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National Bank of Ethiopia

I. OVERALL ECONOMIC PERFORMANCE


Economic Growth

The Ethiopian economy continued to USD 389 in the preceding year,


grow in 2011/12. Real GDP registered registering a 31.0 percent increase.
a relatively robust growth of 8.8
percent compared to the 5.5 percent The resilience of the Ethiopian
estimate for Sub-Saharan Africa in the economy is projected to continue with
same period. The growth was ascribed 11.3 percent growth expected in
mainly to higher growth in service 2012/13. The Sub-Saharan Africa and
sector (10.6 percent), agriculture (4.9 world economy growths are
percent) and industry (17.1 percent). anticipated to be 5.7 and 4.1 percent
However, the real GDP averaged 10 respectively in the same period.
percent during 2010/11-2011/12.
Moreover, the economy expanded
rapidly mirroring the performance of
the economy, the growth of nominal
GDP per capita rose to USD 510 from

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National Bank of Ethiopia

Table 1.1: Sectoral Contributions to GDP and GDP Growth


(In Billions of Birr)
years
Items 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12
Agriculture 130.5 144.8 158.5 170.3 181.2 195.0 212.5 222.9
Sector Industry 26.6 29.3 32.1 35.4 38.8 43.0 49.8 58.3
Services 94.4 106.9 123.3 143.1 163.2 184.7 207.2 229.1
Total 249.2 278.5 311.3 346.7 381.7 421.8 469.4 510.3
Less FISIM 1.2 1.6 1.8 2.4 2.7 2.9 3.2 2.9
Real GDP 248.4 277.0 309.7 344.3 378.9 418.9 466.2 507.4
Growth in Real GDP 12.7 11.5 11.8 11.2 10.0 10.6 11.3 8.8
Real GDP per capita 3.6 4.0 4.3 4.6 4.9 5.3 5.8 6.1
Mid-year population(in
million) 68.3 70.0 72.4 74.9 76.8 78.8 80.7 82.7
Agriculture 47.4 47.1 46.1 44.6 43.2 46.2 45.3 43.7
Share in GDP (in %) Industry 13.6 13.4 13.2 13.0 13.0 10.2 10.6 11.5
Services 39.7 40.4 41.7 43.5 45.1 43.8 44.1 44.9
Growth in Real GDP per capita 9.7 8.8 8.1 7.5 7.3 7.8 8.7 6.2
Absolute
Growth 13.5 11.0 9.5 7.4 6.4 7.6 9.0 4.9
Contribution
Agriculture to GDP
growth 6.4 5.2 4.4 3.3 2.8 3.5 4.1 2.1
Contribution
in % 50.5 44.8 36.9 29.7 27.5 33.4 36.0 24.2
Absolute
Growth 9.5 10.2 9.6 10.3 9.6 10.8 15.8 17.1
Contribution
Industry to GDP
growth 1.3 1.4 1.3 1.3 1.2 1.1 1.7 2.0
Contribution
in % 10.2 11.8 10.7 12.0 12.4 10.5 14.9 22.2
Absolute
Growth 12.8 13.2 15.3 16.1 14.0 13.2 12.2 10.6
Contribution
Services to GDP
growth 5.1 5.3 6.4 7.0 6.3 5.8 5.4 4.7
Contribution
in % 40.1 46.5 54.2 62.5 63.0 54.6 47.6 53.7
Source: Ministry of Finance and Economic Development (MoFED)

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National Bank of Ethiopia

GDP By Sector
In terms of sector development, production which went down from 10
agriculture grew just by 4.9 percent in to 5 percent. Crop production
2011/12 compared to 9 percent growth constituted the largest share in GDP,
recorded in the previous year mainly about 30 percent.
due to lower increase in crop

Fig. I.1: GDP Growth by Major Sectors

Source: Central Statistical Agency


(CSA)

The growth in agricultural output was marginally by 7.4 percent to 218.6


largely attributed to productivity million quintals. As a result,
improvement aided by favorable productivity improved slightly to 18.1
weather condition as well as conducive quintal in 2011/12 compared to 17.2
economic policies. While total quintal per hectare in the preceding
cultivated land expanded by 2.2 year. Cereal production accounted for
percent only to 12.1 million hectares in 86.1 percent of the total agricultural
2011/12, total agricultural output rose production estimated for 2011/12.

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National Bank of Ethiopia

Meanwhile, the industrial sector gained Consequently, the contribution of


17.1 percent growth mainly due to the agriculture and allied activities to real
increase in electricity and water GDP growth stood at 24.2 percent
supply. Manufacturing output grew by while industrial and service sectors
11.8 percent while mining and constituted about 22.2 and 53.7 percent
quarrying expanded by 12.7 percent respectively. Although, the share of
during the same period. The service agriculture to GDP tended to decline
sector, which has bolstered in the continuously, it has remained the
recent years, registered 10.6 percent largest source of employment, foreign
growth; due to the expansion in exchange earning, raw material supply
financial sector, real estate and hotel & and market for domestic industrial
tourism sectors. outputs.(FigI.1)

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National Bank of Ethiopia

Table 1.2: Estimates of Agricultural Production and Cultivated Areas of Major


Crops for Private Peasant Holdings - Meher Season

(Area and production are in thousands of hectors and quintals, respectively)

2008/09 2009/10 2010/11 2011/12

Agricultural Cultivated Total Cultivated Total Cultivated Total Cultivated Total


Production Area Production Area Production Area Production Area Production

Cereals 8,770.0 144,964.1 9,233.0 155,342.0 9,690.0 177,613.0 9,588.0 188,099.0

(Annual %
Change) 0.5 5.7 5.3 7.2 4.9 14.3 8.0 9.0

Pulses 1,585.2 19,646.3 1,489.3 18,980.0 1,357.0 19,531.0 1,616.0 23,162.0


(Annual %
Change) 4.4 10.2 -6.0 -3.4 -8.9 2.9 19.1 18.6

Oilseeds 855.1 6,557.0 780.9 6,436.0 774.0 6,339.0 880.0 7,308.0


(Annual %
Change) 20.8 6.3 -8.7 -1.8 -0.88 -1.5 13.7 15.3

Total 11,210.3 171,167.4 11,503.2 180,758.0 11,821.0 203,483.0 12,084.0 218,569.0


(Annual %
Change) 2.3 6.2 2.6 5.6 2.8 12.6 2.2 7.4

Source: Central Statistical Agency (CSA)

1.3 GDP by Expenditure Component

Total consumption expenditure (both In contrary, gross domestic saving to


private and public) as a percent of GDP ratio improved to 15.0 percent
GDP went down marginally to 85.0 in from 12.7 percent recorded in the
2011/12 from 87.3 in 2010/11, largely previous year. Likewise, the ratio of
on account of the reduction in private gross capital formation to GDP
and public consumption by 1.5 and 0.8 increased by 6.2 percentage point to
percentage points, respectively. 33.1 percent relative to last year.

As a result, the resource gap widened


to 18.1 percent of GDP from 15.1
percent during the same period.

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National Bank of Ethiopia

Table: 1.3: Expenditure on GDP and Gross Domestic Savings (As Percentage of GDP)

Consumption Expenditure Exports Imports


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

1999/00 110.4 88.2 19.1 69.1 22.2 (12.0) 12.1 24.2 11.8

2000/01 110.5 86.9 15.7 71.2 23.6 (11.8) 12.1 23.9 13.1

2001/02 117.1 90.7 15.9 74.8 26.4 (14.1) 12.7 26.9 9.3

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

2004/05 116.6 90.6 13.3 77.3 26.0 (20.6) 15.3 35.8 9.5

2005/06 119.4 91.8 13.1 78.7 27.6 (22.9) 14.0 36.9 8.3

2006/07 111.8 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

2010/11 115.1 87.3 8.6 78.6 27.9 (15.1) 17.0 32.1 12.7

2011/12 118.1 85.0 7.2 77.8 33.1 (18.1) 13.9 32.0 15.0
Average 115.2 89.0 12.4 76.6 26.2 (17.1) 13.4 30.6 11.0
Source: Ministry of Finance and Economic Development (MoFED)

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National Bank of Ethiopia

1.4. Micro and Small-Scale Enterprises


The five-year Growth and Transformation (FeMESDA), a total of 70,455.00 new
Plan envisages creating a total of three MSEs were established in 2011/12
million Micro and Small-Scale Enterprises employing 806,322.00 people. The total
(MSE’s) at the end of the Plan period. This employment has grown by 23.8 percent,
sector development is believed to be the compared to a year ago. The total amount
major source of employment and income of loan received from micro finance
generation for a wider group of the society institutions was more than Birr 1.088 Billion
in general and urban youth in particular. under the review period, 9.5 percent higher
According to the Federal Micro and Small than last fiscal year.
Enterprise Development Agency

Table: 1.4 Numbers, Amount of Credit and Jobs Created through MSEs
(Credit in Millions of Birr)

Percentage
2011/12 2012/13 Change
A B B/A

No. of MSE's na 70,455.00 -

Amount of credit (in


million Br) 994.09 1,088.14 9.5

No of Total
employment 651,366.00 806,322.00 23.8
Source: FeMSEDA

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National Bank of Ethiopia

Table: 1.5. Number, Amount of Credit and Jobs Created through MSEs by Region

{{{{{[ (Credit in Billions of Birr)

Addis Benisha
Ababa Oromia SNNPR Amhara Tigray Diredawa Harari ngul Somale Gambela Afar Total
No.of MSEs 10,639.0 20,555.0 9,819.0 99,750.0 64,000.0 333.0 265.0 336.0 519.0 109.0 27.0 206,352.0
Amount of
credit 447,485.4 133,084.2 104,759.6 64,600.7 327,059.2 4,029.8 6,275.1 263 580.4 - - 108,813.7
No.of total
Employment
created by 99,899.0
MSEs 0 267,474.0 127,112.0 174,971.00 82,680.0 45,248.0 3,224.0 1,010.0 3,303.0 1,401.0 - 806,322.0

Regional share
Addis Diredaw Benish
Ababa Oromia SNNPR Amhara Tigray a Harari angul Somale Gambela Afar Total
Amount of
credit 41.1 12.2 9.6 5.9 30.1 0.4 0.6 0.0 0.1 0.0 0.0 100.0
No. of total
Employment
created by
MSEs 12.4 33.2 15.8 21.7 10.3 5.6 0.4 0.1 0.4 0.2 0.0 100.0

Source: FeMSEDA

In terms of regional distribution of the


However regarding employment creation,
amount of credit, Addis Ababa took the
Oromia employed 33.2 percent of the total
leading share (41.1 percent) followed by
employment created during the fiscal year.
Tigray (30.1 percent), Oromiya (12.2
Amhara region contributed for 21.7 percent
percent), SNNPR (9.6 percent) and Amhara
of employment created in the report year
5.9 percent.
followed by SNNPR (15.8 percent).

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National Bank of Ethiopia

Figure 1.2 Regional distribution of amount of credit and employment created during 2011/12

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National Bank of Ethiopia

1.5. Access to Water Supply


During the Growth & Transformation water within 0.5 km reached to 78.7
Plan, both urban and rural population percent, rural population having access
with 68 percent in 2009/10 would to potable water within 1.5 km improved
increase to 98.5 percent by the end of the to 55.2 percent in 2011/12 from 74.6 and
plan period. Urban and rural population 48.9 percent respectively in 2010/11.
within 0.5 km and 1.5 km access to
potable water are also expected to reach The proportion of rural population with
to 100 and 98.5 percent, respectively by access to water supply in Harari reached
the end of the plan period. 87.1 percent, in Gambella 71.4 percent,
in Benshangule Gumz 65.7 percent, in
Accordingly, the national population Amhara 60.8 percent and in Oromia 54.9
with access to potable water supply percent. In contrary, urban population
reached 58.3 percent in 2011/12 from with access to water supply declined in
52.1 percent in the preceding year. Addis Ababa (80.71 percent), Afar (80.7
percent), Harari (97.2 percent) and Dire
Population with access to potable water Dawa (85.5 percent) compared to the
improved in 2011/12 compared to the preceding year performance (Table 1.5)
preceding year performance. Similarly (Figure I.3).
urban population with access to potable

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National Bank of Ethiopia

Table: 1.5 Percentages of People with Access to Potable Water by Region*

2010/11 2011/12
Change in
A B C D E F percentage point

Region Rural Urban Average Rural Urban Average D-A E-B F-C

Addis Ababa - 82.22 82.22 - 80.71 80.71 0.0 -1.5 -1.5

Tigray 52.3 68.7 55.4 58.6 72.1 61.2 6.4 3.4 5.8

Amhara 52.0 66.0 53.4 60.8 70.7 61.8 8.8 4.7 8.4

Oromia 49.8 74.2 51.8 54.9 85.1 57.4 5.1 11.0 5.6

SNNPR 42.9 65.9 44.3 49.1 75.5 50.7 6.2 9.6 6.4

Afar 35.0 82.2 38.0 37.5 80.7 40.3 2.6 -1.5 2.3

Somali 36.1 74.7 41.6 56.1 77.4 59.2 20.0 2.7 17.6

Ben-Gumz 59.6 66.8 59.9 65.7 69.8 65.8 6.0 2.9 5.9

Harari 65.1 100.0 84.0 87.1 97.2 92.6 22.0 -2.8 8.6

Gambella 63.6 80.3 66.1 71.4 85.7 73.6 7.9 5.4 7.5

Dire Dawa 75.6 87.6 83.8 77.1 85.5 81.3 1.5 -2.1 -2.5

National
Average 48.9 74.6 52.1 55.2 78.7 58.3 6.4 4.1 6.1

Source: Ministry of Water Resources Development (MoWRD) and NBE Staff Computation

Note: Water supply access is calculated based on the provision of 20 liters/capita/day for urban and 15 l/c/d
for rural at a radius of 0.5 and 1.5 kilo meters, respectively.
*Based on 2010/11 assessment data

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National Bank of Ethiopia Annual Bulletin

Source: Ministry of Water Resources Development (MoWRD) and NBE Staff C

1.6 Road Sector Development


1.6.1 Road Network
The government of Ethiopia has been array of infrastructural facilities so as to
engaged in investment of infrastructure improve the accessibility and mobility of
development to sustain economic agricultural and industrial products. As a
growth, improving product result, the road transport in Ethiopia has
competitiveness and encourage private been the dominant mode of transport and
investors. In particular, the government accounts for 90 to 95 percent of the total
noted that, the development of road motorized inter-urban freight and
transport creates a network over a wide passenger transports.

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National Bank of Ethiopia Annual Bulletin

In 2011/12, the total stock of road In 2011/12 the total road network
network reached 63,083 km of which expanded by 16.8 percent (9.086Km)
24,550 km Federal1, 31,550 km rural compared to 10.67 expansions in
road and 6,983 are woreda road. The 2010/11.
Federal road includes 9,875km (40
Total woreda road network, which was
percent) asphalt and 14,675km (60
previously known as community road,
percent) gravel road, which showed
also increased significantly to 6,983km
annual expansion of 19.1 percent and 3.8
compared to 854 km in 2010/11 due to
percent respectively. Particularly, the
the government’s plan to integrate every
asphalt road net work in 2011/12
kebele to the main roads
constituted about 15.7 percent of the
total stock of road network in the
country.

1
Federal roads are administered by federal government

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National Bank of Ethiopia Annual Bulletin

Table 1.7 Classification of Road Network (length in km)


Year Federal Road Woreda road
Rural road Total
Asphalt Gravel
Length Growth Length Growth Length Growth Length Growth Length** Growth
rate rate rate rate rate
-
2000 /01 3,924 - 12,467 - 16,480 - NA 32,871 -
-
2001/02 4,053 3.29 12,564 0.78 16,680 1.21 NA 33,297 1.30
-
2002/03 4,362 7.62 12,340 -1.78 17,154 2.84 NA 33,856 1.68
-
2003/04 4,635 6.26 13,905 12.68 17,956 4.68 NA 36,496 7.80
-
2004/05 4,972 7.27 13,640 -1.91 18,406 2.51 NA 37,018 1.43
-
2005/06 5,002 0.60 14,311 4.919355 20,164 9.55 NA 39,477 6.64

2006/07 5,452 8.99 14,628 2.215079 22,349 10.84 57,763.74 - 42,429 7.48

2007/08 6,066 11.26 14,363 -1.81159 23,930 7.07 70,038.10 - 44,359 4.55

2008/09 6,938 14.38 14,234 -0.89814 25,640 7.15 85,767.00 - 46,812 5.53

2009/10 7,476 7.75 14,373 0.976535 26,944 5.09 100,384.9 - 48,793 4.23

2010/11 8,295 10.96 14,136 -1.64893 30,712 13.98 - 854.00 53,997 10.67
-
2011/12 9,875 19.05 14,675 3.81296 31,550 2.73 6,983.00 63,083 16.83
Source: Ethiopian Road Authority (2011/12)
*Growth rate of community road (woreda road) is not calculated because since 2009/10 community road is
replaced by woreda road
** Total length does not include community road (woreda road) length till 2010/11 as it is non-
engineered road.

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National Bank of Ethiopia Annual Bulletin

1.6.2 Road Density


The proper level of road network is 2011/12 fiscal year, road density per
assessed by road density, which is 1,000 square km was 57.3 km with
measured by road length per 1000 annual growth rate of 18.6 percent
persons or by road length per 1000 km2. (Table 1.8).

In the five year GTP period, the plan is The road density per 1000 population in
to increase the road density from 44.5 to 2011/12 was 0.75 km and registered 15.4
123.7 km per 1000 persons and from percent growth from the preceding fiscal
2
0.64 to 1.54 km per 1000 km . year (Table 1.8).

At the end of 2011/12, the road density


showed improvement to 57.3km from
48.3km per 1,000 square km as
compared to a year ago. Similarly, in

Table 1.8 Road Densities per 1000 persons

Year Road Density /1000 person Road density /1000 sq. km


2000/01 0.50 29.9
2001/02 0.50 30.3
2002/03 0.49 30.8
2003/04 0.51 33.2
2004/05 0.50 33.7
2005/06 0.53 35.9
2006/07 0.55 38.6
2007/08 0.56 40.3
2008/09 0.57 42.6
2009/10 0.60 44.4
2010/11 0.65 48.3
2011/12 0.75 57.3

Source: Ethiopian Road Authority

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National Bank of Ethiopia Annual Bulletin

1.6.3 Road Accessibility2


According Ethiopian Roads Authority, Hence, large sum of finance has been
Ethiopia requires constructing about mobilized for road construction and
200,000 km of optimum national road maintenance from external loans and
network, as a target to provide to its grants as well as domestic sources.
people a reasonably good accessibility.
Figure 1.5 below depicts investment
The level of road network in good capital in the road construction and
condition has improved continuously expansion sector, which has been
over the past years and reached 64 steadily rising over the past years
percent of the total road network. In reached Birr 28.6 billion in 2011/12
particular, about 75 percent of asphalt showing annual growth rate of 46.8
road is found in good condition (Figure percent (Table 1.9). Investment in
I.4). Federal road construction and expansion
was Birr 21 billion, which constituted
1.6.4 Road Sector Financing
the lion’s share of the total road
investment capital.
Construction and maintenance of roads
remained the key investment for the
government in the past years.

