I. OVERALL ECONOMIC PERFORMANCE · 2019-04-04 · National Bank of Ethiopia 5 I. OVERALL ECONOMIC...

National Bank of Ethiopia

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I. OVERALL ECONOMIC PERFORMANCE

Economic Growth

The Ethiopian economy continued to

grow in 2011/12. Real GDP registered

a relatively robust growth of 8.8

percent compared to the 5.5 percent

estimate for Sub-Saharan Africa in the

same period. The growth was ascribed

mainly to higher growth in service

sector (10.6 percent), agriculture (4.9

percent) and industry (17.1 percent).

However, the real GDP averaged 10

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

USD 389 in the preceding year,

registering a 31.0 percent increase.

The resilience of the Ethiopian

economy is projected to continue with

11.3 percent growth expected in

2012/13. The Sub-Saharan Africa and

world economy growths are

anticipated to be 5.7 and 4.1 percent

respectively in the same period.


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Table 1.1: Sectoral Contributions to GDP and GDP Growth(In Billions of Birr)

Items

years

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

SectorAgriculture 130.5 144.8 158.5 170.3 181.2 195.0 212.5 222.9Industry 26.6 29.3 32.1 35.4 38.8 43.0 49.8 58.3Services 94.4 106.9 123.3 143.1 163.2 184.7 207.2 229.1

Total 249.2 278.5 311.3 346.7 381.7 421.8 469.4 510.3Less FISIM 1.2 1.6 1.8 2.4 2.7 2.9 3.2 2.9

Real GDP 248.4 277.0 309.7 344.3 378.9 418.9 466.2 507.4Growth in Real GDP 12.7 11.5 11.8 11.2 10.0 10.6 11.3 8.8Real GDP per capita 3.6 4.0 4.3 4.6 4.9 5.3 5.8 6.1Mid-year population(inmillion) 68.3 70.0 72.4 74.9 76.8 78.8 80.7 82.7

Share in GDP (in %)Agriculture 47.4 47.1 46.1 44.6 43.2 46.2 45.3 43.7Industry 13.6 13.4 13.2 13.0 13.0 10.2 10.6 11.5Services 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

Agriculture

AbsoluteGrowth 13.5 11.0 9.5 7.4 6.4 7.6 9.0 4.9Contributionto GDPgrowth 6.4 5.2 4.4 3.3 2.8 3.5 4.1 2.1Contributionin % 50.5 44.8 36.9 29.7 27.5 33.4 36.0 24.2

Industry


Services


Source: Ministry of Finance and Economic Development (MoFED)


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GDP By Sector

In terms of sector development,

agriculture grew just by 4.9 percent in

2011/12 compared to 9 percent growth

recorded in the previous year mainly

due to lower increase in crop

production which went down from 10

to 5 percent. Crop production

constituted the largest share in GDP,

about 30 percent.

Fig. I.1: GDP Growth by Major Sectors

Source: Central Statistical Agency(CSA) owever, the growth in agricultural outputs was largely attributed to productivity improvement aided by

The growth in agricultural output was

largely attributed to productivity

improvement aided by favorable

weather condition as well as conducive

economic policies. While total

cultivated land expanded by 2.2

percent only to 12.1 million hectares in

2011/12, total agricultural output rose

marginally by 7.4 percent to 218.6

million quintals. As a result,

productivity improved slightly to 18.1

quintal in 2011/12 compared to 17.2

quintal per hectare in the preceding

year. Cereal production accounted for

86.1 percent of the total agricultural

production estimated for 2011/12.


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Meanwhile, the industrial sector gained

17.1 percent growth mainly due to the

increase in electricity and water

supply. Manufacturing output grew by

11.8 percent while mining and

quarrying expanded by 12.7 percent

during the same period. The service

sector, which has bolstered in the

recent years, registered 10.6 percent

growth; due to the expansion in

financial sector, real estate and hotel &

tourism sectors.

