Ethiopia's annual inflation has declined to 13.6% by the end of August, according to the National Bank of Ethiopia (NBE)
In a press release on Monday, assessment, the main reasons for the decline in inflation are the tight monetary policy implemented by the National Bank, the improvement in agricultural productivity and the administrative measures taken by the government to stabilize prices.
NBE also indicated that while food inflation showed a significant decrease the same month last year, non-food inflation increased slightly compared to the previous year and reached 15.1 percent. The recent foreign exchange rate pressure contributed to this to some extent.
The monthly inflation rate declined to 11 percent at the end of August 2017E.C ( Sep. 5, 2025) indicating that the impact of inflation on the economy is easing, the bank said.
NBE noted that domestic economic growth has continued to strengthen. The National Bank’s Composite |ndex of Economic Activities (CBA) indicators showed that economic growth is robust. This was supported by the increase in production and productivity in the agricultural sector, the growth in industrial production in line with foreign exchange gains, and the significant growth in export trade, especially coffee and gold exports. On the other hand, there was a slowdown in imports of semi-finished goods and consumer goods.
On monetary conditions, the bank said there was a rapid increase was observed in the indicators of financial flows. This was supported by the easing of credit growth limits and the growth in the fiscal and external sectors. Thus, at the end of August 2017, the broad money supply in the economy grew by 23.1 percent, base money by 70.7 percent, and domestic credit by 14 percent year-on-year. In addition, the total bank credit stock increased by 5.4 percent compared to June 2017. The main reason for the high growth in base money was the increase in the foreign exchange reserves of the National Bank in connection with the purchase of gold and the resulting increase in the flow of silver into banks. However, the existence of a credit growth limit policy has prevented the growth of broad money from being elastic.
NBE passed a decion that the National Bank Rate (NBR) should remain at its current level of 15 percent, and the National Bank’s standing deposit service (SDS) should be maintained at a level of 15 percent.
It has been decided that the interest rates on the Standing Lending Facility (SLF) and the Standing Reserve Facility (SRF) will remain unchanged, and that the reserve requirement ratio (RR) of banks will remain unchanged.
Second; While it is believed that the lifting of the limit on bank lending growth will help to reflect the monetary policy stance of the National Bank and improve the monetary policy framework, in order to maintain the current inflationary trend and maintain the soundness of the financial sector, it has been decided to temporarily raise the limit from 18 percent to 24 percent instead of completely lifting the limit on bank lending growth, which is expected to be lifted in September. The Monetary Policy Committee will review this issue in its next meetings and make a decision.
The Nationl Bank has also decided to continue using market-oriented monetary policy instruments, individually or in combination, as necessary to ensure that inflation remains at the desired level. These monetary policy instruments are the National Bank's interest rate, open market operations, foreign exchange interventions, and the reserve requirement ratio that banks maintain with the National Bank.