2
Access refers to the opportunity to use or the right to
or the ability to reach some destiny and often used to
analyze the level of population having access to all
weather roads. In fact, its benefit could be evaluated in
terms of reductions in monetary costs or time needed
by the given population to access markets or key
public social services like health and education.

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National Bank of Ethiopia Annual Bulletin

Source: Ethiopian Road Authority

Source: Ethiopian Road Authority (2011/12)

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National Bank of Ethiopia Annual Bulletin

Table 1.9 Investments in the Road Sector


In million Birr

Road Type 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12

Federal road
2,848 2,886 5,037 8,124 9,813 13512 16989 21023.7

Regional road
222.9 471.2 395.2 671 624.2 1091.2 1768.7 1506.9

Community /woreda road*


17.8 684.4 719.3 121 439.3 307 680.7 6027.2
Urban road**
25.2 46.60 63.3 61.1 53.7 127 52.5 58.5

Total 3,114.2 4,088.1 6,215.2 8,977.5 10,930.4 15,038 19,490.9 28,616.3

Source: Ethiopian Road Authority

*Community road- before 2009/10 and woreda road after 2010/11


** All municipalities’ maintenance

Developments in Education Sector

The government of Ethiopia views 85.4 and 52.1 percent from 85.3 and
education sector development as part of 49.4 percent respectively (Table
its long term vision in making the 1.10).primary school enrolment has
country a middle income economy. To reached 17 million of which 47.8
this end, it has devised and put in place percent were girls.
various strategies for the sector. It has
also increased the budget allocated every On the other hand, secondary
year to education sector to execute education enrolment stood at 1.8
development programs and planned million, 3 percent higher than last year.
activities (Table 1.10). Accordingly,
primary schools in urban and rural areas, In addition, by the end of 2011/12, the
increased to 29,482 in 2011/12 from number of secondary schools (9-12
28,349 in the preceding year. Net grades) reached 1,710 exhibiting a 12.7
primary school enrolment and percent annual growth.
completion, however, rose slightly to

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National Bank of Ethiopia Annual Bulletin

Technical and Vocational Education and


Training (TVET) enrolment reached
330,409 registered 11 percent fall though
the number of TVET institutions
remained at 505 compared to the
preceding year.

The share of education sector in the


annual national budget was 25.3 percent
in 2011/12, about 44.6 percent higher
than a year earlier (Table 1.10).

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National Bank of Ethiopia

Table 1.10: Development in Education Sector


Indicator 2007/08 2008/09 2009/10 2010/11 2011/12

(2000) (2001) (2002) (2003) (2004)

Primary Education
Number of primary
schools (urban, rural) 23,354 25,212 26,951 28,349 29,482

Urban 3,100 3,206 3,206 3,988 NA

Rural 20,254 21,886 23,745 24,313 NA

Primary enrolment (in millions) 15.3 15.6 15.8 16.7 17.0

Girls' primary enrolment (%) 46.5 47.3 47.4 47.3 47.8

Grades (1-4) gross enrolment ratio (%) 127.8 122.6 118.8 124 122.6

a. Girls' gross enrolment ratio (%) 122.8 118.4 114.3 119.1 118.1

b. Boys' gross enrolment ratio (%) 133 126.7 123.2 128.8 127

Grades (5-8) gross enrolment ratio (%) 60.2 63.1 65.5 66.1 65.6

a. Girls' gross enrolment ratio (%) 55.5 60.5 63.5 64.8 65.3

b. Boys' gross enrolment ratio (%) 64.8 65.6 67.4 67.4 65.9

Girls’ gross primary enrolment ratio (%) 90.5 90.7 101.6 93.2 92.9

Boys' gross primary enrolment ratio (%) 100.5 97.6 108.4 99.5 97.9

Proportion of pupils starting grade 1 who


reach grade 5(%) 49.2 39.6 75.6 69.1 NA

Gross Primary Enrolment ratio (%) (urban,


rural, regional) 95.6 94.4 93.4 96.4 95.4
NA
1. Tigray 109 107.1 103.3 102.1
NA
2. Afar 26.2 31.2 39.3 40.1
NA
3. Amhara 112.4 112.5 104.9 104.2
NA
4. Oromia 91.4 89.3 88.4 94.8
NA
5. Somali 32.7 35 65.6 61.3
NA
6. Ben.Gumuz 112.3 112.1 114.6 119.7

7. SNNPR NA
102.9 101 97.3 102.6

8. Gambella NA
121.4 112.5 125.1 132

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National Bank of Ethiopia Annual Bulletin

Indicator 2007/08 2008/09 2009/10 2010/11 2011/12

(2000) (2001) (2002) (2003) (2004)


NA

9. Harari 108.4 107.9 95.3 91.5 NA

10. A.A 114.3 109.2 107.3 103.1 NA

11. Dire Dawa 86.3 92.1 91.3 89.1 NA

Primary net enrolment rate (%) 83.4 83 82.1 85.3 85.4

No. of students registered in the first cycle


primary schools(1-4) (in millions) 10.7 10.6 10.5 11.3 11.4

No. of students registered in the second cycle


primary schools(5-8) (in millions) 4.6 5 5.3 5.5 5.7

Number of students registered in the first cycle


secondary schools(9-10) (in millions) 1.3 1.4 1.5 1.5 1.4

Completion rate of primary school (%) 44.7 43.6 47.8 49.4 52.1

Girls/boys ratio in primary schools (%) 87 89.7 91 90.4 92

Grade 1-8(primary) repetition rates (%) 6.7 6.7 4.9 8.5 8.5

Primary school dropout rate (%) 14.6 18.6 13.1 16.3 NA

1st grade dropout rate (%) 18.3 22.9 28.1 19.9 25.0

Secondary Education

Number of secondary schools (urban,


rural) 1,087 1,197 1,335 1,517 1,710

Urban 904 976 1,053 1,053 NA

Rural 183 209 298 339 NA

Secondary enrolment (in thousands) 1,501 1,588 1,696 1,760 1,766

Gross enrolment rate in (9-10 grades)(%) 37.1 38.1 39.1 38.4 36.9

Number of students registered in the second


cycle secondary schools(11-12)(in millions ) 0.2 0.21 0.24 0.29 0.32

Preparatory admission 100,651 118,289 142,781 NA NA

Girls/boys ratio in secondary schools (%) 63 67 0.75 79 0.84

Girls/boys ratio in(9-10) 0.65 0.72 0.78 0.81 0.86

Girls/boys ratio in (11-12) 0.48 0.4 0.56 0.83 0.75

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National Bank of Ethiopia Annual Bulletin

Indicator 2007/08 2008/09 2009/10 2010/11 2011/12

(2000) (2001) (2002) (2003) (2004)


TVET

Number of TVET centers (public, private,


mission) 458 458 448 505 505

TVET enrolment 229,252 308,501 353,420 371,347 330,409

TVET Admission 95,563 NA 95,563 NA NA

Girls/boys ratio inTVET 0.92 0.86 0.8 0.86 0.91

Tertiary level Education


Number of tertiary level institutions by
universities (public, private), colleges
(public, private) 61 72 90 86 91

Universities 22 22 22 26 32

Student intake capacity of higher education


institutions 56,421 NA NA 95,000 NA

Participation of women in higher education


institutions (%) 24 22.2 27 27 21.1

Girls/boys ratio in higher education 0.24 0.28 0.36 0.36 0.39

Percentage of female enrolled in under 22.0


graduate degree (%) 24.1 29 27 27

Percentage of female graduated in under- 25.3


graduate degree (%) 20.6 29.7 23.4 27.2

Percentage of female enrolled in post- 20.2


graduate degree 9.6 11.3 11.9 13.8

Percentage of female graduated in post- 14.0


graduate degree 10.7 10.5 13.9 14.4

Pupil/teacher ratio

i. Grade (1-8) 57 54 51 51 50

ii. Grade (9-12) 43 41 36 31 29

iii. TEVT 25 34 NA 29 NA

iv. In higher education NA 28.2 26.8 26.7 25

Pupil/section ratio

i. Grade (1-8) 62 59 57 57 55

ii. Grade (9-12) 74 68 64 58 56.1

26
National Bank of Ethiopia Annual Bulletin

Indicator 2007/08 2008/09 2009/10 2010/11 2011/12

(2000) (2001) (2002) (2003) (2004)

Number of class rooms in primary schools 236,712 247,759 254,744 279,292 NA

7. Pupil-textbook ratio

i. Grade(1-8) 1.5 1.5 1.5 NA NA

ii. Grade(9-12) 1 1 1 NA NA

Pupil-school ratio

i. Grade(1-8) 657 619 573 590 576

ii. Grade(9-12) 1,381 1,345 1270 1160 1,033

iii. TEVT 501 673 788 735 654

Other Indicator

Annual education share to the national


budget 22.8 23.6 25.9 17.5 25.3

Source: - Education statistics annual abstract, Ministry of Education & NBE Staff Computation

27
National Bank of Ethiopia Annual Bulletin

II. ENERGY PRODUCTION


2.1 Electric Power Generation

Ethiopia has very large potential for The Ethiopian Electric Power
hydroelectric power and geothermal Corporation is a public enterprise
energy generation. Nine of its major mandated with the task of generating,
rivers are suitable for hydroelectric transmitting, distributing, and selling
power with a total capacity of electricity. The Corporation generates
generating 45,000 MW. The country electricity through two different power
also has vast potential for geothermal supply systems, namely, the Inter
energy. Connected System (ICS) and Self

The Ethiopian Electric Power Contained System (SCS).

Corporation (EEPCo) supplies power


to more than 1,899,685 customers, of The ICS, which is largely generated by
which 9,633 were registered in
hydropower plants, constitutes the
2011/12. The country’s installed major source of electric power in
electricity generating capacity was Ethiopia. The SCS system merely
2000 MW in 2010 which is targeted to contributed about 0.2 percent in
increase to 10,000 MW by the end of 2011/12 (Fig.II.1).
2014/15, according to the five year
Growth and Transformation Plan
(GTP).

28
National Bank of Ethiopia

Fig.II.1 Trends in Share of ICS and SCS in Total Power Generation

ICS share in% SCS share in%


120.0

100.0

80.0

Share 60.0

40.0

20.0
Year
0.0
2000/0 2001/0 2002/0 2003/0 2004/0 2005/0 2006/0 2007/0 2008/0 2009/1 2010/1 2011/1
1 2 3 4 5 6 7 8 9 0 1 2
ICS share in% 98.3 99.1 99.1 98.6 98.2 98.2 98.8 99.2 99.0 98.8 99.5 99.8
SCS share in% 1.7 0.9 0.9 1.4 2.0 1.8 1.2 0.8 1.0 1.2 0.5 0.2

Source: Ethiopian Electric and Power Corporation

The total amount of electric power Currently, the number of towns and
generated during 2011/12 was 6.3 cities having access to electricity has
million KWH, 26.2 percent higher than reached 5,637 of which 474 towns
a year ago. About 99.3 percent of the were added in 2011/12.
electric power was generated through
hydropower and the remaining 0.7
percent from thermal, wind and
geothermal sources (Table 2.1).

The coverage of electricity is expected


to scale up by 75 percent to 8000 mw
in 2015 compared to 2000mw in 2010.

In addition, the number of customers


accessing electric power is envisaged
to double to 4 million during the same
period.

29
National Bank of Ethiopia Annual Bulletin

Table 2.1: Electric Power Generation in ICS and SCS


(In 000 KWH)
2009/10 Share 2010/11 Share 2011/12 Share Percentage Change
Source [A] in % [B] in % [C] in % [C/A] [C/B]

Hydro Power 3,418,610 87.5 4,922,069 98.8 6,239,288.9 99.3 82.5 26.8

Thermal Power 418,170 10.7 13,716 0.3 0.0 0.0 -100 -100

Geothermal 23,522 0.6 19,267 0.4 7,979.9 0.13 -66.1 -58.6

ICS Wind 0.0 0.0 0.0 0.0 S 0.47 - -


Sub
Total 3,860,302 98.8 4,955,052 99.5 6,276,525.2 99.8 62.6 26.7

Hydro Power 20,113 0.5 9,351 0.2 1,715.7 0.1 -91.5 -81.7

Thermal Power 24,960 0.6 16,094 0.3 8,180.4 0.1 -67.2 -49.2
SCS Geothermal
Sub
Total 45,073 1.2 25,445 0.5 9,896.2 0.2 -78.0 -61.1

Hydro Power 3,438,723 88.1 4,931,420 99.0 6,241,004.6 99.3 81.5 26.6

Thermal Power 443,130 11.3 29,810 0.6 8,180.4 0.13 -98.2 -72.6

Geothermal 23,522 0.6 19,267 0.4 7,979.9 0.13 -66.1 -58.6

Total Wind 0.0 0.0 0.0 0.0 29,256.3 0.47 - -

Grand
Total 3,905,375 100.0 4,980,497 100.0 6,286,421.3 100.0 61.0 26.2
Source: Ethiopian Electric and Power Corporation

Volume and Value of Petroleum Imports

In 2011/12, about 2.14 million metric percent). The total volume of petroleum
tons of petroleum products worth Birr imports increased by 12.6 percent solely
36.7 million were imported into the due to higher volume of gas oil (24.3
country. Total value of petroleum percent) and regular gasoline (4.7
product imports surged by 37.3 percent percent) despite marginal reduction in
was mainly due to an increase in import volume of fuel oil (4.3 percent) and jet
bill of gas oil (59.8 percent), regular fuel (2.7 percent) (Table 2.2).
gasoline (49.4 percent) and fuel oil (54.2

30
National Bank of Ethiopia Annual Bulletin

Table 2.2: Volume and Value of Petroleum Imports

(Volume in MT and value in ‘ooo Birr)

2010/11 2011/12
Percentage
Volume Value Volume Value Change

Products [A] [B] [C] [D] [C/A] [D/B]

Regular Gasoline (MGR) 143,878.8 1,743,315.0 150,619.1 2,604,584.2 4.7 49.4

Jet Fuel 559,522.5 9,738,630.0 544,519.6 9,795,246.5 -2.7 0.6

Fuel Oil 150,968.0 1,171,276.2 144,501.3 1,805,728.2 -4.3 54.2

Gas Oil (ADO) 1,047,862.0 14,096,853.0 1,302,451.2 22,531,329.0 24.3 59.8

Total 1,902,232.0 26,750,074.0 2,142,091.2 36.736,887.6 12.6 37.3

Source: Ethiopian Petroleum Enterprise

Source: Ethiopian Petroleum Enterprise

31
National Bank of Ethiopia Annual Bulletin

Fig. II.3 Trends in Value of Petroleum Imports (1000 birr)

25,000
MGR Jet Fuel Fuel Oil Gas Oil

20,000

15,000
Value in birr

10,000

5,000

0
2001/022002/032003/042004/052005/062006/072007/082008/092009/102010/112011/12
Year

Source: Ethiopian Petroleum Enterprise

As the international oil prices tended to Accordingly, the retail prices in Addis

increase domestic retail prices were also Ababa increased on average by 25.7

adjusted upwards during 2011/12. percent for gas oil, 23 percent for regular
gasoil, 21.8 percent for fuel oil and 16.1
percent for kerosene (Table 2.3)

32
National Bank of Ethiopia Annual Bulletin

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

Year Quarter MGR Fuel Oil Gas Oil Kerosene

Qtr.1 7.60 4.20 5.20 3.90


Qtr.2 8.00 5.60 5.40 4.10
Qtr.3 7.70 5.20 5.40 4.10
Qtr.4 7.70 5.20 5.40 4.10

2006/07 Average 7.80 5.00 5.40 4.10


Qtr.1 7.80 4.10 5.40 4.10
Qtr.2 7.80 4.10 5.40 4.10
Qtr.3 9.60 5.90 6.90 5.70
Qtr.4 9.60 5.90 6.90 5.70

2007/08 Average 8.70 5.00 6.20 4.90


Qtr.1 9.61 5.89 6.90 5.72
Qtr.2 9.61 7.40 9.40 7.50
Qtr.3 8.14 5.90 7.81 6.00
Qtr.4 8.20 5.80 7.30 5.70

2008/09 Average 8.89 6.25 7.85 6.23


Qtr.1 9.67 8.10 8.45 7.46
Qtr.2 12.33 9.53 10.15 8.88
Qtr.3 12.99 9.88 10.53 9.29
Qtr.4 13.10 9.87 10.72 9.50

2009/10 Average 12.02 9.34 9.96 8.78


Qtr.1 13.14 10.08 10.98 9.75
Qtr.2 15.10 11.64 12.87 11.43
Qtr.3 17.14 12.98 14.75 12.92
Qtr.4 20.94 14.09 17.73 14.05

2010/11 Average 16.58 12.20 14.08 12.04


Qtr.1 20.94 14.09 17.73 14.05
Qtr.2 19.81 14.84 17.28 13.95
Qtr.3 20.42 15.27 17.89 13.95
Qtr.4 20.42 15.27 17.89 13.95

Average 20.40 14.86 17.70 13.98


Annual
percentage
2011/12 change 23.0 21.8 25.7 16.1
Source: Ethiopian Petroleum Enterprise

33
National Bank of Ethiopia Annual Bulletin

Fig.II.4 Trends in Addis Ababa Retail Fuel Prises(Birr/liter)

Source:Ethiopian Petroleum Enterprise

34
National Bank of Ethiopia Annual Bulletin

III. PRICE DEVELOPMENTS


3.1. Developments in National Consumer Price

Annual average headline inflation at the Similarly, annual average core inflation
end of the fiscal year 2011/12 was 34.1 slightly increased to 22.4 percent from
percent, 16 percentage point higher than 21.8 percent a year ago as a result of
the previous year level. This was largely higher prices of all non-food components
due to significant increase in food price (Table 3.1 and Fig.III.1).
inflation which contributed the 14.9 On contrary, year-on-year, headline
percentage points to the total annual inflation slowed down to 20.8 percent
change in headline inflation (Table 3.1). from 38.0 percent a year ago as both food
Meanwhile, annualized food inflation, and non-food price inflation registered
scaled up significantly to 42.9 percent 19.9 and 12 percentage points decline,
and depicted a 27.2 percentage point respectively. Annual food inflation,
increment over the preceding year as a which was 45.3 percent in June 2011,
result of a price hike in most of the food declined to 25.4 percent in June 2012
items except oil and fats, spices and non – while annual core inflation dropped to
alcoholic beverage and coffee. 15.8 percent from 27.8 over the same
period (Fig III.2).

