Ethiopia's National Bank has raised reserve requirements for banks and eliminated the minimum savings rate to control inflation and manage excess liquidity. These measures were approved by the Monetary Policy Committee on December 29, 2025. The actions aim to support a shift toward single-digit inflation targets.
Ethiopia's central bank, the National Bank of Ethiopia (NBE), announced tighter monetary policies on December 30, 2025, following a quarterly review by its Monetary Policy Committee (MPC) the previous day. The MPC highlighted an annual credit expansion of 44.5 percent in November 2025 and robust liquidity growth in the banking sector. It emphasized the need to "ensure that liquidity injection into the economy is managed in a gradual and orderly manner" to prevent unintended expansionary effects.
Key changes include increasing the monthly average reserve ratio on bank deposits by two percentage points to 10 percent, while maintaining the daily minimum at 5 percent. Banks have three to six months to meet the new requirement. Additionally, the MPC immediately abolished the minimum savings rate, which had been set at 7 percent in recent years. Going forward, deposit interest rates will be determined through negotiations between depositors and financial institutions, moving away from administrative controls.
These steps build on the NBE's adoption of a price-based monetary framework in July 2024, when it established the National Bank Rate at 15 percent. The measures respond to a surge in loan disbursements and outstanding credit during the first five months of the fiscal year, which accelerated broad money growth. Analysts anticipated such tightening as part of efforts to achieve single-digit inflation in the coming months, reinforcing a firm monetary stance for price stability.