Consequently, the contribution of

agriculture and allied activities to real

GDP growth stood at 24.2 percent

while industrial and service sectors

constituted about 22.2 and 53.7 percent

respectively. Although, the share of

agriculture to GDP tended to decline

continuously, it has remained the

largest source of employment, foreign

exchange earning, raw material supply

and market for domestic industrial

outputs.(FigI.1)


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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)

Source: Central Statistical Agency (CSA)

1.3 GDP by Expenditure Component

Total consumption expenditure (both

private and public) as a percent of

GDP went down marginally to 85.0 in

2011/12 from 87.3 in 2010/11, largely

on account of the reduction in private

and public consumption by 1.5 and 0.8

percentage points, respectively.

In contrary, gross domestic saving to

GDP ratio improved to 15.0 percent

from 12.7 percent recorded in the

previous year. Likewise, the ratio of

gross capital formation to GDP

increased by 6.2 percentage point to

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.

AgriculturalProduction

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

CultivatedArea

TotalProduction

CultivatedArea

TotalProduction

CultivatedArea

TotalProduction

CultivatedArea

TotalProduction

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


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

YearDomestic

Absorption

Consumption ExpenditureGross

CapitalFormation

ResourceBalance

Exportsof Goods

&Services

Importsof Goods

&Services

GrossDomesticSavingsTotal Govt. Pvt.

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 11.0Source: Ministry of Finance and Economic Development (MoFED)


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1.4. Micro and Small-Scale Enterprises

The five-year Growth and Transformation

Plan envisages creating a total of three

million Micro and Small-Scale Enterprises

(MSE’s) at the end of the Plan period. This

sector development is believed to be the

major source of employment and income

generation for a wider group of the society

in general and urban youth in particular.

According to the Federal Micro and Small

Enterprise Development Agency

(FeMESDA), a total of 70,455.00 new

MSEs were established in 2011/12

employing 806,322.00 people. The total

employment has grown by 23.8 percent,

compared to a year ago. The total amount

of loan received from micro finance

institutions was more than Birr 1.088 Billion

under the review period, 9.5 percent higher

than last fiscal year.

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

Source: FeMSEDA

2011/12 2012/13Percentage

Change

A B B/A

No. of MSE's na 70,455.00 -

Amount of credit (inmillion Br) 994.09 1,088.14 9.5

No of Totalemployment 651,366.00 806,322.00 23.8


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

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

Source: FeMSEDA

In terms of regional distribution of the

amount of credit, Addis Ababa took the

leading share (41.1 percent) followed by

Tigray (30.1 percent), Oromiya (12.2

percent), SNNPR (9.6 percent) and Amhara

5.9 percent.

However regarding employment creation,

Oromia employed 33.2 percent of the total

employment created during the fiscal year.

Amhara region contributed for 21.7 percent

of employment created in the report year

followed by SNNPR (15.8 percent).

AddisAbaba Oromia SNNPR Amhara Tigray Diredawa Harari

Benishangul 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 ofcredit 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 totalEmploymentcreated byMSEs

99,899.00 267,474.0 127,112.0 174,971.00 82,680.0 45,248.0 3,224.0 1,010.0 3,303.0 1,401.0 - 806,322.0

Regional share

AddisAbaba Oromia SNNPR Amhara Tigray

Diredawa Harari

Benishangul Somale Gambela Afar Total

Amount ofcredit 41.1 12.2 9.6 5.9 30.1 0.4 0.6 0.0 0.1 0.0 0.0 100.0No. of totalEmploymentcreated byMSEs 12.4 33.2 15.8 21.7 10.3 5.6 0.4 0.1 0.4 0.2 0.0 100.0


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


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1.5. Access to Water Supply

During the Growth & Transformation

Plan, both urban and rural population

with 68 percent in 2009/10 would

increase to 98.5 percent by the end of the

plan period. Urban and rural population

within 0.5 km and 1.5 km access to

potable water are also expected to reach

to 100 and 98.5 percent, respectively by

the end of the plan period.