Table 3.1: Annual Average Inflation Rates (in percent)


Consumption 2010/11 2011/12 Change (in Contribution to Change in
Items Percentage Points) Headline Inflation (in Percentage
Points)
A B B-A C
General 18.1 34.1 16.0 16.0
Food 15.7 42.9 27.2 14.9
Non-Food 21.8 22.4 0.6 1.1
Source: CSA and NBE Staff Computation

35
National Bank of Ethiopia Annual Bulletin

Source:CSA and NBE Staff computation

Source:CSA and NBE Staff computation

36
National Bank of Ethiopia Annual Bulletin

3.2 Consumer Price Developments in Regional States

At the end of 2011/12, the regional inflation than the regional simple
average general inflation picked up to average. Beni-shangul Gumz saw the
32.7 percent from 16.4 percent a year highest surge in headline inflation (32.9
earlier. Amhara, Oromia, SNNP, percentage point) while the lowest (5.4
Gambella and Beni-shangul Gumz percentage point) rise was recorded in
regional states registered higher headline Addis Ababa (Table 3.2).

Table 3.2: Regional Average Annual Inflation

2010/11 2011/12 Change


Non Non Non
Regions General Food General Food General Food
Food Food Food
A B C D E F G=D-A H=E-B I=F-C
Tigray 9.7 5.3 16.9 31.1 33.6 28.4 21.4 28.2 11.5
Afar 19.6 13.8 27.2 29.2 37.0 23.9 9.6 23.2 -3.3
Amhara 15.9 11.8 24.0 33.8 42.0 20.7 17.9 30.2 -3.4
Oromia 19.8 18.4 22.0 36.4 44.4 25.1 16.6 26.0 3.1
Somali 20.8 21.3 19.6 29.2 30.5 26.9 8.4 9.3 7.3
SNNP 19.7 18.8 21.1 38.2 49.1 24.0 18.5 30.3 3.0
Harari 19.2 20.5 17.5 28.0 36.8 21.1 8.8 16.3 3.6
Gambela 11.3 8.3 15.9 40.9 55.3 20.2 29.6 47.0 4.3
Dire Dawa 14.7 13.2 16.7 24.5 32.2 14.4 9.8 19.0 -2.3
B. Gumuz 10.7 4.0 17.9 43.6 67.5 21.7 32.9 63.5 3.8
A.A 19.4 14.8 23.5 24.8 30.6 21.1 5.4 15.9 -2.4

Mean 16.4 13.7 20.2 32.7 41.7 22.5


Standard dev. 4.2 5.9 3.6 6.4 11.7 3.8
Coeff. of Var. 0.3 0.4 0.2 0.2 0.3 0.2
Source: CSA and NBE Staff Computation

37
National Bank of Ethiopia Annual Bulletin

Source: CSA and NBE Staff Computation

The regional average food inflation The highest increase in food inflation was
significantly increased to 41.7 percent by registered in Beni-shangul (63.5
the end of June 2012 compared to last percentage points); and the lowest in
year. Food inflation higher than the Somali (9.3 percentage points). Over the
regional simple average was registered in two-year period (2010/11 to 2011/12),
Oromia, Amhara, SNNP, Gambella and food price instability was high in most of
Beni-shangul Gumz (Table 3.2). the regions.

Source: CSA and NBE Staff Computation

38
National Bank of Ethiopia Annual Bulletin

Likewise, the average regional non-food The highest rise in non-food inflation was
inflation stood at 22.5 percent at June recorded in Tigray (11.5 percentage
2012. Non-food inflation stood above the points), while the higher decline
average level in SNNP, Oromia, Tigray, registered in Amhara (-3.4 percentage
Somali and Afar (Table 3.2). points).

Source: CSA and NBE Staff Computation

Regarding inflation rate disparity across


regions which is measured by the change in
coefficient of variation3 between 2010/11
and 2011/12 indicated that no significant
change were observed apparently due to the
growing regional market integration as
transportation and communication facilities
have been improved.

3
Coefficient of variation is the ratio of standard deviation to mean.

39
National Bank of Ethiopia Annual Bulletin

IV. MONETARY AND FINANCIAL DEVELOPMENTS

4.1. Monetary Developments and Policy

During the year under review, Ethiopia’s administrational measures coupled with
monetary policy continued to focus on slow down in global food and fuel prices ,
containing inflationary pressure. the year-on-year headline inflation dropped
Accordingly as a result of prudent fiscal to 20.5 percent by end 2011/12 compared
and tight monetary policies as well as other to 38 percent last year.

Developments in Monetary Aggregates


As at end of the 2011/12 domestic fiscal policy nit to borrow from the Central
liquidity, as measured by broad money Bank in a bid to fight inflationary pressure.
supply (M2), reached Birr 189.4 billion Fiscal year 2011/12 also witnessed a 30
reflecting a 30.3 percent growth, over the percent growth in broad money. Narrow
same period last year. This was largely money rose by 24.5 percent due to higher
attributed to the 39.5 percent surge in demand deposits and currency outside
domestic credit offsetting the 28.4 percent banks reflecting the growth in economic
decline in net foreign assets. Of the activities and improvement in transactions
components of domestic credit, credit to demand for money. Similarly, quasi-money
non-central government sector grew that comprises savings and time deposits
remarkably by 56.7 percent while credit to went up by 36.6 percent and reached Birr
central government slow down by 24.8 94.5 billion owing to improved financial
percent. This was consistent with the intermediation by banks partly through
government’s policy of promoting private opening up of 319 new branches.
sector development as well as prudent

40
National Bank of Ethiopia Annual Bulletin

Table 4.1: Components of Broad Money


(In Million of Birr)
Year Ended June 30 Annual Percentage Change
Particulars 2008/09 2009/10 2010/11 2011/12 2008/09 2009/10 2010/11 2011/12

Narrow Money Supply 42,112.7 52,434.6 76,171.0 94,849.9 19.1 24.5 45.3 24.5

. Currency Outside Banks 19,715.0 24,206.8 32,574.9 38,537.1 11.7 22.8 34.6 18.3
. Demand Deposits (net) 22,397.6 28,227.8 43,596.1 56,312.7 26.6 26.0 54.4 29.2
Quasi-Money 40,397.1 51,997.8 69,206.0 94,548.9 23.0 28.7 33.1 36.6
. Savings Deposits 37,148.7 48,041.6 64,539.6 82,487.8 26.0 29.3 34.3 27.8
. Time Deposits 3,248.4 3,956.2 4,666.4 12,061.1 -3.2 21.8 18.0 158.5

Broad Money Supply 82,509.8 104,432.4 145,377.0 189,398.8 21.0 26.6 39.2 30.3
Source: NBE

Fig IV.1: Major Components of Broad Money


(2002/03 - 2011/12)

Broad Money

24,000
(In Millions of Birr)

22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
02/03 04/05 06/07 08/09 10/11
Year
Currency Outside Banks Net Demand Deposit Quasi- Money

Source: NBE

41
National Bank of Ethiopia Annual Bulletin

Table 4.2: Factors Influencing Broad Money


(In Millions of Birr)
Year Ended June 30 Annual Percentage Change
Particulars 2008/09 2009/10 2010/11 2011/12 2008/09 2009/10 2010/11 2011/12
External Assets (net) 17,976.8 27,189.8 55,534.7 39,787.7 54.1 51.2 104.2 -28.4

Domestic Credit 89,203.0 104,413.5 135,553.9 189,080.8 11.5 17.1 29.8 39.5
. Claims on Central Gov't (net) 32,786.5 33,013.1 28,651.7 21,557.4 -0.9 0.7 -13.2 -24.8

. Claims on Non-Central Gov't 56,416.5 71,400.4 106,902.2 167,523.4 20.3 26.6 49.7 56.7
Other Items (net) 24,670.1 27,170.9 45,711.6 39,469.7 5.2 10.1 68.2 -13.7

Broad Money (M2) 82,509.8 104,432.4 145,377.0 189,398.8 21.0 26.6 39.2 30.3
Source: NBE

Source: NBE

42
National Bank of Ethiopia Annual Bulletin

4.1.2. Developments in Reserve Money and Monetary Ratios


During the year under review, reserve of their active participation in the
money or base money went down by 4.4 weekly T-bills market.
percent over last year due to 32.6 percent The ratio of M2/GDP, an indicator of
decline in deposits of banks at the NBE financial deepening, went up by 13.7
offsetting a 17.1 percent rise in currency percent to 0.32 percent in 2011/12,
in circulation. The drop in reserve partly indicating the tight monetary
money was also attributed to a 35.3 policy measures taken in order to
percent decline in NBE’s net foreign mitigate the inflationary pressure.
asset outweighing12.2 percent rise in Compared to last year same period, the
domestic credit. Excess reserves of money multiplier defined as narrow
commercial banks decreased to Birr 3.7 money to reserve money and broad
billion from Birr 7.3 billion last year money to reserve money also slightly
reflecting the slow down in deposits of increased reflecting increased deposit
commercial banks at the NBE as a result mobilization by commercial banks.

7
National Bank of Ethiopia Annual Bulletin

Table 4.3: Reserve Money and Monetary Ratios


(In Millions of Birr)
Year Ended June 30 Annual Percentage Change
Particulars 2008/09 2009/10 2010/11 2011/12 2008/09 2009/10 2010/11 2011/12
Reserve Requirement (CB's) 11,183.3 14,368.0 20,495.2 18,080.6 22.7 28.5 42.6 -11.8
Actual Reserve (CB's) 19,569.4 20,620.9 27,757.3 21,791.8 28.5 5.4 34.6 -21.5
Excess Reserve (CB's) 8,386.0 6,252.9 7,262.1 3,711.3 37.0 -25.4 16.1 -48.9
Reserve Money 45,107.0 49,424.5 69,043.1 65,972.6 26.9 9.6 39.7 -4.4
. Currency in Circulation 23,836.4 28,802.9 39,100.6 45,785.2 17.9 20.8 35.8 17.1
. Bank Deposits 21,270.7 20,621.5 29,942.5 20,187.4 38.7 -3.1 45.2 -32.6
Money Multiplier (Ratio):
. Narrow Money to Reserve
Money 0.9 1.1 1.1 1.4 -6.1 13.6 4.0 30.3
. Broad Money to Reserve
Money 1.8 2.1 2.1 2.9 -4.6 15.5 -0.3 36.3
Other Monetary Ratios (%):
. Currency to Narrow Money 46.8 46.2 42.8 40.6 -6.3 -1.4 -7.4 -5.0
. Currency to Broad Money 23.9 23.2 22.4 20.3 -7.7 -3.0 -3.3 -9.2
. Narrow Money to Broad
Money 51.0 50.2 52.4 50.1 -1.6 -1.6 4.4 -4.4
. Quasi Money to Broad Money 49.0 49.8 47.6 49.9 1.7 1.7 -4.4 4.9
M2/GDP Ratio* 0.25 0.27 0.28 0.32 -10.4 10.9 4.3 13.7
Source: NBE
* M2/GDP ratio was calculated on the basis of new GDP series.

Source: NBE

44
National Bank of Ethiopia Annual Bulletin

4.2. Developments in Interest Rate

In 2011/12 the minimum interest rate on increased to 5.73 percent from 5.49
saving deposit was 5 percent and the percent last year. Average lending rate,
maximum 5.75 percent. Consequently, however, remained at 11.88 percent.
average interest rate on savings deposit All rates including yield on T-Bills were
remained at 5.4 percent. negative against the year-on-year
On the other hand, the weighted annual headline inflation of 20.9 percent during
average interest rate on time deposit the review fiscal year.

45
National Bank of Ethiopia

Table 4.4: Interest Rate Structure of Commercial Banks

(In % per annum)

Rates 2002/03 2003/04 2005/06 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12

Deposit Rate

Savings Deposit

Minimum 3.00 3.00 3.00 3.00 3.00 4.00 4.00 4.00 5.04 5.00

Maximum 3.15 3.15 3.15 3.15 3.15 4.15 5.00 5.00 5.75 5.75

Average* 3.08 3.08 3.08 3.08 3.08 4.08 4.50 4.50 5.40 5.40

Time deposit

Up to 1 year 3.35 3.40 3.60 3.60 3.64 4.67 4.12 4.56 5.37 5.65

1 -2 years 3.62 3.64 4.01 4.01 4.11 5.23 4.48 4.80 5.51 5.74

Over 2 years 3.82 3.84 4.30 4.30 4.49 5.59 4.73 5.01 5.60 5.78

Average* 3.60 3.62 3.97 3.97 4.08 5.16 4.44 4.79 5.49 5.73

Demand Deposit
(Average*) 0.04 0.05 0.06 0.06 0.06 0.04 0.06 0.06 0.06 0.03

Lending Rate

Minimum 7.00 7.00 7.00 7.00 7.00 8.00 8.00 8.00 7.50 7.50

Maximum 14.00 14.00 14.00 14.00 14.00 15.00 16.50 16.50 16.25 16.25

Average* 10.50 10.50 10.50 10.50 10.50 11.50 12.25 12.25 11.88 11.88

Real Rate of Interest

Deposit 1/ -14.70 0.70 -7.73 -7.73 -12.03 -51.13 1.80 1.70 -12.70 -28.3

Deposit 2/ 1.98 0.48 -7.93 -7.93 -7.83 -19.13 -10.50 -13.70 -16.40 -17.20

Lending/1 -7.27 8.12 -0.30 -0.30 -4.60 -43.70 9.55 13.70 -6.23 -21.80

T-bills (Nominal) 1.31 1.05 0.04 0.04 0.50 0.67 0.80 0.89 1.31 1.92

Source: NBE

1/ Real saving deposit interest rates and real lending rates computed based on average headline inflation.

2/ Real saving deposit interest rates computed based on average core inflation

It is simple average for saving deposit and lending rates, while weighted mean for time and demand deposits .As a result,
the movements in the average interest rate on time and demand deposits reflect the change in the proportion of commercial bank
deposits that would pay higher interest rate on time and demand deposits, rather than the change in interest rate.

46
National Bank of Ethiopia

Fig. IV.4: Interest Rate Structure of Commercial Banks


14.00
12.00
Value in %

10.00
8.00
6.00
4.00
2.00
0.00

Years

Average Saving Deposit Rate Average Time Deposit Rate Average Lending Rate

Source: NBE

4.3: Developments in Financial Sector

The major financial institutions operating in declined from 65,415.834 people to 62,063.6
Ethiopia are banks, insurance companies and in 2011/12.
micro-finance institutions. The number of The significant branch expansion was
banks operating in the country during the undertaken by Commercial Bank of Ethiopia
fiscal year reached 17, of which 14 were (CBE) (142 branches), followed by
private, and the remaining 3 state-owned. Construction & Business Bank (50
During the fiscal year, 319 new branches branches), United Bank (19 branches),
were opened raising the total branch network
in the country to 1,289 from 970 last year.
As a result, bank branch to population ratio
4
Taking total population 84 million
47
National Bank of Ethiopia

Abay Bank (17 branches), Awash the share of private banks in total capital
International Bank (16 branches) and Buna rose to 49.3 percent from 45.3 percent same
International Bank (14 branches). Hence, the period last year. On the other hand, the share
share of private banks branch network was of public banks in total capital was 50.7
47.6 percent at the end of 2011/12 slightly percent with CBE taking up to 34.6 percent.
down from 50.2 percent last year due to
aggressive branch expansion by CBE. In the meantime, the number of insurance
companies increased to 15 from 14 last year.
The number of bank branches in Addis
The number of branches also rose to 243
Ababa, reached 430 showing 23.2 percent
following the opening of 22 additional
growth last year, indicating the booming
branches. Major expansion of branches was
economic activities in the central city.
undertaken by Berhan Insurance S.C. (6

Following significant capital injection by branches) followed by Ethiopian Insurance

private banks, mainly Nib International Bank Corporation (5 branches), Oromia Insurance

(Birr 259 million), Dashen Bank (Birr 229 S.C. and Tsehay Insurance S.C. each with

million), Wegagen Bank (Birr 176 million), three branches.

Bank of Abyssinia (Birr 159 million) and About 53.1 percent of insurance branches
Awash International Bank (Birr 153 were located in Addis Ababa. Ownership
million), the total capital of the banking wise, private insurance companies accounted
industry increased by 12.9 percent to Birr 18 for 81.1 percent of the total branches.
billion by the end of June 2012. As a result,

48
National Bank of Ethiopia
At the same time, the total capital of percent of the total capital while one public
insurance companies increased by 25.6 insurance company alone accounted for 26.7
percent to Birr 1.2 billion in 2011/12. Private percent.
insurance companies accounted for 73.3

Source: Commercial Banks

49
National Bank of Ethiopia

Table 4.5: Capital and Branch Network of the Banking System at the Close of June 30, 2012

(Branch in Number and Capital in Million Birr)


Branch Network Capital
2010/11 2011/12 2010/11 2011/12
Banks
Addis % Addis % Total % Total %
Regions Total Regions Total
Ababa Share Ababa Share Capital Share Capital Share
1. Public Banks
Commercial Bank of
Ethiopia 323 94 417 43.0 448 111 559 43.4 6,262.0 39.3 6,231.0 34.6
Construction & Business
Bank 17 17 34 3.5 53 31 84 6.5 277.0 1.7 363.0 2.0
Development Bank of
Ethiopia 31 1 32 3.3 31 1 32 2.5 2,179.0 13.7 2,540.0 14.1
Total Public Banks 371 112 483 49.8 532 143 675 52.4 8,718.0 54.7 9,134.0 50.7
2. Private Banks
Awash International Bank 36 34 70 7.2 39 47 86 6.7 1,104.0 6.9 1,257.0 7.0
Dashen Bank 31 34 65 6.7 38 37 75 5.8 1,152.0 7.2 1,381.0 7.7
Bank of Abyssinia 25 32 57 5.9 29 32 61 4.7 532.0 3.3 691.0 3.8
Wegagen Bank 29 24 53 5.5 33 27 60 4.7 1,093.0 6.9 1,269.0 7.0
United Bank 18 32 50 5.2 29 40 69 5.4 748.0 4.7 785.0 4.4
Nib International Bank 19 32 51 5.3 20 38 58 4.5 983.0 6.2 1,242.0 6.9
Cooperative Bank of
Oromiya 38 5 43 4.4 45 6 51 4.0 207.0 1.3 338.0 1.9
Lion International Bank 17 13 30 3.1 19 17 36 2.8 318.0 2.0 357.0 2.0
Oromia International Bank 25 11 36 3.7 29 12 41 3.2 265.0 1.7 393.0 2.2
Zemen Bank 0 3 3 0.3 3 4 7 0.5 193.0 1.2 290.0 1.6
Buna International Bank 2 9 11 1.1 14 11 25 1.9 220.0 1.4 257.0 1.4
Berhan International Bank 3 7 10 1.0 7 8 15 1.2 138.0 0.9 211.0 1.2
Abay Bank 7 1 8 0.8 21 4 25 1.9 161.0 1.0 250.0 1.4
Addis International Bank n/a n/a 0 0.0 1 4 5 0.4 117.0 0.7 155.0 0.9
Total Private Banks 250 237 487 50.2 327 287 614 47.6 7,231.0 45.3 8,876.0 49.3
3.Grand Total Banks 621 349 970 100 859 430 1,289 100.0 15,949.0 100 18,010.0 100
Source: Commercial Banks

