Ethiopian Banking Sector and Central Bank Market Activity Report

Recent financial data reveals high demand from Ethiopian banks for government and central bank securities. In the September auction, bids reached 50.6 billion Birr for a 15.98 billion Birr offering, more than triple the supply. Separately, on September 3, five institutions bid 86.2 billion Birr for 40 billion Birr worth of two-week central bank papers at a 3.25 percent interest rate. In the interbank market, overnight and seven-day money has traded consistently at 13 percent since early September, with banks lending each other 51.1 billion Birr in the week leading to October 9. While some banks paid over 16 percent for overnight funds in late August, market conditions have since shifted. Regulatory requirements for sovereign securities and a lack of alternative short-term investments remain the primary drivers for why banks continue to accept these returns.