Accordingly, the national population

with access to potable water supply

reached 58.3 percent in 2011/12 from

52.1 percent in the preceding year.

Population with access to potable water

improved in 2011/12 compared to the

preceding year performance. Similarly

urban population with access to potable

water within 0.5 km reached to 78.7

percent, rural population having access

to potable water within 1.5 km improved

to 55.2 percent in 2011/12 from 74.6 and

48.9 percent respectively in 2010/11.

The proportion of rural population with

access to water supply in Harari reached

87.1 percent, in Gambella 71.4 percent,

in Benshangule Gumz 65.7 percent, in

Amhara 60.8 percent and in Oromia 54.9

percent. In contrary, urban population

with access to water supply declined in

Addis Ababa (80.71 percent), Afar (80.7

percent), Harari (97.2 percent) and Dire

Dawa (85.5 percent) compared to the

preceding year performance (Table 1.5)

(Figure I.3).


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

Region

2010/11 2011/12Change in

percentage pointA B C D E F

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

NationalAverage 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

National Bank of Ethiopia Annual Bulletin

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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

engaged in investment of infrastructure

development to sustain economic

growth, improving product

competitiveness and encourage private

investors. In particular, the government

noted that, the development of road

transport creates a network over a wide

array of infrastructural facilities so as to

improve the accessibility and mobility of

agricultural and industrial products. As a

result, the road transport in Ethiopia has

been the dominant mode of transport and

accounts for 90 to 95 percent of the total

motorized inter-urban freight and

passenger transports.


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In 2011/12, the total stock of road

network reached 63,083 km of which

24,550 km Federal1, 31,550 km rural

road and 6,983 are woreda road. The

Federal road includes 9,875km (40

percent) asphalt and 14,675km (60

percent) gravel road, which showed

annual expansion of 19.1 percent and 3.8

percent respectively. Particularly, the

asphalt road net work in 2011/12

constituted about 15.7 percent of the

total stock of road network in the

country.

1Federal roads are administered by federal government

In 2011/12 the total road network

expanded by 16.8 percent (9.086Km)

compared to 10.67 expansions in

2010/11.

Total woreda road network, which was

previously known as community road,

also increased significantly to 6,983km

compared to 854 km in 2010/11 due to

the government’s plan to integrate every

kebele to the main roads


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.

Table 1.7 Classification of Road Network (length in km)

Year Federal RoadRural road

Woreda roadTotal

Asphalt GravelLength Growth

rateLength Growth

rateLength Growth

rateLength Growth

rateLength** Growth

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 16.83Source: 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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1.6.2 Road Density

The proper level of road network is

assessed by road density, which is

measured by road length per 1000

persons or by road length per 1000 km2.

In the five year GTP period, the plan is

to increase the road density from 44.5 to

123.7 km per 1000 persons and from

0.64 to 1.54 km per 1000 km2.

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

2011/12 fiscal year, road density per

1,000 square km was 57.3 km with

annual growth rate of 18.6 percent

(Table 1.8).

The road density per 1000 population in

2011/12 was 0.75 km and registered 15.4

percent growth from the preceding fiscal

year (Table 1.8).

Table 1.8 Road Densities per 1000 persons

Source: Ethiopian Road Authority

Year Road Density /1000 person Road density /1000 sq. km2000/01 0.50 29.92001/02 0.50 30.32002/03 0.49 30.82003/04 0.51 33.22004/05 0.50 33.72005/06 0.53 35.92006/07 0.55 38.6

2007/08 0.56 40.32008/09 0.57 42.62009/10 0.60 44.42010/11 0.65 48.32011/12 0.75 57.3


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1.6.3 Road Accessibility2

According Ethiopian Roads Authority,

Ethiopia requires constructing about

200,000 km of optimum national road

network, as a target to provide to its

people a reasonably good accessibility.

The level of road network in good

condition has improved continuously

over the past years and reached 64

percent of the total road network. In

particular, about 75 percent of asphalt

road is found in good condition (Figure

I.4).