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National Bank of Ethiopia

Table.4.6: Branch Network & Capital of Insurance Companies at a close of June 2012.
(Branch in Number and Capital in Million Birr)

Branch Capital

%
2010/11 2011/12 2010/11 2011/12
Change

Region Region
A.A Total A.A Total A B B/A
No. Insurance Companies s s
1 Ethiopian Insurance Corporation. 11.0 30.0 41 11 35 46 291.0 321.0 10.3
2 Awash Insurance S.C. 18.0 11.0 29 20 11 31 89.0 113.9 27.9
3 Africa Insurance S.C. 6.0 7.0 13 6 7 13 81.0 96.7 19.5
4 National Ins. Co. of Eth. 8.0 8.0 16 9 8 17 27.9 52.5 87.8
5 United Insurance S.C 15.0 8.0 23 15 8 23 88.0 121.9 38.4
6 Global Insurance S.C 6.0 4.0 10 6 4 10 27.8 29.8 7.1
7 Nile Insurance S.C 11.0 10.0 21 11 10 21 100.3 122.9 22.6
8 Nyala Insurance S.C 8.0 8.0 16 10 8 18 96.3 126.0 30.8
9 Nib Insurance S.C 14.0 8.0 22 14 8 22 87.4 102.7 17.5
10 Lion Insurance S.C 6 5 11 6 5 11 17.3 35.2 103.3
11 Ethio-Life Insurance S.C. 0.0 0.0 - 0 0 - 4.9 5.3 7.4
12 Oromia Insurance S.C. 8 8 16 11 8 19 23.9 39.6 65.4
13 Abay Insurance S.C. 1 2 3 1 2 3 11.4 10.4 -8.6
14 Berhan Insurance S.C - - - 6 0 6 9.4 11.4 20.8
15 Tsehay Insurance S.C - - - 3 0 3 0.0 10.9 -
16 Total 112.0 109.0 221.0 129 114 243 955.7 1,200.1 25.6
Source: Insurance Companies
Note: A.A represents Addis Ababa

51
National Bank of Ethiopia

Source: Insurance Companies

By the end of 2011/12, the number of billion while their credit provision rose by
Micro-finance Institutions (MFIs) operating 32.9 percent to Birr 9.3 billion.
in the country was 33. Their total capital and
total asset remarkably increased by 27.5 and The four largest MFI namely Amhara,
31 percent and reached Birr 3.8 billion and Dedebit, Oromia and Omo Crediit and
Birr 13.3 billion, respectively. Savings institution accounted for 75.4
percent of the total capital, 88.0 percent of
Similarly their deposit mobilization and the savings, 82.7 percent of the credit and
credit extension have witnessed a significant 82.7 percent of the total assets of MFIs at
growth. Compared to last year, their the end of 2011/12, reflecting the existence
deposits went up by 44.2 percent to Birr 5.4 of low competition in the industry.

52
National Bank of Ethiopia

Table 4.7: Microfinance Institutions Performance as of June 2012


(In Thousands of Birr)
Micro-Financing Institutions 2010/11 2011/12 Percentage Change
A B B/A

Total Capital 2,945,970.0 3,755,479.9 27.5

Saving 3,779,089.0 5,450,593.5 44.2

Credit 6,991,986.0 9,289,642.6 32.9

Total Assets 10,156,387.0 13,308,200.1 31.0

Source: Microfinance Institutions

4.3.1 Resource Mobilization by Banks

The total resource mobilized by the The surge in demand deposit over saving
banking system in the form of deposit, deposit indicates the relative increase in
loan collection and borrowing increased transaction demand for money. At the
by 16.6 percent and reached Birr 89.2 same time the rise in saving deposits
billion at the end of 2011/12. reflects the ever growing financial
intermediation of banks
Spurred by remarkable branch
expansion, deposit liabilities of the Despite the opening of 127 new branches
banking system reached Birr 187.3 by private commercial banks, the share
billion reflecting annual growth rate of of private banks in deposit mobilization
33.3 percent over last year. Component slightly went down to 31.9 percent from
wise, time deposits registered a 33.3 percent last year. CBE alone
significant increase (143 percent) mobilized 65.9 percent of the total
followed by demand deposits (30.2 deposit due to its wider branch network.
percent), and saving deposits (27.8
percent). Demand deposits accounted for Raising funds through borrowing by the
49.3 percent of the total deposits banking industry was not an important
followed by saving deposits (44 percent) source of resource mobilization as most
and time deposit (6.7 percent). of the banks were sufficiently liquid due
to the surge in deposit mobilization and
53
National Bank of Ethiopia

collection of loans. As a result, total Loan collection by the banking system


outstanding borrowing at the end of the stood at Birr 35.2 billion 15.2 percent
fiscal year reached Birr 16.9 billion higher than last year. More than half of
in2011/12 up from Birr 9.7 billion a year 52.5 percent of the loan was collected by
earlier. Of the total borrowing, domestic public banks
sources accounted for 93.9 percent, while
foreign sources took the remaining
balance.

54
National Bank of Ethiopia

Table 4.8: Annual Resource Mobilization & Disbursement Activities of Commercial Banks
and DBE (Specialized Bank) During 2011.

(In Million Birr)

Percent
2009/10 2010/11 2011/12 Change

Public Private Total Public Private Total Public Private


Particulars Banks Banks (A) Banks Banks (B) Banks Banks Total (C) C/A C/B

1. Deposits (net change) 11,863.0 8,618.4 20,481.4 30,423.2 11,475.2 41,898.4 37,004.6 9,754.3 46,758.9 128.3 11.6

Demand 6,813.9 2,067.9 8,881.8 19,721.7 4,971.7 24,693.4 19,199.2 2,213.2 21,412.4 141.1 (13.3)

Savings 4,574.5 6,322.0 10,896.6 10,114.6 6,364.2 16,478.8 12,049.3 5,916.5 17,965.9 64.9 9.0

Time 474.5 228.5 703.0 586.9 139.3 726.2 5,756.0 1,624.6 7,380.6 949.8 916.3

2. Borrowing (net change) 2,597.5 - 2,597.5 4,041.7 - 4,041.7 7,247.1 - 7,247.1 179.0 79.3

Local 2,266.1 - 2,266.1 4,001.0 - 4,001.0 7,232.4 - 7,232.4 219.2 80.8

Foreign 331.4 - 331.4 40.8 - 40.8 14.7 - 14.7 (95.6) (63.9)

3. Collection of Loans 10,168.0 14,898.8 25,066.8 11,987.8 18,560.4 30,548.2 18,479.9 16,707.6 35,187.4 40.4 15.2

4. Total Resources
Mobilized (1+2+3) 24,628.4 23,517.2 48,145.6 46,452.7 30,035.6 76,488.4 62,731.5 26,461.9 89,193.4 85.3 16.6

5. Disbursement 13,939.3 14,965.8 28,905.1 21,955.8 20,252.0 42,207.9 36,949.2 19,152.9 56,102.1 94.1 32.9

6. Change in Liquidity (4-5) 10,689.2 8,551.4 19,240.5 24,496.9 9,783.6 34,280.5 25,782.4 7,308.9 33,091.3 72.0 (3.5)

Memorandum Item:

7. Outstanding Credit* 33,912.8 17,720.8 51,633.5 50,743.5 26,947.0 77,690.5 79,605.7 36,740.4 116,346.1 125.3 49.8

Source: Commercial Banks &Staff Computation


* Includes government borrowing in the form of bonds and treasury bills from commercial banks and other sectors other than NBE

4.9: Deposits and Borrowings of Commercial Banks and DBE At June 30, 2012
(In Million Birr)
2009/10 2010/11 2011/12
B/A C/B
Particulars A B C
A. Deposits
-Demand 46149.0 70842.4 92254.8 53.5 30.2
-Savings 48049.9 64528.7 82494.6 34.3 27.8
-Time 4434.4 5160.6 12541.3 16.4 143.0
Total 98633.3 140531.8 187290.7 42.5 33.3
B. Borrowings
-Local 4665.6 8666.5 15898.9 85.8 83.5
-Foreign 978.7 1019.4 1034.1 4.2 1.4
Total 5644.2 9686.0 16933.1 71.6 74.8
Source: Commercial Banks &Staff Computation

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National Bank of Ethiopia

4.3.2 New Lending Activities.


Despite the tight monetary policy
measures followed by the National Bank Regarding loan allocation by sector, 29.4
of Ethiopia, the fiscal year witnessed a percent went to industry followed by
32.9 percent increase in fresh loan agriculture (25.3 percent) and domestic
disbursements by banks, (including DBE) trade (17.3 percent), with other sectors
which reached Birr 56.1 billion in taking up the remaining balance. The
2011/12. This was attributed to enhanced share of the new loan disbursement to
deposit mobilization and loan collection real sector (agriculture, industry and
of the banks. Of the total new loans housing & construction) rose from 51.2
disbursed by the banking system, 34.1 percent last year to 63.8 percent in
percent was by private banks and 2011/12 reflecting the shift in loan from
remainder by public banks. The ratio of trade and other short term loans towards
new loan disbursement of private banks the production sector.
to their total deposit was 32.1 percent
while that of public banks was 29
percent.

Source: Commercial Banks and DBE

56
National Bank of Ethiopia

Table.4.10: Loans and Advances by Lenders 1/ At June 30, 2012


(In Million Birr)
2010/11 2011/12
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 17796.8 10156.7 34,217.7 31940.3 15718.4 58,327.0 79.5 54.8 70.5
3. Construction & Business Bank 367.2 593.8 1,726.6 460.8 605.4 1,803.1 25.5 2.0 4.4
2.Development Bank of Ethiopia 3791.8 1237.3 11,980.5 4548.1 2156.1 15,120.0 19.9 74.3 26.2
Sub-Total 21,955.8 11,987.8 47,924.8 36,949.2 18,479.9 75,250.1 68.3 54.2 57.0
B. Private Banks
4 Awash International Bank 4654.0 4257.3 3994.8 2467.2 2204.7 5511.6 -47.0 -48.2 38.0
5. Dashen Bank 2912.0 2748.1 6141.7 3632.4 3380.4 8042.0 24.7 23.0 30.9
6. Bank of Abyssinia 2497.9 2338.4 3315.9 2101.7 1998.0 3897.7 -15.9 -14.6 17.5
7. Wegagen Bank 2612.0 2640.7 2910.0 2556.5 2370.4 3565.7 -2.1 -10.2 22.5
8. United Bank 2557.1 2287.4 3277.0 2358.1 2228.6 4085.4 -7.8 -2.6 24.7
9. Nib International Bank 1645.0 1724.9 2766.5 2093.4 1755.5 3708.2 27.3 1.8 34.0
10. Cooperative Bank of Oromia 660.2 703.6 799.5 669.0 407.4 1383.5 1.3 -42.1 73.1
11. Lion International Bank 472.9 514.8 677.0 568.8 454.6 970.8 20.3 -11.7 43.4
12. Oromia International Bank 649.4 465.4 645.2 786.7 745.8 1012.7 21.2 60.2 57.0
13. Zemen Bank 817.4 490.0 661.7 579.5 467.6 1019.6 -29.1 -4.6 54.1
14.Berhan International Bank 312.4 192.0 330.0 254.2 165.1 499.6 -18.6 -14.0 51.4
15.Bunna International Bank 309.5 187.0 366.3 472.8 296.5 649.1 52.8 58.6 77.2
16.Abay Bank 152.3 10.8 161.0 453.0 213.4 450.4 197.5 1876.1 179.8
17. Addis International Bank 0.0 0.0 0.0 159.6 19.5 154.2 - - -
Sub-Total 20,252.0 18,560.4 26,046.6 19,152.9 16,707.6 34,950.5 -5.4 -10.0 34.2
Grand Total 42,207.9 30,548.2 73,971.4 56,102.1 35,187.4 110,200.6 32.9 15.2 49.0
Source: Commercial Banks & DBE
1. O/S Credit excludes lending to central government
D*=Disbursement, C*=Collection, O/S*= Outstanding Credit

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National Bank of Ethiopia

Table 4.11: Percentage Share of Loans and Advances by Lenders at June 30, 2012
(In Million Birr)
2010/11 2011/12
D* C* O/S* D* C* O/S* Percentage change
Lenders A B C D E F D/A E/B F/C
Public Banks
1.Commercial Bank of Ethiopia 42.2 33.2 46.3 56.9 44.7 52.9 35.0 34.4 14.4
2.Development Bank of Ethiopia 9.0 4.1 16.2 0.8 1.7 1.6 -90.9 -57.5 -89.9
3. Construction & Business Bank 0.9 1.9 2.3 8.1 6.1 13.7 831.8 215.2 487.8
Sub-Total 52.0 39.2 64.8 65.9 52.5 68.3 26.6 33.8 5.4
B. Private Banks
4 Awash International Bank 11.0 13.9 5.4 4.4 6.3 5.0 -60.1 -55.0 -7.4
5. Dashen Bank 6.9 9.0 8.3 6.5 9.6 7.3 -6.2 6.8 -12.1
6. Bank of Abyssinia 5.9 7.7 4.5 3.7 5.7 3.5 -36.7 -25.8 -21.1
7. Wegagen Bank 6.2 8.6 3.9 4.6 6.7 3.2 -26.4 -22.1 -17.8
8. United Bank 6.1 7.5 4.4 4.2 6.3 3.7 -30.6 -15.4 -16.3
9. Nib International Bank 3.9 5.6 3.7 3.7 5.0 3.4 -4.3 -11.6 -10.0
10. Cooperative Bank of Oromia 1.6 2.3 1.1 1.2 1.2 1.3 -23.8 -49.7 16.2
11. Lion International Bank 1.1 1.7 0.9 1.0 1.3 0.9 -9.5 -23.3 -3.7
12. Oromia International Bank 1.5 1.5 0.9 1.4 2.1 0.9 -8.9 39.1 5.4
13. Zemen Bank 1.9 1.6 0.9 1.0 1.3 0.9 -46.7 -17.1 3.4
14.Berhan International Bank 0.7 0.6 0.4 0.5 0.5 0.5 -38.8 -25.4 1.6
15.Bunna International Bank 0.7 0.6 0.5 0.8 0.8 0.6 14.9 37.7 18.9
16. Abay Bank 0.4 0.0 0.2 0.8 0.6 0.4 123.8 1615.5 87.8
17. Addis International Bank 0.0 0.0 0.0 0.3 0.1 0.1 0.0 0.0 0.0
Sub-Total 48.0 60.8 35.2 34.1 47.5 31.7 -28.8 -21.9 -9.9
Grand Total 100.0 100.0 100.0 100.0 100.0 100.0 0.0 0.0 0.0
Source: Commercial Banks & DBE
D*=Disbursement, C*=Collection, O/S*= Outstanding Credit

4.3.3 Outstanding Loans

Total outstanding credit of the banking cooperatives rose by 32 and 64.1 percent,
system including the central government respectively.
increased by 49.8 percent and reached
Birr 116.3 billion at end June 2012. Gross The sectoral distribution of outstanding

outstanding claims on the central loans indicated that credit to Industry

government and public enterprises surged accounted for 28.8 percent followed by

by 65.2 and 102.3 percent, while claims international trade (21.5 percent) and

on the private sector including agriculture (14.8 percent).

58
National Bank of Ethiopia

Table 4.12: Loans & Advances by Economic Sectors 1


2010/11 2011/12 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 3,719.1 0 0 6,145.6 - - 65.2

Agriculture 8,248.0 5,114.4 10,575.3 14,175.4 8,686.4 17,165.6 71.9 69.8 62.3

Industry 10,465.2 3,556.5 20,650.5 16,511.9 5,706.6 33,557.3 57.8 60.5 62.5

Domestic Trade 6,733.5 6,148.3 7,261.1 9,700.7 6,548.9 12,074.7 44.1 6.5 66.3

International Trade 10,569.9 9,943.5 18,025.7 7,061.3 7,489.3 25,015.6 (33.2) (24.7) 38.8

Export 5,921.4 6,078.5 7,222.8 2,659.5 2,733.6 10,720.6 (55.1) (55.0) 48.4

Import 4,648.5 3,895.6 10,802.8 4,401.8 4,755.7 14,294.8 (5.3) 22.1 32.3

Hotels and Tourism 395.4 333.1 1,435.5 456.3 433.7 1,650.5 15.4 30.2 15.0

Transport and Communication 1,850.6 1,455.4 3,558.6 1,917.3 1,724.6 4,428.9 3.6 18.5 24.5

Housing and Construction 2,900.9 2,739.5 9,023.1 5,083.4 3,440.1 12,397.4 75.2 25.6 37.4

Mines, Power and Water resource 7.3 14.9 37.2 16.2 16.3 31.9 123.5 9.5 (14.1)

Others 711.9 729.0 3,076.6 907.0 931.4 3,172.3 27.4 27.8 3.1

Personal 311.7 359.4 315.0 183.8 174.6 430.1 (41.0) (51.4) 36.5

Interbank Lending 13.66 123.6 12.9 88.8 35.5 276.4 549.9 (71.3) 2,038.3

Total 42,207.9 30,548.2 77,690.5 56,102.1 35,187.4 116,346.1 32.9 15.2 49.8
Source: Commercial Banks including DBE & Staff Computation
D*=Disbursement, C*=Collection, O/S*= Outstanding Credit
1/ includes lending to central government

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National Bank of Ethiopia

Source: Commercial Banks including DBE & Staff Computation

Table 4.13: Loans and Advances by Borrowers1atst June 30, 2012


(In Million Birr)
2008/09 2009/10 2010/11 2011/12
O/S* O/S* O/S* D* C* O/S* Percentage change
Borrowing Sector A B C E F G G/B G/C

Central Government 5,628.8 7,600.1 3,719.1 - 0.0 6,145.6 -19.1 65.2

Public Enterprises 8,170.8 8,442.7 13,687.9 13,534.5 3,753.4 27,694.9 228.0 102.3

Cooperatives 3,364.5 5,077.8 8,377.5 12,116.3 8,197.2 13,750.2 170.8 64.1

Private & Individuals 34,041.9 40,910.7 51,893.1 30,362.6 23,201.4 68,479.1 67.4 32.0

Inter-bank Lending 427.5 260.9 12.9 88.8 35.5 276.4 6.0 2038.3

Total 51,633.5 62,292.2 77,690.5 56,102.1 35,187.4 116,346.1 86.8 49.8

Total less Inter-bank Lending 51,206.0 62,031.3 77,677.5 56,013.3 35,151.9 116,069.7 87.1 49.4
Source: Commercial Banks including DBE & Staff Computation
D*=Disbursement, C*=Collection, O/S*= Outstanding Credit
1/ Includes lending to central government

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National Bank of Ethiopia

4.4 Financial Activities of NBE

By the end of 2011/12, outstanding on DBE rose from Birr 9.3 billion to Birr
claims of NBE on the central government 12.5 billion.
reached Birr 55.56 billion of which direct
advances stood at Birr 46.3 billion or Regarding liabilities of NBE, total
83.3 percent of the total claim, while deposits at the NBE dropped by 24.4
bond holdings accounted for the percent to Birr 30.8 billion due to lower
remaining 16.7 percent. By the end of deposits of financial institutions and
2011/12, the outstanding claim of NBE central government.

