. Headline inflation in
2018 is projected at 2.7 percent, same as in
emerging market and developing economies
2017, before declining to 2.2 percent in
is projected to rise to 4.6 percent in 2018
2019.
from 4.0 percent in 2017. In 2019, inflation
is expected to moderate to about 4.3 percent.
Headline inflation in Japan forecasted to be
1.1 percent in 2018 and 2019 from 0.5
percent in 2017. Higher energy and food
prices and strong domestic demand are the

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main causes for the rise in inflation rate in

Japan. Oil prices have continued to increase, due to
supply outages, the extension of the

In emerging market economies, inflation production agreement of OPEC members,

development is diverse. In China inflation is and stronger global economic growth.

expected to pick up to 2.5 percent in 2018

Metal prices increased by 8.3 percent
from 1.6 percent in 2017. Headline inflation
between August 2017 and February 2018.
rates in Brazil and Russia are expected to
The increase in price is attributed to the
continue to remain subdued in a range of 3
solid growth in global economy and a wider
percent to 4 percent in 2018 as output gaps
demand-supply gap for all base metals
gradually close, with growth continuing to
specially aluminum.
recover from the recession between 2015
and 2017. In Mexico, the inflation rate is The IMF agriculture price index, which
projected to decline to 4.4 percent in 2018 consists of food, beverages, and agricultural
from 6.0 percent in 2017 as the effects of raw materials prices, has increased by 4.1
fuel price liberalization fade. percent from August 2017 to February 2018.
The sub-indices of food and agricultural raw
Inflation is expected to moderate in 2018
materials rose by 4.1 and 6.0 percent,
and 2019 in Sub-Saharan Africa, but is
respectively. The beverages index declined
expected to remain double digits in key
by 3.6 percent as results of a substantial
large economies reflecting the pass-through
decline in the price of coffee (by 12.7
effects of currency depreciation and their
percent) while the gain in the index of raw
impact on inflation expectations in Angola,
agricultural materials was due to the
supply factors, and assumed monetary
increase in the price of cotton.
policy accommodation to support fiscal
policy (Nigeria).

8.1.4. Exchange Rate

Between August 2017 and March 2018, the becomes 4 percent stronger than its 2017
U.S. dollar weakened modestly in real average. The Japanese yen has remained
effective terms by about 1.5 percent. The broadly stable, while the British pond
euro has appreciated by 1 percent and appreciated by 5.5 percent. Among
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emerging market currencies, the Chinese depreciated by more than 10 percent on

renminbi appreciated by 3.5 percent in real account of the higher inflation.
effective terms. The South African rand
rebounded by 10 percent on reduced
political uncertainty and the Malaysian
ringgit by over 8 percent in line with
improved growth outlook and stronger
commodity prices. The Turkish lira

8.2 Implications of International Economic Developments on the Ethiopia Economy

Global growth strengthened and marked and stronger global economic growth. The
improvements in 2017 due to recovery in increase in oil price during 2017/18 has
investment in advanced economies and increased the country’s import bills during
continued strong growth in emerging Asia the period.
and signs of recovery in several commodity
exporters. Economic activity in both On the other hand, the beverages index
advanced economies and emerging & declined as results of a substantial decline in
developing economies is forecast to the price of coffee. The decrease in the
accelerate in 2018. price of coffee in the international market
reduced Ethiopia’s export earnings from
Oil prices have continued to increase, due to coffee which is the major export item of the
supply outages, the extension of the country.
production agreement of OPEC members,

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