1.6.4 Road Sector Financing

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.

Hence, large sum of finance has been

mobilized for road construction and

maintenance from external loans and

grants as well as domestic sources.

Figure 1.5 below depicts investment

capital in the road construction and

expansion sector, which has been

steadily rising over the past years

reached Birr 28.6 billion in 2011/12

showing annual growth rate of 46.8

percent (Table 1.9). Investment in

Federal road construction and expansion

was Birr 21 billion, which constituted

the lion’s share of the total road

investment capital.


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Source: Ethiopian Road Authority (2011/12)


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Table 1.9 Investments in the Road SectorIn million Birr


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

** All municipalities’ maintenance

Developments in Education Sector

The government of Ethiopia views

education sector development as part of

its long term vision in making the

country a middle income economy. To

this end, it has devised and put in place

various strategies for the sector. It has

also increased the budget allocated every

year to education sector to execute

development programs and planned

activities (Table 1.10). Accordingly,

primary schools in urban and rural areas,

increased to 29,482 in 2011/12 from

28,349 in the preceding year. Net

primary school enrolment and

completion, however, rose slightly to

85.4 and 52.1 percent from 85.3 and

49.4 percent respectively (Table

1.10).primary school enrolment has

reached 17 million of which 47.8

percent were girls.

On the other hand, secondary

education enrolment stood at 1.8

million, 3 percent higher than last year.

In addition, by the end of 2011/12, the

number of secondary schools (9-12

grades) reached 1,710 exhibiting a 12.7

percent annual growth.

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

Federal road2,848 2,886 5,037 8,124 9,813 13512 16989 21023.7

Regional road222.9 471.2 395.2 671 624.2 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


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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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Table 1.10: Development in Education Sector

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

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

Primary EducationNumber 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 whoreach 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

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

NA

7. SNNPR102.9 101 97.3 102.6

NA

8. Gambella 121.4 112.5 125.1 132NA


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

No. of students registered in the second cycleprimary schools(5-8) (in millions) 4.6 5 5.3 5.5 5.7

Number of students registered in the first cyclesecondary 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 secondcycle 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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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 EducationNumber of tertiary level institutions byuniversities (public, private), colleges(public, private) 61 72 90 86 91

Universities 22 22 22 26 32

Student intake capacity of higher educationinstitutions 56,421 NA NA 95,000 NA

Participation of women in higher educationinstitutions (%) 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 undergraduate degree (%) 24.1 29 27 27

22.0

Percentage of female graduated in under-graduate degree (%) 20.6 29.7 23.4 27.2

25.3

Percentage of female enrolled in post-graduate degree 9.6 11.3 11.9 13.8

20.2

Percentage of female graduated in post-graduate degree 10.7 10.5 13.9 14.4

14.0

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


27

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 nationalbudget 22.8 23.6 25.9 17.5 25.3

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


28

II. ENERGY PRODUCTION

2.1 Electric Power Generation

Ethiopia has very large potential for

hydroelectric power and geothermal

energy generation. Nine of its major

rivers are suitable for hydroelectric

power with a total capacity of

generating 45,000 MW. The country

also has vast potential for geothermal

energy.

The Ethiopian Electric Power

Corporation (EEPCo) supplies power

to more than 1,899,685 customers, of

which 9,633 were registered in

2011/12. The country’s installed

electricity generating capacity was

2000 MW in 2010 which is targeted to

increase to 10,000 MW by the end of

2014/15, according to the five year

Growth and Transformation Plan

(GTP).

The Ethiopian Electric Power

Corporation is a public enterprise

mandated with the task of generating,

transmitting, distributing, and selling

electricity. The Corporation generates

electricity through two different power

supply systems, namely, the Inter

Connected System (ICS) and Self

Contained System (SCS).

The ICS, which is largely generated by

hydropower plants, constitutes the

major source of electric power in

Ethiopia. The SCS system merely

contributed about 0.2 percent in

2011/12 (Fig.II.1).