Table 4.14: Financial Activities of National Bank of Ethiopia at the Close of June 30, 2012
(In Million Birr)
2009/10 2010/11 2011/12 % Change
Particulars A B C B/A C/B
Loans and Advances (1+2) 45,522.8 61,864.6 68,064.5 35.9 10.0
1.Claims on Central Government 45,522.8 55,614.6 55,562.5 22.2 -0.1
1.1 Direct Advance 36,044.1 46,265.0 46,264.9 28.4 0.0
1.2 Bonds 9,478.7 9,349.6 9,297.5 -1.4 -0.6

2. Claims on DBE - 6,250.0 12,502.0 - 100.0

3. Deposit Liabilities 27,107.8 40,705.9 30,756.9 50.2 -24.4


3.1 Government 6,182.5 10,290.9 10,218.4 66.5 -0.7
3.2 Financial Institutions 20,925.3 30,415.0 20,538.5 45.4 -32.5
Source: NBE and Staff Computation

4.5. Developments in Financial Markets

Treasury bill market is the only regular Government bonds are also occasionally
primary market where securities are issued to finance government
transacted on a weekly basis. There is no expenditures and/or to absorb excess
secondary market for the security. liquidity in the banking system.

61
National Bank of Ethiopia

4.5.1 NBE Treasury Bill Market

The amount of Treasury-bills offered to continued to dominate in the market by


the weekly auction market during the holding 88.1 percent of the total
fiscal year reached Birr 96.5 billion, outstanding T-bills. At the end of
depicting 15.7 percent annual growth 2011/12, the total outstanding T-bills
while total demand increased by 38.4 went up by 85.4 percent to Birr 20
percent. billion.

The amount of T-bills sold during the The average weighted yield for all types
year was Birr 74.7 billion (96.8 percent of bills increased to 1.87 from 1.13
of total demand), depicting a 42.8 percent percent last year. The yields for 28-days,
rise. 91-days and 182 days T-bills grew by

Albeit improved participation of banks in 73.5, 17.9 and 83.2 percent, respectively

the T-bill market, non-bank institutions over last year.

62
National Bank of Ethiopia

Table 4.15: Results of Treasury Bills Auction at June 30, 2012

2009/10 2010/11 2011/12 Percentage Change


Particulars A B C C/A C/B
Number of Bidders 280 220 406 45.0 84.5
Amount Demanded (Mn.Birr) 51,258.015 55,760.025 77,194.810 50.600 38.4
28-day bill 19,760.000 30,635.000 33,689.070 70.491 9.969
91-day bill 27,553.755 22,159.875 28,691.740 4.130 29.476
182-day bill 3,944.260 2,965.150 9,748.000 147.144 228.752
364-day bill 5,066.000 - -

Amount Supplied (Mn.Birr) 55,203.315 83,390.670 96,511.875 74.8 15.7


28-day bill 15,110.000 41,575.900 40,023.990 164.884 -3.733
91-day bill 28,150.495 35,152.630 35,435.585 25.879 0.805
182-day bill 11,942.820 6,662.140 16,652.300 39.434 149.954
364-day bill 4,400.000 - -
Amount Sold (Mn.Birr) 41,736.415 52,316.025 74,694.810 79.0 42.8
Banks 13,902.000 20,271.275 24,212.670 74.167 19.443
Non-Banks 27,834.415 32,044.750 50,482.140 81.366 57.536
Average Weighted Price for
Successful bids(Birr) 97.017 99.745 98.556 1.586 -1.192
28-day bill 99.943 99.886 99.806 -0.137 -0.080
91-day bill 99.757 99.703 99.653 -0.105 -0.051
182-day bill 91.352 99.645 97.254 6.461 -2.400
364-day bill 97.513 - -
Average Weighted Yeild for
Successful bids(%) 0.786 1.126 1.866 137.299 65.671
28-day bill 0.750 1.460 2.533 237.809 73.497
91-day bill 0.976 1.186 1.399 43.336 17.944
182-day bill 0.633 0.732 1.342 112.004 83.201
364-day bill 2.189 - -
Outstanding bills at the end of
period(Mn.Br.) 11,566.200 10,796.620 20,011.860 73.020 85.353
Banks 4,400.000 900.000 2,383.500 -45.830 164.833
Non-Banks 7,166.200 9,896.620 17,628.360 145.993 78.125
Source: NBE

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National Bank of Ethiopia

4.5.2 NBE Bill Market

On April 4, 2011, NBE introduced NBE over all economic growth. Since its
Bill to mobilize resource from banks to introduction total NBE bill purchased by
help long term financing of some priority the banking sector reached Birr 12.84
sectors identified as the driving forces for billion at the end of the fiscal year.

Fig IV.9:Treasury Bills Auction Result

120000.00 3.00

100000.00 2.50
Value in Millions of Birr

80000.00 2.00

60000.00 1.50

40000.00 1.00

20000.00 0.50

0.00 0.00

Year

Demand Supply Average Weighted Yield

Source: NBE

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National Bank of Ethiopia

4.5.3. Bonds Market

In recent years, following the strong for 79.2 percent, regional states and DBE
growth in economic activities and real 17.8 percent and 3 percent, of total bond
income, there was strong demand for holdings by CBE.
corporate bonds. As a result, corporate Public institutions and regional
bond holdings of CBE increased by 53.5 governments are the sole issues of
percent to Birr 61.8 billion in 2011/12 corporate bonds.
from Birr 40.3 billion a year ago.
Corporate bonds of EEPCO accounted

Table 4.16: Disbursement, Redemption and Outstanding of Coupon and Corporate Bond
Purchases by the Banking System at the end of June 30, 2012
(In Millions of Birr)
Percentage
Annual Change
2010/11 2011/12
Particulars A B B/A
1. Corporate Bond Purchases by holders 18,157.0 23,501.0 29.4
EEPCO 13,000.0 19,300.0 48.5
Regional governments 3,007.0 4,101.0 36.4
Development Bank of Ethiopia 2,150.0 100.0 -95.3
Private Sector
2. Redemption of Bonds by Clients 5,611.7 1,740.3 -69.0
EEPCO 0.0 0.0 0.0
Regional governments 1,167.1 1,740.3 49.1
Development Bank of Ethiopia 4,444.6 0.0 -100.0
Private Sector
3. Outstanding Bonds by Clients 40,258.3 61,786.7 53.5
EEPCO 29,600.0 48,900.0 65.2
Regional governments 8,858.3 11,015.8 24.4
Development Bank of Ethiopia 1,800.0 1,870.9 3.9
Private Sector
Source: Commercial Bank of Ethiopia

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National Bank of Ethiopia

4.5.4. Inter-bank Money Market


The interbank money market was not active 1998, merely twenty three transactions to
in Ethiopia due to the existence of excess the tune of Birr 259.2 million were
reserves in the banking system. conducted with interest rates ranging
Accordingly, no inter-bank money market between 7 to 11 percent per year. The
transaction has been conducted since April maturity period of these loans widely
2008. Since the introduction of the spanned from overnight to 5 years.
interbank money market in September

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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National Bank of Ethiopia

V. DEVELOPMENTS IN EXTERNAL SECTOR


5.1 Overall Balance of Payments

The overall balance of payments in Meanwhile, although net private transfers


2011/12 recorded a deficit of USD 972.8 improved in the same period, the current
million in contrast to USD 1.4 billion account deficit worsened to USD 2.8
surplus registered in the preceding year. billion from USD 210.6 million in the
previous year. As a result, net transfers to
The trade deficit also widened by 43.6 GDP ratio declined to 11.8 percent from
percent during the review period owing to 14.7 percent a year ago.
a 34 percent growth in merchandise
imports compared to moderate increase
(14.8 percent) in merchandise exports.

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National Bank of Ethiopia

Table 5.1: Balance of Payments


(In Millions of USD)
Particulars 2009/10 2010/11 2011/12 Percentage Change
S/N A B C B/A C/B
1 Exports,f.o.b. 2,003.1 2,747.1 3,152.7 37.1 14.8
Coffee 528.3 841.8 833.0 59.3 -1.0
Other 1,474.8 1,905.3 2,319.7 29.2 21.7
2 Imports 8,268.9 8,253.3 11,061.2 -0.2 34.0
Fuel 1,310.7 1,659.3 2,124.7 26.6 28.0
Cereals 513.1 196.0 652.5 -61.8 232.9
Aircraft 0.8 24.7 42.1 2,987.5 70.6
Imports excl. fuel, cereals, aircraft 6,444.3 6,373.3 8,241.8 -1.1 29.3
3 Trade Balance (1-2) -6,265.8 -5,506.2 -7,908.5 -12.1 43.6
4 Services,net 457.4 688.1 74.9 50.4 -89.1
Non-factor services, net 513 757.6 171.1 47.7 -77.4
Exports of non-factor services 2,044.0 2,585.5 2,810.5 26.5 8.7
Imports of non-factor services 1531 1,827.9 2,639.4 19.4 44.4
Income, net -55.3 -69.5 -96.2 25.7 38.4
O/w Gross official int. payment 31.9 51.9 89.1 62.7 71.7
Dividend -26.6 -28.1 -15.5 5.6 -44.8
5 Private transfers 2,709.6 2,746.7 3,245.8 1.4 18.2
o/w: Private Individuals 1,847.3 1,886.3 1,945.9 2.1 3.2
6 Current account balance (3+4+5) -3,098.8 -2,071.4 -4,587.8 -33.16 121.48445
Current account balance (excluding
official transfers) %age of GDP -10.4 -6.6 -10.7
7 Official transfers 1,905.6 1,860.7 1,787.9 -2.4 -3.9
8 Current account balance (6+7) -1,193.2 -210.6 -2,799.8 -82.3 1,229.3
Current account balance as %age
of GDP -4.0 -0.7 -6.6
9 Capital account 1,996.2 2,535.5 2,119.8 27.0 -16.4
Off. Long-term Cap., net 857.16 1,019.3 937.8 18.9 -8.0
Disbursements 893.96 1,054.5 1,007.0 18.0 -4.5
Amortization 36.8 35.2 69.2 -4.3 96.7
Other pub. long-term cap. 186.4 430.3 230.8 130.8 -46.4
Foreign Direct Investment(net) 956.4 1,242.5 1,072.1 29.9 -13.7
Sht-trm Capital -3.8 -156.6 -120.9
10 Errors and omissions -486.3 -940.7 -292.7
11 Overall balance (8+9+10) 316.6 1,384.2 -972.8
12 Financing -316.6 -1,384.2 972.8
13 Reserves (-; Increase) -304.6 -1,375.8 980.8
14 Central Bank (NFA) 57.8 -932.2 846.5
Asset -397.7 -1,065.0 810.0
Liabilities 455.5 132.8 36.6
15 Commercial banks (net) -362.4 -443.6 134.3
16 Debt Relief -12.0 -8.4 -8.0
Principal 9.8 7.8 6.7
Interest 2.2 0.6 1.3
Source: NBE Staff Compilation

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National Bank of Ethiopia

Table 5.2: Components of External Trade as Percentage of GDP

2009/10 2010/11 2011/12 Percentage Change


Particulars A B C B/A C/B
Exports 6.7 8.7 9.5 29.9 9.2
Imports 27.8 26.0 33.2 -6.5 27.7
Trade Balance -21.1 -17.4 -23.7 -17.5 36.2
Net Services 1.5 2.2 0.2 40.9 -89.6
Net Private Transfers 15.5 14.5 15.1 -6.5 3.9
Current Account Deficit (excluding official transfers) -10.4 -6.5 -13.8 -37.4 110.6
Current Account Deficit (including official transfers) -4.0 -0.7 -8.4
Source: NBE Staff Compilation

Source: NBE Staff Computations

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National Bank of Ethiopia

5.2 Developments in Merchandise Trade

The deficit in merchandise trade during Compared to same period last year,
2011/12 was widened by 42.8 percent to export to GDP ratio and import to GDP
USD 7.9 billion, relative to the preceding ratios was declined by 1.3 and 0.4
fiscal year mainly due to higher growth in percentage points respectively from 8.7
total imports than total exports. percent and 26.3 percent last year.

5.2.1 Exports
Total export proceeds during 2011/12 9 percent growth in volume and 19.7
amounted to USD 3.15 billion, about 14.8 percent increase in international price.
percent higher than the previous fiscal Revenue from gold accounted for 19.1
year. The growth was largely attributed to percent of total export earnings.
increased earnings from oilseeds (44.6 Export of live animals earned USD 207.1
percent), gold (30.5 percent), live animals million, depicting a 40 percent growth
(40 percent), pulses (15.8 percent), flower over the preceding year owing to a rise in
(12.4 percent), meat & meat products the volume of exports (28.4 percent) and
(24.5 percent), fruits and vegetables (42.7 higher international price (9 percent).
percent), leather & leather products (5.9 Earnings from live animals contributed
percent), and chat (0.8 percent). 6.6 percent of the total merchandise
Earnings from export of oilseeds grew by export proceeds.
44.6 percent and reached USD Driven by marginal improvement in the
472.3 million, as a result of significant volume of export (0.7 percent) and
increment in volume of export (44.6 moderate rise in international price (15
percent) and marginal improvement in percent); export proceeds from pulses
international price (0.03 percent). increased by 15.8 percent to USD 159.7
million accounting for 5.1 percent of the
Revenue from gold rose by 30.5 percent total merchandise exports.
annually to USD 602.4 million driven by

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National Bank of Ethiopia

Earning from flower was USD 197 increase in international price. As a


million, 12.4 percent higher than a year result, revenue from this export item
ago owing to 12.6 percent growth in accounted for 2.5 percent of the total
volume despite 0.2 percent decline in export, earnings.
world price. The share of flower export
in total export revenue was 6.3 percent, Earnings from export of fruits and
down from 8.5 and 6.4 percent in the last vegetables at USD 44.9 million showed a
consecutive two years, respectively. 42.7 percent annual growth driven by
higher volume of exports (34.9 percent)
and international price (5.8 percent).
Similarly, earnings from export of meat
Fruits and vegetables export accounted
& meat products rose by 24.5 percent to
for 1.4 percent of the total export
USD 78.8 million as a result of 4.7
revenue.
percent growth in volume and 19 percent

Table 5.3: Values of Major Export Items


(In Millions of USD)
2009/10 2010/11 2011/12
Share Share Share Percentage
Value Value Value
(%) (%) (%) Change
Particulars A B C C/B C/A
Coffee 528.3 26.4 841.8 30.6 833.1 26.4 -1.0 57.7
Oilseeds 358.5 17.9 326.6 11.9 472.3 15.0 44.6 31.7
Leather & Leather products 56.4 2.8 103.8 3.8 109.9 3.5 5.9 95.0
Pulses 130.1 6.5 137.9 5.0 159.7 5.1 15.8 22.7
Meat & Meat Products 34.0 1.7 63.3 2.3 78.8 2.5 24.5 131.8
Fruits & Vegetables 31.5 1.6 31.5 1.1 44.9 1.4 42.7 42.8
Live Animals 90.7 4.5 147.9 5.4 207.1 6.6 40.0 128.2
Chat 209.5 10.5 238.3 8.7 240.3 7.6 0.8 14.7
Gold 281.4 14.0 461.7 16.8 602.4 19.1 30.5 114.1
Flower 170.2 8.5 175.3 6.4 197.0 6.2 12.4 15.7
Others 112.5 5.6 219.1 8.0 207.1 6.6 -5.4 84.1
Total 2003.1 100.0 2747.1 100.0 3152.7 100.0 14.8 57.4
Source: Ethiopian Revenue and Customs Authority

Leather & leather products earned USD international price despite 14.2 percent
109.9 million, about 5.9 percent higher decline in volume. However, their share
than the previous year. This increment in the total export declined to 3.5 percent
ascribed to a 23.4 percent rise in from 3.8 percent in the previous period.
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National Bank of Ethiopia

USD 833.0 million. This slight fall in


Export of chat rose slightly by 0.8 percent export proceeds from coffee was solely
and reached USD 240.3 million owing to attributed to the 13.6 percent decline in
marginal increase in volume and volume of export despite higher price. As
improved price. The share of Chat in total a result, the share of coffee in total
export was 7.6 percent. exports went down to 26.4 percent from
30.6 percent last year.
Revenue, from export of coffee declined
by 1 percent in 2011/12 and amounted to

Source: Ethiopian Revenue and Customs Authority

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National Bank of Ethiopia

Source: NBE Staff Compilation

Table 5.4: Volume of Major Exports


(In Millions of K.G.)
2009/10 2010/11 2011/12 Percentage Change

Particulars A B C C/B C/A


Coffee 172.2 196.1 169.4 -13.6 -1.6
Oilseeds 299.0 254.2 367.4 44.6 22.9
Leather and Leather products 2.9 5.2 4.4 -14.2 52.6
Pulses 225.7 224.5 226.2 0.7 0.2
Meat & Meat Products 10.2 16.9 17.7 4.7 73.5
Fruits & Vegetables 66.3 91.6 123.5 34.9 86.2
Live Animals 67.9 112.8 144.9 28.4 113.3
Chat 36.1 41.0 41.1 0.2 13.8
Gold 0.0089 0.0112 0.0122 9.00 36.76
Flower 36.0 41.6 46.8 12.6 30.1
Source: Ethiopian Revenue and Customs Authority

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National Bank of Ethiopia

Source: Ethiopian Revenue and Customs Authority

Table 5.5: Unit Value of Major Exports


(In USD per K.G.)

