Ethiopia's Monetary Policy and Banking Sector Challenges

The Ethiopian government's reliance on cheap financing is impacting savers through negative real returns on their deposits. Previously, banks competed for large deposits through aggressive interest rate offerings; however, this practice was banned by a circular issued in September by Governor Eyob Tekalegn (PhD). The banking sector is currently adjusting to these regulatory changes, particularly regarding the removal of minimum deposit-rate controls. Ultimately, this monetary policy framework imposes significant financial burdens on importers who bear the final costs of these economic shifts.