29

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

2009/10

2010/11

2011/12

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

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Share

Year

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

ICS share in% SCS share in%

Source: Ethiopian Electric and Power Corporation

The total amount of electric power

generated during 2011/12 was 6.3

million KWH, 26.2 percent higher than

a year ago. About 99.3 percent of the

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.

Currently, the number of towns and

cities having access to electricity has

reached 5,637 of which 474 towns

were added in 2011/12.


30

Table 2.1: Electric Power Generation in ICS and SCS(In 000 KWH)

Source2009/10 Share

in %2010/11 Share

in %2011/12 Share

in %Percentage Change

[A] [B] [C] [C/A] [C/B]

ICS

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

Wind 0.0 0.0 0.0 0.0 S 0.47 - -SubTotal 3,860,302 98.8 4,955,052 99.5 6,276,525.2 99.8 62.6 26.7

SCS

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

Geothermal

SubTotal 45,073 1.2 25,445 0.5 9,896.2 0.2 -78.0 -61.1

Total

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

Wind 0.0 0.0 0.0 0.0 29,256.3 0.47 - -

GrandTotal 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

tons of petroleum products worth Birr

36.7 million were imported into the

country. Total value of petroleum

product imports surged by 37.3 percent

was mainly due to an increase in import

bill of gas oil (59.8 percent), regular

gasoline (49.4 percent) and fuel oil (54.2

percent). The total volume of petroleum

imports increased by 12.6 percent solely

due to higher volume of gas oil (24.3

percent) and regular gasoline (4.7

percent) despite marginal reduction in

volume of fuel oil (4.3 percent) and jet

fuel (2.7 percent) (Table 2.2).


31

Table 2.2: Volume and Value of Petroleum Imports

(Volume in MT and value in ‘ooo Birr)

Products


ChangeVolume Value Volume Value

[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



32

0

5,000

10,000

15,000

20,000

25,000

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

Value in birr

Year

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

MGR Jet Fuel Fuel Oil Gas Oil


As the international oil prices tended to

increase domestic retail prices were also

adjusted upwards during 2011/12.

Accordingly, the retail prices in Addis

Ababa increased on average by 25.7

percent for gas oil, 23 percent for regular

gasoil, 21.8 percent for fuel oil and 16.1

percent for kerosene (Table 2.3)


33

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

Year Quarter MGR Fuel Oil Gas Oil Kerosene

2006/07

Qtr.1 7.60 4.20 5.20 3.90Qtr.2 8.00 5.60 5.40 4.10Qtr.3 7.70 5.20 5.40 4.10Qtr.4 7.70 5.20 5.40 4.10

Average 7.80 5.00 5.40 4.10

2007/08

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

Average 8.70 5.00 6.20 4.90

2008/09

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

Average 8.89 6.25 7.85 6.23

2009/10

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

Average 12.02 9.34 9.96 8.78

2010/11

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

Average 16.58 12.20 14.08 12.04

2011/12

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

Average 20.40 14.86 17.70 13.98Annualpercentagechange 23.0 21.8 25.7 16.1



34

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

Source:Ethiopian Petroleum Enterprise


35

III. PRICE DEVELOPMENTS

3.1. Developments in National Consumer Price

Annual average headline inflation at the

end of the fiscal year 2011/12 was 34.1

percent, 16 percentage point higher than

the previous year level. This was largely

due to significant increase in food price

inflation which contributed the 14.9

percentage points to the total annual

change in headline inflation (Table 3.1).

Meanwhile, annualized food inflation,

scaled up significantly to 42.9 percent

and depicted a 27.2 percentage point

increment over the preceding year as a

result of a price hike in most of the food

items except oil and fats, spices and non –

alcoholic beverage and coffee.

Similarly, annual average core inflation

slightly increased to 22.4 percent from

21.8 percent a year ago as a result of

higher prices of all non-food components

(Table 3.1 and Fig.III.1).