2009/10 2010/11 2011/12 Percentage Change


A B C C/B C/A
Coffee 3.1 4.3 4.9 14.6 60.3
Oilseeds 1.199 1.285 1.285 0.03 7.2
Leather and Leather products a 19.4 20.1 24.8 23.4 27.7
Pulses 0.58 0.61 0.71 15.0 22.5
Meat & Meat Products 3.3 3.8 4.5 19.0 33.6
Fruits & Vegetables 0.47 0.34 0.36 5.8 -23.3
Live Animals 1.34 1.31 1.43 9.0 7.0
Chat 5.81 5.82 5.85 0.6 0.8
Gold 31.6 41.3 49.4 19.7 56.5
Flower 4.73 4.22 4.21 -0.2 -11.1
Source: Calculated from Tables 5.3 and 5.4

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National Bank of Ethiopia

Source: NBE Staff Compilation

5.2.2. Imports

Compared to last year, total merchandise percent from 27.8 percent in the
import in 2011/12 surged by 33.8 percent preceding year.
to USD 11.06 billion owing to growth in
Similarly, fuel import bill rose by 28.1
imports of consumer goods (53.9
percent in 2011/12 and amounted to USD
percent), fuel (28.1 percent), and semi-
2.12 billion. This was due to higher
finished goods (59.4 percent), capital
volume of export (20.4 percent) and
goods (7.4 percent) and raw materials
improvement in international fuel price
(8.4 percent).
(16.6 percent)5. As a result, the share of
fuel in total import bill went down to 19.2
Imports of consumer goods rose
percent from 20.1 percent recorded last
considerably by 53.9 percent mainly due
year same period.
to 70.1 percent increment in imports of
non-durable goods. The boost in imports
of cereals (232.9 percent) was the main
factor for higher import of non-durably.
Consequently, the share of consumer
goods in total imports increased to 31.9 5
Information on international fuel price was
obtained from U.S. Energy Information
Administration

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National Bank of Ethiopia

Meanwhile, import of capital goods Import bill of semi-finished goods was


increased by 7.4 percent over the USD 1.96 billion, which was 59.4 percent
previous year and amounted to USD 2.96 higher than last year. Import of fertilizer
billion. The increase was due to a rise in surged by 76.6 percent and reached USD
import of transport goods (17.7 percent), 604.6 million, driven by the rising global
agricultural goods (87.9 percent) and prices and increased volume of imports.
industrial goods (1.4 percent). Capital
During that time, raw material imports
goods import accounted for 26.8 percent
rose by 8.7 percent relative to the
of the total import during the period.
preceding year and constituted 1.8
percent of the total imports.
Table 5.6: Value of Imports by End Use
(In Millions of USD)
2009/10 2010/11 2011/12
Share Share Share Percentage
Value (%) Value (%) Value (%) Change
Categories A B C C/B C/A
Raw Materials 212.4 2.6 183.7 2.2 199.7 1.8 8.7 -6.0
Semi-finished Goods 1,226.5 14.8 1,228.0 14.9 1,957.2 17.7 59.4 59.6
Fertilizers 249.4 3.0 342.4 4.1 604.6 5.5 76.6 142.4
Fuel 1,310.7 15.9 1,659.3 20.1 2,124.8 19.2 28.1 62.1
Petroleum Products 1,303.0 15.8 1,648.8 20.0 2,078.3 18.8 26.1 59.5
Others 7.7 0.1 10.5 0.1 46.4 0.4 340.5 502.9
Capital Goods 2,886.3 34.9 2,757.0 33.4 2,961.7 26.8 7.4 2.6
Transport 509.8 6.2 688.1 8.3 809.7 7.3 17.7 58.8
Agricultural 59.8 0.7 63.6 0.8 119.5 1.1 87.9 99.8
Industrial 2,316.7 28.0 2,005.4 24.3 2,032.5 18.4 1.4 -12.3
Consumer Goods 2,515.7 30.4 2,294.8 27.8 3,531.7 31.9 53.9 40.4
Durables 865.0 10.5 868.5 10.5 1,105.3 10.0 27.3 27.8
Non-durables 1,650.7 20.0 1,426.3 17.3 2,426.4 21.9 70.1 47.0
Miscellaneous 117.3 1.4 130.5 1.6 286.3 2.6 119.3 144.0
Total Imports 8,268.9 100.0 8,253.3 100.0 11,061.2 100.0 34.0 33.8
Source: Ethiopian Revenue and Customs Authority

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National Bank of Ethiopia

5.2.3 Direction of Trade

Ethiopia’s merchandise exports have vast products, natural gums and vegetables.
market in Europe, accounting for 47.1 Coffee, meat & meat products, oilseeds,
percent of the total merchandise exports. live animals and flower were exported to
Within European countries, Switzerland, Saudi Arabia. Meat & meat products,
accounting for about 38.6 percent of the pulses, live animals, oilseeds, vegetables,
total exports, was the largest market natural gum, flower and food were the
mainly for gold. Germany, the second major export products sold to United
important market in the continent Arab Emirates. Israel bought mainly
accounting for 20.7 percent, mainly oilseeds, coffee and vegetables while
imported coffee, textile & garments, Japan imported mainly coffee, oilseeds,
flower and leather & leather products. and flower.
The Netherlands, constituting 14.6
percent of Ethiopia’s export to Europe, Meanwhile, about 18.9 percent of

was an important export destination Ethiopia’s total exports went to African

primarily for flower, gold, vegetable and nations of which Somalia, Sudan,

coffee. Italy with 5.4 percent of the total Djibouti, and Egypt together accounted

Ethiopian exports to the Europe was the for 93.3 percent of the total exports to the

market for coffee, leather & leather continent. Exports to Somalia mainly

products, textile & garment and pulses. included vegetables, live animals and
chat. Live animals, coffee, pulses and

About 30 percent of the total Ethiopian spices were the main exports to Sudan.

exports were shipped to Asian market, of Djibouti imported vegetables, live

which China accounted for 34.6 percent, animals, chat, textile & garments, fruits

Saudi Arabia 21.7 percent, United Arab and pulses whilst Egypt bought live

Emirates 8.1 percent, Israel 6.4 percent animals, oilseeds, meat & meat products

and Japan 4.8 percent. The prime export and pulses.

items shipped to China included oilseeds,


leather & leather products, mineral Ethiopia’s exports to American accounted
for 3.4 percent of the total export during

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National Bank of Ethiopia

2011/12 of which United States and coffee, oilseeds, mineral products and
Canada together made up 92.5 percent. leather & leather products while Canada
The United States imported mainly mainly bought coffee.

Fig VI.6 Export by Destinations


Ocea nia
Asia Africa
0.6%
30% 18.9%

America
3.4% Europe
47.1%

Source: NBE staff compilation

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National Bank of Ethiopia

Concerning Ethiopia’s imports, about machinery & aircraft and electrical


65.4 percent of the total merchandise materials were bought from Turkey. The
imports in 2011/12 originated from Asia, major imports from Russia were grain
23 percent from Europe, 6.2 percent from and fertilizer while fertilizer, metal &
America and 5.1 percent from Africa. metal manufacturing, road & motor
vehicles and grain were the principal
Among Asian countries, China accounted imports from Ukraine. Machinery &
for 25.4 percent, Saudi Arabia 21.2 aircraft, road & motor vehicles, metal &
percent, India 12.8 percent, Kuwait 6.6 metal manufacturing, medical &
percent, Japan 6.3 percent, and Indonesia pharmaceutical and electrical materials
3.9 percent. The prime imports from import were imported from Germany.
China included machinery & aircraft, Electrical materials, machinery & aircraft
metal and metal manufacturing, road & and metal & metal manufacturing were
motor vehicles, electric materials, imported from France. Spain mainly
clothing, textiles and rubber products. exported electrical materials, road &
Petroleum products were the major motor vehicles, metal & metal
imports from Saudi Arabia which manufacturing and machinery & aircraft
accounted for 67 percent of the total to Ethiopia.
petroleum import of the nation in
2011/12. About 85.1 percent of Ethiopian imports
from America were from USA and
The share of European countries in total Brazil. These imports mainly include
imports was just 23 percent, of which glass & glass ware, machinery & aircraft,
79.4 percent came from six countries; road & motor vehicles, grain and medical
namely, Italy (15.4 percent), Turkey (14.7 & pharmaceutical imports.
percent), Russia (14.1 percent), Ukraine
(12.3 percent), Germany (7.1 percent) African countries were the sources of 5.1
and France (5.8 percent). Machinery & percent of the total Ethiopian imports.
aircraft, road & motor vehicles, grain, The major imports were from Morocco
metals & metal manufacturing and (32.1 percent), South Africa (20.9
electrical materials were imported from percent), Sudan (19.4 percent), and Egypt
Italy. Metal & metal manufacturing, (15.9 percent) which altogether accounted

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National Bank of Ethiopia

for 88.3 percent of the total import from South Africa. Petroleum products were
Africa. Import from Morocco was mainly the main import from Sudan. Imports
fertilizer. Road & motor vehicles, food & from Egypt included metal & metal
live animals, machinery & aircraft, manufacturing, petroleum products,
medical and pharmaceutical products, rubber products, food & live animals,
metal & metal manufacturing, paper & paper & paper manufacturing.
paper manufacturing, fertilizer, grain and
beverages were the major imports from

Fig. VI. 7 Import by Origin


Oceania Africa
0.2% 5.1% Europe
23%

Asia America
65.4% 6.2%

Source: NBE staff compilation

5.3 Services and Transfers


5.3.1 Services
In 2011/12, net services account recorded year on account of higher net payments
USD 74.9 million inflow, showing 89.1 and decline in government and travel
percent fall compared to the preceding services.

5.3.2 Unrequited Transfers


Net transfers in 2011/12 improved by 9.3 and 3.2 percent private individual
percent, owing to 52.2percent increment transfers mainly cash component. Official
in NGO transfers (both cash and food aid) transfers, however tended to decline.

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National Bank of Ethiopia

Table 5.7 Services Accounts


(In Millions of USD)

2009/10 2010/11 2011/12 Percentage Change


S/N Particulars A B C B/A C/B
1 Investment Income (2+5) -55.3 -69.5 -96.2 25.7 38.4

2 Interest, net (3-4) -28.7 -41.4 -80.7 44.3 94.9

3 Credit 3.2 10.5 8.4 228.1 -20.0

4 Debit 31.9 51.9 89.1 62.7 71.7


5 Dividend, net -26.6 -28.1 -15.5 5.6 -44.8
6 OTHER SERVICES, net (7-8) 513.0 757.6 171.1 47.7 -77.4

7 Exports of non-factor servies 2,044.0 2,585.5 2,810.5 26.5 8.7


Travel 360.1 722.7 680.9 100.7 -5.8
Transport 1 1,101.3 1,319.8 1,690.8 19.8 28.1
Gov't 2 252.6 262.0 212.1 3.7 -19.0
Other 3 330.0 281.0 226.7 -14.8 -19.3
8 Imports of non-factor servies 1,531.0 1,827.9 2,639.4 19.4 44.4

Travel 135.9 147.8 188.2 8.8 27.3

Transport 1 859.9 997.3 1,355.7 16.0 35.9

Gov't 2 27.5 14.6 10.2 -46.9 -30.1

Other 3 507.7 668.2 1,085.3 31.6 62.4

Net Services
9 (10+11+12+13+14) 457.4 688.1 74.9 50.4 -89.1
10 Travel 224.1 574.9 492.6 156.5 -14.3

11 Transport 241.3 322.5 335.1 33.7 3.9


12 Gov't 225.1 247.4 202.0 9.9 -18.4

13 Other -177.8 -387.2 -858.6 117.8 121.7

14 Investment Income -55.3 -69.5 -96.2 25.7 38.4


Source: MOFED, Transport and Telecommunication Companies, NBE- FEMEMD and Staff Compilation.

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National Bank of Ethiopia

Table 5.8 Unrequited Transfers

(In Millions of USD)


2009/10 2010/11 2011/12 Percentage
% % % Change
No. Particulars A Share B Share C Share B/A C/B
1 Private Transfers 2,709.7 58.7 2,746.7 59.6 3,245.9 64.5 1.4 18.2
1.1 Receipts 2,736.2 58.8 2,788.1 59.6 3,318.4 64.7 1.9 19.0

NGOs 888.9 19.1 901.8 19.3 1,372.5 26.8 1.5 52.2


Cash 860.5 18.5 893.5 19.1 1,186.6 23.1 3.8 32.8
Other 28.4 0.6 0.0 0.0 0.0 0.0
Food 0.0 0.0 8.3 0.2 185.9 3.6
Private individuals 1,847.3 39.7 1,886.3 40.3 1,945.9 37.9 2.1 3.2
Cash 790.3 17.0 1,066.4 22.8 1,347.5 26.3 34.9 26.4
In kind 96.7 2.1 63.9 1.4 70.8 1.4 -33.9 10.7
Underground Transfers(in kind) 960.3 20.6 756.0 16.1 527.6 10.3 -21.3 -30.2
1.2 Payments -26.6 74.5 -41.4 55.7 -72.5 75.0 55.9 75.0
2. Official Transfers 1,905.6 41.3 1,860.8 40.4 1,787.9 35.5 -2.3 -3.9
2.1 Receipts 1,914.7 41.2 1,893.7 40.4 1,812.1 35.3 -1.1 -4.3
Cash 1,741.5 37.4 1,863.5 39.8 1,692.3 33.0 7.0 -9.2
Other 0.0 0.0 0.0 0.0 0.0 0.0
Food 173.2 3.7 30.1 0.6 119.8 2.3 -82.6 297.4
2.2 Payments -9.1 25.5 -32.9 44.3 -24.2 25.0 261.6 -26.5

Total Net Transfers 4,615.2 100 4,607.5 100 5,033.8 100 -0.2 9.3
Source: Disaster Prevention and Preparedness Agency, MoFED and NBE

Net official transfers declined by 3.9 official transfers declined by 9.2 percent to
percent owing to lower grants from both USD 1.7 billion while food aid increased to
international financial institutions and USD 119.8 million compared to USD 30.1
bilateral donors. Cash component of million in the previous year.

5.4. Current Account


As a result of widening trade balance, 2.8 billion in 2011/12 from USD 210.6
decline in net services and public transfers, million deficits recorded last fiscal year.
the current account deficit widened to USD

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National Bank of Ethiopia

5.5 Capital Account


In 2011/12, the balance in capital account public long term net capital inflows
showed a surplus of USD 2.12 billion, Likewise, foreign direct investment
about 16.4 percent lower than that of last declined by 13.7 percent compared to last
year owing to a fall in official and other year.

5.6 Changes in Reserve Position


Net foreign assets of the banking system at and commercial banks. The gross
the end of 2011/12 recorded a reserve international reserve of NBE was adequate
drawdown of USD 972.8 million, due to to cover 1.9 months of imports of goods
decreases in the net foreign assets of NBE and non-factor services.

5.7 External Debt


External debt stock of the country at the showed a 23.9 percent annual growth. Of
end of 2011/12 amounted to USD 8.8 the total debt stock, 45.3 percent was owed
billion, depicting a 20.9 percent increase to multilateral and 25.2 percent to bilateral
over the preceding year. This was attributed creditors.
largely to higher debt owed to multilateral
(USD 4 billion) and bilateral creditors The country’s external debt burden as
(USD 2.2 billion). Hence, the country’s measured by debt services to export of
external debt stock to GDP ratio rose to goods and services ratio increased to 7.1
26.5 percent from 23.1 percent in percent from 3.6 percent in the same period
2010/11. Debt stock to total receipts from last year.
export of goods and non-factor services
ratio also slightly rose to 1.5 percent in
from 1.4 percent a year ago.

Similarly, commercial debt stock, reached


USD2.6 billion in 2011/12. It accounted for
29.6 percent of the total debt stock and

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National Bank of Ethiopia

Table 5.9: External Public Debt


(In Million of USD)
Percentage
2009/10 2010/11 2011/12 Change
Particulars A B C B/A C/B
Debt Outstanding
Lender Total 5,569.8 7,318.8 8,846.3 31.4 20.9
Multilateral 2,729.1 3,480.9 4,001.1 27.5 14.9
Bilateral 1,389.7 1,724.5 2,227.5 24.1 29.2
Commercial 1,451.0 2,113.4 2,617.7 45.7 23.9
Drawing by Lender 1,601.2 1,148.5 1,471.8 -28.3 28.1
Lender Total 1,601.2 1,148.5 1,471.8 -28.3 28.1
Drawing by Sector 1,601.2 1,148.5 1,471.8 -28.3 28.1
Sector Total 1,601.2 1,148.5 1,471.8 -28.3 28.1
Debt Service 106.7 204.5 391.8 91.6 91.6
Principal repayments 74.5 151.6 302.1 103.5 99.3
Interest payments 32.2 52.9 89.7 64.1 69.7
Debt stock to GDP ratio (in percent ) 18.7 23.1 26.5 23.1 14.9
Debt stock to export of goods and non-factor
services 1.4 1.4 1.5 -0.5 8.2
Receipts from goods and non-factor services 4,047.0 5,605.6 5557.6 38.5 -0.9

Debt service ratio ( percent )1/ 2.6 3.6 7.1 38.3 93.3

Arrears 0.0 0.0 0.0


Principal 0.0 0.0 0.0
Interest 0.0 0.0 0.0

Relief 12.0 8.4 8.0 -29.8 -5.5


Principal 9.8 7.8 6.7 -20.2 -14.1
Interest 2.2 0.6 1.3 -72.6 106.7
Source: MoFED
1/ Ratio of debt service to receipts from export of goods and non-factor services
Note: Outstanding as at end period.

Developments in Foreign Exchange Markets


Developments in Nominal Exchange Rate

In the inter-bank foreign exchange market, (Table 5.9). Similarly, the Birr weakened
the average weighted exchange rate of the in the parallel foreign exchange market to
Birr depreciated by 7.1 percent year-on- Birr17.9883/USD on average, showing 8.8
year to reach Birr 17.2536/USD percent annual depreciation.
8.8 percent annual depreciation.

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National Bank of Ethiopia

As a result, the average spread between faster depreciation of the Birr in the
the official and parallel market rates parallel market.
widened to 4.3 percent from 2.6 percent
the previous year, mainly due to relatively

Table 5.9 Inter-Bank and Parallel Forex Market Exchange Rates

Amount Traded in
millions of USD Number of Trades
Average Average Rates
Weighted o/w Among in Parallel
Period Rate Total CBs Total o/w Among CBs Market

2009/10 12.8909 12.6 0.0 252.0 0.0 13.6806


Qtr. I 12.3746 3.3 0.0 65.0 0.0 13.2933
Qtr. II 12.5851 3.3 0.0 66.0 0.0 13.3933
Qtr. III 13.1342 3.0 0.0 60.0 0.0 13.8495
Qtr. IV 13.4697 3.1 0.0 61.0 0.0 14.1863

2010/11 16.1178 90.2 25.1 284.0 11.0 16.5292


Qtr. I 14.5535 3.2 0.0 64.0 0.0 14.9833
Qtr. II 16.4667 3.3 0.0 65.0 0.0 16.9567
Qtr. III 16.6342 3.0 0.0 60.0 0.0 17.1067
Qtr. IV 16.8169 80.8 25.1 95.0 11.0 17.0700

2011/12 17.2536 152.2 90.9 292.0 37.0 17.9883


Qtr. I 17.0011 80.3 28.6 75.0 10.0 17.3900
Qtr. II 17.1522 17.5 14.2 73.0 8.0 17.8333
Qtr.III 17.3107 41.4 38.2 78.0 15.0 18.2400
Qtr. IV 17.5503 13.1 10.0 66.0 4.0 18.4900
Source: NBE, Foreign Exchange Monitoring & Reserve Management Directorate and staff compilation

Reflecting the depreciation of the


exchange rate of the Birr in the inter-bank The average premium between forex
foreign exchange market, the average bureau’s buying and selling rates,
retail buying and selling rates of forex however, remained stable at 2 percent
bureau also depreciated by 2.6 percent (Table 5.13).
each and stood at Birr 17.2531/USD and
Birr 17.6002/USD, respectively.

