KEYIR NEWS:- Governor of the National Bank of Ethiopia (NBE), Mamo Mihretu, disclosed that banks have engaged in over 700 billion Br worth of interbank transactions over the past 10 months, a development he attributed to sweeping monetary policy reforms implemented in the financial sector.
Speaking during a briefing on the progress of the macroeconomic reform program, Mamo highlighted the success of the interbank money market, which enables commercial banks to borrow from each other without relying on central bank liquidity facilities. Introduced for the first time as part of broader financial sector reforms, the interbank mechanism has enhanced liquidity management across the banking sector.
“The establishment of a functioning interbank market is a significant step in modernizing Ethiopia’s monetary policy tools,” said Mamo. “It allows banks to manage short-term liquidity needs efficiently, without always turning to the central bank.”
The Governor also outlined additional reforms aimed at improving monetary transmission mechanisms. Among them is the implementation of short-term security transactions between the National Bank and commercial banks, a tool to either absorb excess liquidity or inject funds into the banking system, depending on macroeconomic conditions.
According to Mamo, this open market operation has facilitated 530 billion Br in transactions to date. When liquidity is abundant and inflationary pressures loom, the central bank uses these tools to mop up excess cash; conversely, when economic activity softens, the central bank injects liquidity to stimulate growth.
“These reforms have not only improved financial intermediation but also contributed to stabilizing inflation,” said the Governor.
The National Bank has introduced these instruments as part of Ethiopia’s ongoing transition to a more market-oriented and transparent monetary policy framework, aiming to enhance macroeconomic stability and support sustainable growth.