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National Bank of Ethiopia

Table 5.10: End Period Mid Market Rates (USD per Unit of Foreign Currency)

2009/10 2010/11 2011/12 Percentage change

Currency A B C C/B C/A


Pound 1.5052 1.6036 1.5563 -2.9 3.4

Swedish Kroner 0.1279 0.1566 0.1416 -9.6 10.7


Djibouti Frank 0.0057 0.0056 0.0056 0.0 -2.2

Swiss Frank 0.9190 1.1989 1.0365 -13.5 12.8

Saudi Riyal 0.2666 0.2666 0.2666 0.0 0.0


UAE Dirhams 0.2723 0.2723 0.2722 0.0 0.0

Canadian Dollar 0.9523 1.0274 0.9745 -5.2 2.3

Japanese Yen 0.0113 0.0123 0.0126 2.0 11.7

Euro 1.2187 1.4434 1.2450 -13.7 2.2

SDR 1.4796 1.5903 1.5139 -4.8 2.3


Source: Staff Compilation

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

2009/10 2010/11 2011/12 Percentage change

Currency A B C C/B C/A


USD 13.5998 16.9927 17.8192 4.9 31.0

Pound 20.4704 27.2494 27.7320 1.8 35.5

Swedish Kroner 1.7395 2.6612 2.5231 -5.2 45.0

Djibouti Frank 0.0781 0.0954 0.1000 4.9 28.1

Swiss Frank 12.4986 20.3725 18.4693 -9.3 47.8

Saudi Riyal 3.6261 4.5308 4.7513 4.9 31.0


UAE Dirhams 3.7027 4.6264 4.8513 4.9 31.0

Canadian Dollar 12.9510 17.4588 17.3642 -0.5 34.1

Japanese Yen 0.1533 0.2096 0.2243 7.0 46.3


Euro 16.5741 24.5272 22.1849 -9.6 33.9

SDR 20.1222 27.0234 26.9757 -0.2 34.1


Source: Staff Compilation

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National Bank of Ethiopia

During the review year, the end period Since USD is an intervention currency in
mid market exchange rate of the US Ethiopia, the end period exchange rate of
dollar appreciated against major the Birr also followed similar patterns as
international currencies. The highest rate it appreciated against Euro (9.6 percent),
of appreciation was against Euro (13.7 Swiss Frank (9.3 percent), Swedish
percent) and Swiss Frank (13.5 percent), Kroner (5.2 percent), Canadian Dollar
followed by Swedish Kroner (9.6 (0.5 percent) and SDR (0.2 percent). The
percent), Canadian Dollar (5.2 percent), Birr also showed annual depreciation of 7
SDR (4.8 percent) and Pound sterling percent against Japanese Yen and 4.9
(2.9 percent). percent against Djibouti Frank, Saudi
Riyal and UAE Dirham each (Table 5.
However, the US dollar has shown slight
11).
depreciated vis-à-vis Japanese Yen, while
it remained stable with respect to Djibouti
Frank, Saudi Riyal and UAE Dirhams
(Table 5.10).

5.8.2. Movements in Real Effective Exchange Rate

Following the decline in its rate of The nominal effective exchange rate,
depreciation, the real effective exchange however, depreciated by 5.2 percent
rate (REER) appreciated by 22 percent in compared to 20.6 percent depreciation in
2011/12 against 10.8 percent depreciation 2010/11 as domestic annual inflation
in the preceding year, mainly due to tended to slow down from 38 percent to
higher domestic inflation (Table 5.12). 20.5 percent during the review period.

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National Bank of Ethiopia

Table 5.12: Trends in Real and Nominal Effective Exchange Rates

Percentage Change
Year REERI NEERI REER NEER

2005/06 108.6 90.6 _ _


2006/07 120.5 87.4 10.98 -3.49

2007/08 126.6 78.2 5.07 -10.50


2008/09 152.8 72.0 20.69 -7.99
2009/10 124.2 57.5 -18.71 -20.10
2010/11 110.7 45.6 -10.83 -20.66
2011/12 135.1 43.2 22.02 -5.24
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

USD 152.2 million was traded in the inter- Meanwhile, foreign exchange purchase of
bank foreign exchange market during forex bureau of commercial banks declined
2011/12, about 68.7 percent higher than last by 32.5 percent to USD 134.6 million. Their
year. Of the total transactions, USD 90.9 sales of foreign exchange, however, surged
million (or 60 percent) was among from USD 19.7 million in 2010/11 to USD
commercial banks while the remaining USD 88 million in 2011/12 (Table 5.13).
61.3 million was supplied by the NBE (Table
5.9).

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National Bank of Ethiopia

Table 5.13: Foreign Exchange Transactions by Forex Bureaux of Commercial Banks


(In Millions of
USD)
2009/10 2010/11 2011/12 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 40.64 0.20 55.56 1.94 55.77 2.26 0.4 16.3
Bank of Abyssinia 2.96 4.23 5.67 1.69 5.99 7.24 5.6 329.8
Dashen Bank 13.64 20.57 15.48 5.29 17.24 29.56 11.4 459.0
Awash International Bank 8.96 5.96 25.94 3.01 7.08 14.75 -72.7 389.6
Construction & Business
Bank 0.97 0.16 2.27 0.26 4.56 0.91 100.8 247.9
Wegagen Bank 11.78 3.38 16.08 1.29 3.06 4.44 -81.0 245.8
United Bank 30.44 7.90 20.96 2.84 22.30 12.05 6.4 324.2
Development Bank 0.00 0.00 0.00 0.00 0.00 0.00 - -
Nib International Bank 97.41 5.11 52.46 2.33 8.90 7.75 -83.0 232.4
Lion International Bank 7.89 0.97 1.38 0.12 1.94 1.76 40.9 1408.3
Oromia International Bank 2.10 0.25 1.59 0.23 2.35 1.28 48.1 458.9
Zemen Bank 0.54 0.74 0.99 0.61 2.89 3.92 192.3 541.7
Cooperative Bank of Oromia 0.03 0.10 0.03 0.04 0.50 0.70 1727.2 1696.4
Buna International Bank 0.19 0.05 0.92 0.03 1.00 0.05 9.4 38.4
Birhan International Bank 0.00 0.00 0.07 0.04 0.60 1.05 786.2 2752.4
Abay Bank - - - - 0.37 0.21 - -
Addis International Bank - - - - 0.09 0.08 - -
Total 217.5 49.6 199.4 19.7 134.6 88.0 -32.5 346.4
Average Exchange Rate 12.8763 12.8763 16.8116 17.1485 17.2531 17.6002 2.6 2.6
Source: Staff Compilation

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National Bank of Ethiopia

GENERAL GOVERNMENT FINANCE


G o ve r n me n t Fi n a n c e
The overall fiscal performance of the increased to 14.0 percent from 13.7
general government in 2011/12 resulted percent a year ago.
in a deficit of Birr 21.5 billion, which
was less than Birr 24.7 billion Meanwhile, general government
(excluding grants) recorded in 2010/11. expenditure rose by 32.6 percent during
the review period as all of its
Total revenue (including grants) components showed significant
depicted a 35.1 percent growth in increases. The ratio of expenditure to
2011/12 as compared to the preceding GDP became 16.9 which was marginally
year. Thus revenue to GDP ratio less than a year ago (Table 6.1).

6.1 Measuring Fiscal Sustainability (In %)


Fiscal Year PD/GDP IP/RR Debt/GDP R(Debt) R(GDP) Exp/GDP Rev/GDP R(OR)
1999/00 -9.4 9.9 39.8 30.7 13.4 26.6 14.8 2.3
2000/01 -3.7 7.9 40.9 4.9 2.1 23.4 15.7 7.9
2001/02 -7.3 10.1 41.8 0.0 -2.2 26.8 15.8 -1.0
2002/03 -6.6 8.8 38.8 2.4 10.3 28.2 15.3 12.2
2003/04 -3.0 6.1 36.3 10.4 18.0 23.9 16.2 17.2
2004/05 -4.5 5.0 38.2 29.4 22.9 23.5 14.7 13.7
2005/06 -4.7 4.5 37.8 22.3 23.6 22.5 15.0 25.3
2006/07 -3.7 4.1 36.3 25.5 30.6 20.9 12.8 11.6
2007/08 -2.9 3.0 32.5 29.3 44.4 19.1 12.1 36.7
2008/09 -0.9 2.4 26.9 11.5 35.1 17.4 12.1 34.8
2009/10 -1.3 2.4 27.5 17.1 14.2 18.8 14.2 34.1
2010/11 -1.6 2.2 26.8 29.8 33.5 18.5 13.7 28.3
2011/12 -1.2 1.9 25.7 39.5 45.6 16.9 14.0 48.8
Source: Staff Computation
PD = Primary Deficit
IP/RR = Share of interest payments in Recurrent revenue
Ddebt/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 GD
Rev/GDP = Ratio of General Government Revenue to GDP
R(OR) = Growth rate of ordinary Revenue

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National Bank of Ethiopia

6.2 Revenue and Grants


Under the review period, Birr 115.6 of rural and urban land use fee, however,
billion (including grants) was collected was only 3.4 percent.
from various sources. The performance
against the plan was 94.4 percent. Revenue from indirect taxes was Birr
56.9 billion and its share in total tax
Total revenue (including grants) depicted revenue reached 66.3 percent. About 59.0
a 35.1 percent annual growth as a result percent of the indirect tax revenue was
of improved tax collection and generated through import duties whose
administration like application of cash share grew by about 41.4 percentage
registration machines, enhanced capacity points over last year.
building, improved awareness of tax
payers and economic growth. Non-tax revenue reached Birr 17.1 billion
showing a 68.9 percent increment vis-à-
Domestic revenue reached Birr102.9 vis preceding year largely due to higher
billion showing102 percent growth over income from government investment and
last year. Of the total domestic revenue, property sales.
about 83.4 percent was generated through
taxes and 16.6 percent through non-taxes. On the other hand, external grants
dropped by a 22.4 percent compare to a
Tax revenue rose by 45.4 percent in the year earlier.
fiscal year owing to a 47.6 percent
increase in direct taxes, which largely
constitute personal income and business
taxes. These taxes alone accounted for
84.7 percent of the direct taxes. The share

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National Bank of Ethiopia

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

140000

120000

100000
In million Birr

80000

60000

40000

20000

Fiscal Year

Total Revenue and Grants Tax Revenue Direct tax revenue

Indirect tax revenue Non-tax revenue Grants

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National Bank of Ethiopia

6.2 Summary of General Government Revenue by Components


(In Million of Birr)

Percentage Perform-
2010/11 2011-12 Change ance
A [B] C Rate
Revised
Particulars Pre. Act Budget Pre. Act [C/A] [C/B]

Total Revenue and Grants 85,611.2 122,541.8 115,658.5 35.1 94.4


Total Revenue 1/ 69,119.9 101,222.0 102,863.7 48.8 101.6
Tax Revenue 58,980.8 87,131.8 85,739.9 45.4 98.4
1. Direct Tax Revenue 19,549.7 31,610.0 28,857.6 47.6 91.3
1.1 Income and Profit Taxes 18,809.2 27,295.4 27,877.0 48.2 102.1
Personal 5,733.4 8,098.2 8,900.2 55.2 109.9
Business 10,055.2 15,843.1 15,540.0 54.5 98.1
Others 2/ 3,020.7 3,354.1 3,436.8 13.8 102.5
1.2 Rural Land Use Fee 316.6 534.9 320.2 1.2 59.9
1.3 Urban Land Use Fee 423.9 3,779.7 660.3 55.8 17.5
2. Indirect Taxes 39,431.1 55,521.9 56,882.3 44.3 102.5
2.1 Domestic Taxes 15,705.3 22,621.9 23,326.1 48.5 103.1
2.2 Foreign Trade Taxes 23,725.8 32,900.0 33,556.2 41.4 102.0
Import 23,725.8 32,900.0 33,556.2 41.4 102.0
Export -
3. Non-Tax Revenue 10,139.1 14,090.2 17,123.8 68.9 121.5
3.1 Charges and Fees 970.3 762.2 1126.7 16.1 147.8
3.2 Govt. Invt. Income 3/ 4,475.5 4310.3 9178.5 105.1 212.9
3.3 Reimb. And Property
Sales 194.0 364.2 451.0 132.5 123.8
3.4 Sales of Goods &
Services 1,774.6 2920.4 1738.5 (2.0) 59.5
3.5 Others 4/ 2,724.7 5,733.1 4,629.1 69.9 80.7
4. Grants 16,491.4 21,319.8 12,794.9 (22.4) 60.0
Source: Ministry of Finance and Economic Development
1/ It does not include privatization proceeds
2/ Others include rental income tax, with holding income tax on imports, interest income tax,
capital gains tax, agricultural income and other incomes
3/Gov. Investment income includes : Residual surplus, capital charge,
interest payments and state dividend
4/ Other extra ordinary, miscellaneous, pension contribution and other
revenue

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National Bank of Ethiopia

6.3 Expenditure

Total general government expenditure in Likewise, capital expenditure during the


2011/12 reached Birr 124.4 billion review period increased by 36.9 percent
compared with Birr 93.8 billion a year over the preceding year and reached Birr
ago. The growth was attributed to higher 73 billion largely on account of higher
out lays in all its components. Hence the spending on economic development
share of expenditure in GDP showed a which accounted for 69.1 percent of the
marginal decline to 16.9 percent last total capital expenditure. Of the total
year. expenditure on economic development
34.2 percent was allotted to poverty
Recurrent expenditure was Birr 51.4 related programs such as education,
billion about 26.9 percent higher than a health and agriculture etc. Its share in
year ago. The largest share (41.3 GDP stood at about 3.4 percent.
percent) of the current expenditure went
to finance social and general services In summary, general government
and its ratio to GDP was about 5.7 expenditure performance rate was 90.0
percent. percent of the annual budget.

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National Bank of Ethiopia

6.3: Summary of General Government Expenditure


(In million Birr)

Percentage
2010/11 2011/12 Change Perform-ance
[A] [B] [C] Rate
Pre Revised
Particulars actual Budget Pre actual [C/A] [C/B]
Total Expenditure 93,831.4 138,293.5 124,416.7 32.6 90.0
1. Current Expenditure 40,534.7 55,851.6 51,445.5 26.9 92.1
General Services 15,654.5 18,828.3 21,158.8 35.2 112.4
Economic Services 5,324.7 7,119.6 6,577.0 23.5 92.4
Social Services 16,057.3 21,958.6 21,054.8 31.1 95.9
Interest and Charges 1,912.7 3,523.6 2,230.4 16.6 63.3
Others (Miscellaneous) 1,248.0 4,421.5 424.4 (66.0) 9.6
2. Capital Expenditure 53,296.7 82,442.0 72,971.3 36.9 88.5
Economic Development 35,309.8 56,365.8 50,400.7 42.7 89.4
Social Development 14,706.9 20,289.0 17,971.3 22.2 88.6
General Development 3,280.0 5,787.3 4,599.3 40.2 79.5
3,Special programs - - - - -
Source: Ministry of Finance and Economic Development

6.4: Deficit Financing


General government budgetary operation About 74.6 percent of the deficit was
including grants resulted in a deficit of financed through net external borrowing.
Birr 8.7 billion in 2011/12. This was 6.6 The remaining balance was covered
percent higher than the deficit recorded a through net domestic borrowing and
year earlier. Fiscal deficit as a privatization receipts.
percentage of GDP was 1.2 percent.

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National Bank of Ethiopia

Fig.6.3 Trends in General Government Expenditure and Revenue


(% of GDP)

35.0

30.0

25.0
In Percent of GDP

20.0

15.0

10.0

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
Fiscal Year
Expenditure/GDP Revenue/GDP

Source MoFED

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National Bank of Ethiopia

6.4: Summary of General Government Expenditure (In Million Birr)


Percentage performance
2010/11 2011/12 Change rate
[A] [B] [C]
Revised
Particulars Pre. Act Budget Pre. Act [C/A] [C/B]
Revenue and Grants 85,611.22 122,541.79 115,658.50 35.10 94.38
Revenue 69,119.87 101,222.04 102,863.65 48.82 101.62
Grants 16,491.35 21,319.75 12,794.85 (22.41) 60.01
Total Expenditure 93,831.41 138,293.53 124,416.72 32.60 89.97
Current Expenditure 40,534.71 55,851.56 51,445.45 26.92 92.11
Capital Expenditure 53,296.70 82,441.97 72,971.26 36.92 88.51
Overall Surplus/ Deficit
(Including Grants) (8,220.19) (15,751.74) (8,758.21) 6.55 55.60
(Excluding Grants) (24,711.54) (37,071.49) (21,553.06) (12.78) 58.14
Total Financing 8,220.19 15,751.74 8,758.21 6.55 55.60
Net External Borrowings 7,797.63 5,776.34 6,529.65 (16.26) 113.04
Gross Borrowing 8,435.50 6,807.03 7,443.08 (11.76) 109.34
Amortization Paid 770.31 1,185.06 1,062.55 37.94 89.66
HIPC relief & MDRI 132.44 154.37 149.12 12.59 96.60
Net Domestic Borrowings 111.22 9,974.71 3,793.10 3,310.56 38.03
Banking System (3,039.50) - (3,825.50) 25.86
Non-Banking Systems 3,150.72 - 7,618.60 141.81
Privatization Receipts 1,457.61 - 2,763.90 89.62
Others and Residuals (1,146.26) 0.68 (4,328.44) 277.61 (632,618.24)
Source: Ministry of Finance and Economic Development

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VII. INVESTMENT
The Ethiopian Investment Agency and The number of foreign projects reached 604
Regional Investment Offices licensed which were 36.6 percent lower than the
62,068 investment projects with an same period last year.
aggregate capital of Birr 1.2 trillion in the
period between 1992/93 – 2011/12. Of these With regard to investment capital, domestic
projects, 52,462 (84.5 percent) were private projects which made up Birr 59.3
domestic, 9,498 (15.3 percent) foreign and billion or 41 percent while foreign
108 (0.2 percent) public. In terms of capital, investment projects accounted for Birr 84
Birr 483.4 billion (39.5 percent) was from to billion (or 57.5 percent) of the total
domestic investors, Birr 466.2 billion (38.1 approved investment capital the rest
percent) from foreign investors and Birr investment was carried out by the
275.2 billion (22.5 percent) from the public government.
sector (Table 7.1).

In 2011/12, a total of 5,649 investment Upon commencement of operation, the


projects with a combined capital of Birr approved investment projects are expected
146.2 billion were approved. to create job opportunities for 147,400
permanent and 375,657 casual workers
Domestic investment accounted for more (Table 7.2).
than 89 percent of the total projects
approved during the review period.

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Table 7.1: Number and Investment Capital of Approved Projects by Ownership since 1992/93

(Investment capital in millions of Birr)


Domestic projects Foreign Projects Public Projects Total Projects

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


Fiscal Year Projects Capital Projects Capital Projects Capital Projects Capital
1992/93 542 3,750 3 233 0 0.00 545 3,983
1993/94 521 2,926 4 438 1 57.00 526 3,421
1994/95 684 4,794 7 505 2 39.00 693 5,338
1995/96 897 6,050 10 434 1 6.00 908 6,490
1996/97 752 4,447 42 2,268 1 7.00 795 6,722
1997/98 816 5,819 81 4,106 1 14.00 898 9,939
1998/99 674 3,765 30 1,380 9 4,915.00 713 10,060
1999/00 561 6,740 54 1,627 9 5,760.00 624 14,127
2000/01 635 5,675.7 45 2,923 7 257.00 687 8,856
2001/02 756 6,117.3 35 1,474 10 1,598.80 801 9,190.2
2002/03 1,127 9,362.9 84 3,369 6 706.11 1,217 13,437.9
2003/04 1,862 12,177.7 347 7,205 16 1,837.04 2,225 21,220
2004/05 2,240 19,571.7 622 15,405 10 1,486.48 2,872 36,463.3
2005/06 5,100 41,841.1 753 19,980 6 18,215.08 5,859 80,036.3
2006/07 5,322 46,630.1 1,150 46,949 0 0.00 6,472 93,579
2007/08 7,307 77,868.2 1,651 92,249 3 261.56 8,961 170,378.5
2008/09 7,184 83,630.2 1,613 73,111 10 82,783.52 8,807 239,524.8
2009/10 5,080 40,852.2 1,413 55,169 3 393.89 6,496 96,415.4
2010/11 5,360 42,093 952 53,357 10 154,019 6,322 249,469
2011/12 5,042 59,316 604 83,975 3 2,877 5,649 146,168
Average
Annual 2,625 23,248 515 21,868 5 13,638 3,103 61,241
Cumulative 52,462 483,427 9,498 466,156 108 275,233 62,068 1,224,818
Source: Ethiopian Investment Agency

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Source: Ethiopian Investment Agency

Source:EthiopianInvestmentAgency

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Table 7.2 Numbers, Capital and Expected Job Opportunities

(Capital in millions of Birr)


2009/10 2010/11 2011/12 Percentage change
Type of Projects Items A B C C/A C/B

Number 6,496 6,322 5,649 -13.0 -10.6

Capital 96,415 249,469 146,168 51.6 -41.4

Permanent Workers 224,633 227,715 147,400 -34.4 -35.3

1.Total Investment Casual Workers 488,330 586,380 375,657 -23.1 -35.9

Number 6,493 6,312 5,646 -13.0 -10.6

Capital 96,022 95,450 143,291 49.2 50.1

Permanent Workers 223,161 212,470 147,286 -34.0 -30.7

2. Total Private Casual Workers 488,162 412,117 375,504 -23.1 -8.9

Number 5,080 5,360 5,042 -0.7 -5.9

Capital 40,852 42,093 59,316 45.2 40.9

Permanent Workers 152,283 146,378 104,582 -31.3 -28.6

3. Domestic Casual Workers 311,185 283,277 254,733 -18.1 -10.1

Number 1,413 952 604 -57.3 -36.6

Capital 55,169 53,357 83,975 52.2 57.4

Permanent Workers 70,878 66,092 42,704 -39.7 -35.4

4. Foreign Casual Workers 176,977 128,840 120,771 -31.8 -6.3

Number 3 10 3 0.0 -70.0

Capital 394 154,019 2,877 630.4 -98.1

Permanent Workers 1,472 15,245 114 -92.3 -99.3

5.Public Casual Workers 168 174,263 153 -8.9 -99.9


Source: Ethiopian Investment Agency

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Table 7.3 Number and Capital of Investment Projects Approved by Sector


(Capital in millions of Birr)
Percentage Share to
Total in 2011/12
2009/10 2010/11 2011/12
Sectors
No. of Investment No. of Investment No. of Investment No. of Investment
Projects Capital Projects Capital Projects Capital Projects Capital

Manufacturing 1,433 35,583 1,294 43,530 1,211 45,482 21.44 31.12

Agriculture, hunting and


forestry 1,342 21,625 907 82,769 435 23,268 7.70 15.92

Real estate, renting and


Business activities 1,155 11,617 1,652 10,439 2,694 23,165 47.69 15.85

Hotel and restaurants 617 10,463 609 9,968 271 12,322 4.80 8.43

Education 181 1,464 143 1,586 57 465 1.01 0.32

Health and social work 99 2,519 87 1,143 52 2,814 0.92 1.92

Construction 942 9,924 947 11 747 29,794 13.22 20.38


Construction Machinery
Leasing 0 0 0 0 0 0 0 0
Wholesale, retail trade
and repair service 154 893 158 586 22 322 0.39 0.22
Transport, storage and
communication 477 1,596 413 1,743 101 578 1.79 0.40

Fishing 8 19 1 8 2 32 0.04 0.02

Mining and quarying 9 358 17 222 9 159 0.16 0.11


Electricity, gas, steam and
water supply 4 33 7 85,570 2 7,129 0.04 4.88
Public administration and
defense; compulsory
social security 0 0 0 0 0 0 0 0
Other community, social
and personal service
activities 75 321 87 756 46 639 0.81 0.44

Grand Total 6496 96415 6322 249,469 5649 146168 100 100

Source: Ethiopian Investment Agency

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7.1 Investment by Sector

About 21 percent of the approved for 31 percent followed by


projects were in manufacturing; 8 construction (20 percent),
percent in agriculture, hunting and agriculture, hunting and forestry
forestry; 48 percent in real estate, renting (16 percent) and real estate,
and business activities; 13 percent in renting and business activities
construction and 5 percent in hotel and (16 percent).
restaurants.
In terms of approved investment
capital, manufacturing accounted

Source: Ethiopian Investment Agency

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7.2: Distribution by Region

Of the total 5649 projects approved billion capital), Oromia (510 projects
in2011/12, Addis Ababa attracted 4,170 with Birr 25.7 billion capital) and Dire
projects (73.8 percent) with Birr 62.3 Dawa (134 projects with Birr 660
billion investment capital, followed by million capital).
Amhara (612 projects with Birr 38.6

Table 7.4: Number and Capital of Approved Projects by Region


(Capital in millions Birr)

percentage share
to Total
2009/10 2010/11 2011/12
Regions
No. of Investment No. of Investment No. of Investment No. of Investment
Projects Capital Projects Capital Projects Capital Projects Capital

Tigray 626 7,224 349 11,112 7 130 0.12 0.09

Afar 32 1,307 26 399 50 190 0.89 0.13

Amhara 743 17,371 722 32,753 612 38,642 10.83 26.44

Oromia 1,558 20,739 1,386 32,219 510 25,714 9.03 17.59

Somali 58 345 127 2,738 50 1,001 0.89 0.68

Benishangul-
Gumuz 111 1,389 56 81,611 50 354 0.89 0.24

SNNPR 163 2,020 160 49,751 49 2,845 0.87 1.95

Gambella 11 2,675 14 3,920 11 6,265 0.19 4.29

Harari 2 7 48 276 4 974 0.07 0.67

Addis Ababa 2,902 29,195 3,221 30,627 4,170 62,264 73.82 42.60

Dire Dawa 172 1,455 207 2,995 134 660 2.37 0.45

Multiregional
Projects 118 12,689 6 1,067 2 7,129 0.04 4.88

Grand Total 6496 96415.44 6322 249,469 5649.00 146,168 100 100
Source: Ethiopian Investment Agency

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VIII. INTERNATIONAL DEVELOPMENTS


8.1 International Economic Developments
8.1.1 Overview of the World Economy6

Global economic growth momentum among advanced economies. Emerging


weakened in 2011, albeit the firming of economies growth remained robust in the
momentum in the global economic growth earlier period of 2011 but the moderation of
in the final quarter of 2010 continued in the growth in the later part of year helped
onset of 2011. Growth has been 1.6 percent alleviate the build-up of overheating
for advanced economies (against 3.2 percent pressures.
in 2010) and 6.2 percent for emerging and
developing economies (against 7.3 percent In advanced economies growth has been
in 2010). As a reflection of this, the external restrained by the continuing repair of public
imbalances, which had decreased in 2009 in and private sector balance sheets and the
the context of global financial crisis, stopped persistent weaknesses in the labour and
narrowing and remained at elevated levels in housing markets as well as high rate of
2011. The slowdown is contributed by unemployment specifically in the OECD
several factors such as; dampening of real area.
incomes in major advanced economies due
to rising commodity prices and the The second half of the year is characterized
disruption of global supply chain as a result by continued deterioration of business and
of the Great East Japan Earthquake. consumer sentiment on account of increased
financial market stress & uncertainty, the
During the period, the divergence in growth escalation of the sovereign debt crisis in the
patterns continued not only between euro area and the drawn-out discussions on
advanced and emerging economies but also the US debt ceiling.

6
It Extracted from European Central Bank annual
report 2011& monthly reports, through January to
June, 2012 and World Economic Outlook, October
2012.

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Table 8.1: Overview of World Economic Outlook and Projection


(Annual Percentage Change)

Projection
Particulars 2010 2011 2012 2013 2014
World Output 5.1 3.9 3.2 3.5 4.1
Advanced Economies 3.0 1.6 1.3 1.4 2.2
United States 2.4 1.8 2.3 2.0 3.0
Euro Area 2.0 1.4 –0.4 –0.2 1.0
Japan 4.5 –0.6 2.0 1.2 0.7
Emerging Market & Developing 7.4
6.3 5.1 5.5 5.9
Economies
World Trade Volume (goods & services) 12.6 5.9 2.8 3.8 5.5
Imports
Advanced Economies 11.4 4.6 1.2 2.2 4.1
Emerging Market & Developing 14.9
8.4 6.1 6.5 7.8
Economies
Exports
Advanced Economies 12.0 5.6 2.1 2.8 4.5
Emerging Market & Developing 13.7
6.6 3.6 5.5 6.9
Economies
Commodity Prices (U.S. dollars)
Oil 27.9 31.6 1.0 –5.1 –2.9
Non- oil 26.3 17.8 –9.8 –3.0 –3.0
Consumer Prices
Advanced Economies 1.5 2.7 2.0 1.6 1.8
Emerging Market & Developing 6.1
7.2 6.1 6.1 5.5
Economies
Source: IMF, World Economic Outlook, October 2012

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National Bank of Ethiopia

In the US, economic activities continue to In 2011, Japan’s Economy experienced


recover though at a slower pace as the real fluctuation in real GDP due to various
GDP growth declined to 1.7 percent from factors. Sharp decline in production and
3.0 percent in 2010. Lower government exports as well as domestic private demand
expenditure at both the federal and state as a result of the earthquake in March and
levels together with external factors led to the ensuing nuclear disaster intensely
sluggish growth in the first half of 2011. affected its growth which led to significant
decline in real GDP in the first half of the
However, the economy gained momentum year. However, the economic activity has
in the second half of the year as private recovered in the third quarter as the supply
consumption posted gains albeit low constraints caused by the earthquake eased
consumer confidence and weak growth in faster than initially expected. Yet again, the
disposable income. Supported by strong real GDP contracted following a weakening
corporate profits and an environment of very of global demand and the disruption to
low interest rates, non–residential Asian trade caused by the floods in
investment continued its substantial and Thailand. Japan faced the first annual deficit
positive contribution to growth, while in the trade balance since 1980 which is led
residential investment started to contribute by weak exports, partly caused by the
positively to GDP growth from the second appreciation of yen along with increasing
quarter of 2011. imports of raw materials following the
earthquake.
Similarly, the pace of employment growth in
the labour market was insufficient to recover With regard to Emerging Asia, economic
the job losers recorded two-three years later growth decelerated after an exceptionally
and markedly bring down the strong expansion the year before. The
unemployment rate, which averaged 8.9 moderation in global growth considerably
percent in 2011, compared with 9.6 percent reduced export growth in the second half of
the preceding year. the year. However, annual GDP growth was
7.3 percent, close to its long-term average as
domestic demand remained robust.

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National Bank of Ethiopia

In China, real GDP growth, which is mainly domestic demand due to the tightening
driven by domestic demand while the monetary policy stance in most countries of
contribution of net exports tuned negative, the region. Year-on-year growth was 4.9
declined to 9.2 percent from 10.3 percent in percent in the first half for the region as a
2010. Domestic demand was driven by whole compared with 6.3 percent in the
ample liquidity built up in previous years previous year. However, the decline in real
where as construction was sustained by the GDP growth was partly by the less negative
government’s social housing program of contribution from external demand as
2011, which set out to provide 36 million private consumption continued to be the
new housing units by the end of 2015. main engine of growth and labour market
conditions remained favorable and lending
In Latin America, real GDP growth has standards eased.
declined on account of slower expansion of

8.1.2 World Trade


In line with the developments in global industrialized countries in Asia, the
economic activity, a rebound in the volume slowdown was distributed across regions.
of world merchandise trade over the final Consistent with all these developments,
quarter of 2010 continued into the first evidence shows that trade made minor
quarter of 2011. At the same time, the positive contribution to growth, in net terms.
second quarter global supply chain This has great implication of the need for
disruptions caused by the natural disaster in some stabilization in global trade.
Japan coupled with the floods in Thailand
resulted in global trade contraction for the In the US, the current account deficit
first time since mid-2009. Though, the most remained almost unchanged as it stood at
pronounced decline in exports being about 3.2 percent of GDP in the first nine
recorded in Japan and the newly months of the year.

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In Emerging Asia, trade surplus narrowed to mainly as a result of weaker global growth,
USD 155 billion in 2011 from USD 181 while import growth held up relatively well
billion in 2010. This is due to decline in supported by robust domestic demand.
export growth in the second half of the year,

8.1.3 Inflation and Commodity Prices


In 2011, gradual increase in annual inflation labor markets, due to rising food and energy
rate is observed in advanced economies costs. The downward trend that had started
though it slightly declined at the end of the with the economic downturn in 2008 has
year. The surge in oil prices continued been reversed as annual CPI inflation was
owing to the rise in global oil demand 3.1 percent in 2011 up from 1.6 percent the
coupled with the severe disruption to the oil year before. Excluding food and energy, CPI
supply from Libya amid the political turmoil inflation surged to 1.7 percent from 1
in that region. Despite the slow down in percent the previous year.
global growth, oil prices stayed to be strong
in the second half of 2011. The price of In Euro area, there was evidence of upward
Brent crude oil was 38 percent above the pressure on overall inflation, averaging 2.7
average in 2010. In the contrary, the prices percent in 2011, up from 1.6 percent in
of non-energy commodities declined 2010, mainly owing to commodity prices.
substantially during 2011 as it was 15 Concerning the monthly profile of annual
percent lower towards the end of 2011 than HICP, the rate gradually increased from 2.3
at the beginning of the year. percent in January to a peak of 3.0 percent
from September to November, before edging
In OECD countries, average headline down to 2.7 percent in December, reflecting
consumer price inflation was 2.9 percent up mainly developments in energy and other
from 1.9 percent in the preceding year. commodity prices. According to March
Excluding food and energy, average 2011 ECB staff macroeconomic projections,
consumer price inflation stood at 1.7 percent annual HICP inflation was in a range
compared with 1.3 percent in 2010. between 2 percent and 2.6 percent in 2011
In the US, headline inflation was elevated mainly due to higher energy and food prices.
during 2011, despite the slack in product and

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Japanese economy continued with its declined, prompting some central banks to
deflationary environment as CPI inflation halt their monetary tightening cycle they had
remained negative throughout most of 2011. begun in the second half of the preceding
All through the year, the Bank of Japan year.
maintained an accommodative monetary
stance in order to stimulate the economy and In China, inflation remained high mainly
fight deflation. driven by high commodity prices and
adverse domestic supply shocks to food
Emerging economies, inflationary pressures items, but eased to 3.1 percent by the end of
remained strong in 2011. In the first half, the year.
annual inflation rates increased on account
of the surge in food and other non food For Latin America, headline inflation stood
commodity prices though the increase later at 6.7 percent in the first half of 2011. The
on became more broadly based. However, it solid growth performance coupled with
peaked in the third quarter of the year as rising food prices resulted in a wide spread
both imported demand and domestic increase in inflationary pressures, which
demand pressures eased. In the last quarter prompted several central banks to increase
of the period, annual inflation marginally their policy rates during this period.

8.1.4 Exchange Rate


In 2011, developments in foreign exchange Japanese Yen and Pound Sterling in the
markets were the reflection of prospect for second half of the year amid temporarily
the global economic recovery and financial declining volatility. On 30 December 2011,
market conditions. During the year, effective the Euro traded at USD 1.29, JPY 100.2 and
exchange rate of Euro declined moderately GBP 0.84, which was 2.4 percent, 13.9
with high volatility. After continuous percent and 2.7 percent below its average in
appreciation till April 2011, the Euro 2010, respectively.
depreciated overall against the US dollar,

However, the Euro’s subsequent decline a strengthening against other currencies,


against these currencies was partly offset by particularly those of central and eastern

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European currencies. As a result, the average level in 2010 and close to its
nominal effective exchange rate of the Euro, average level since 2009.
as measured against the currencies of 20 of
the Euro areas most important trading The real effective exchange rates of the Euro
partners, declined by 2.2 percent over the based on different cost and price measures
year. increased during the first half of 2011 and
there after depreciated to levels close to
By the end of 2011, in nominal effective those prevailing at the end of 2010.
terms, the Euro stood at 4 percent below its

8.1.5 Capital Flows


In the course of 2011, risks to euro area smaller to some larger euro area countries in
financial stability increased considerably as the second half of the year.
the sovereign debt crisis worsened and its In addition, substantial capital outflows from
harmful interplay with the banking sector emerging Asia occurred at the end of the
intensified. Vulnerabilities grew as the year as a reflection of concerns about the
sovereign debt crisis spread from some global outlook which triggered financial
market volatility.

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8.2 Implications for Ethiopia


The moderation in the global economic On the other hand, FDI dropped by 17.2
activities has been partly reflected in the percent presumably in line with the
external sector of Ethiopia as its momentum slowdown in global economic activities.
of growth tended to decline. Furthermore, Ethiopia’s total import bill
significantly rose as a result of higher world
Following the gradual global economic
commodity prices. Hence, this had negative
recovery, total export growth slowed down
effect on Ethiopia’s current account balance.
to 14.8 percent in 2011/12 compared with
37.1 percent in the preceding year. Net
receipts from private transfers; however,
surged by 18.2 percent vis-à-vis 1.4 percent
a year before.

[[

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