On contrary, year-on-year, headline

inflation slowed down to 20.8 percent

from 38.0 percent a year ago as both food

and non-food price inflation registered

19.9 and 12 percentage points decline,

respectively. Annual food inflation,

which was 45.3 percent in June 2011,

declined to 25.4 percent in June 2012

while annual core inflation dropped to

15.8 percent from 27.8 over the same

period (Fig III.2).

Table 3.1: Annual Average Inflation Rates (in percent)ConsumptionItems

2010/11 2011/12 Change (inPercentage Points)

Contribution to Change inHeadline Inflation (in PercentagePoints)

A B B-A CGeneral 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 1.1Source: CSA and NBE Staff Computation


36

Source:CSA and NBE Staff computation

Source:CSA and NBE Staff computation


37

3.2 Consumer Price Developments in Regional States

At the end of 2011/12, the regional

average general inflation picked up to

32.7 percent from 16.4 percent a year

earlier. Amhara, Oromia, SNNP,

Gambella and Beni-shangul Gumz

regional states registered higher headline

inflation than the regional simple

average. Beni-shangul Gumz saw the

highest surge in headline inflation (32.9

percentage point) while the lowest (5.4

percentage point) rise was recorded in

Addis Ababa (Table 3.2).

Table 3.2: Regional Average Annual Inflation

Regions

2010/11 2011/12 Change

General FoodNonFood

General FoodNonFood

General FoodNonFood

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


38


The regional average food inflation

significantly increased to 41.7 percent by

the end of June 2012 compared to last

year. Food inflation higher than the

regional simple average was registered in

Oromia, Amhara, SNNP, Gambella and

Beni-shangul Gumz (Table 3.2).

The highest increase in food inflation was

registered in Beni-shangul (63.5

percentage points); and the lowest in

Somali (9.3 percentage points). Over the

two-year period (2010/11 to 2011/12),

food price instability was high in most of

the regions.



39

Likewise, the average regional non-food

inflation stood at 22.5 percent at June

2012. Non-food inflation stood above the

average level in SNNP, Oromia, Tigray,

Somali and Afar (Table 3.2).

The highest rise in non-food inflation was

recorded in Tigray (11.5 percentage

points), while the higher decline

registered in Amhara (-3.4 percentage

points).


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.

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


40

IV. MONETARY AND FINANCIAL DEVELOPMENTS

4.1. Monetary Developments and Policy

During the year under review, Ethiopia’s

monetary policy continued to focus on

containing inflationary pressure.

Accordingly as a result of prudent fiscal

and tight monetary policies as well as other

administrational measures coupled with

slow down in global food and fuel prices ,

the year-on-year headline inflation dropped

to 20.5 percent by end 2011/12 compared

to 38 percent last year.

Developments in Monetary Aggregates

As at end of the 2011/12 domestic

liquidity, as measured by broad money

supply (M2), reached Birr 189.4 billion

reflecting a 30.3 percent growth, over the

same period last year. This was largely

attributed to the 39.5 percent surge in

domestic credit offsetting the 28.4 percent

decline in net foreign assets. Of the

components of domestic credit, credit to

non-central government sector grew

remarkably by 56.7 percent while credit to

central government slow down by 24.8

percent. This was consistent with the

government’s policy of promoting private

sector development as well as prudent

fiscal policy nit to borrow from the Central

Bank in a bid to fight inflationary pressure.

Fiscal year 2011/12 also witnessed a 30

percent growth in broad money. Narrow

money rose by 24.5 percent due to higher

demand deposits and currency outside

banks reflecting the growth in economic

activities and improvement in transactions

demand for money. Similarly, quasi-money

that comprises savings and time deposits

went up by 36.6 percent and reached Birr

94.5 billion owing to improved financial

intermediation by banks partly through

opening up of 319 new branches.


41

Table 4.1: Components of Broad Money(In Million of Birr)

ParticularsYear Ended June 30 Annual Percentage Change2008/09 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 30.3Source: NBE

02,0004,0006,0008,000

10,00012,00014,00016,00018,00020,00022,00024,000

02/03 04/05 06/07 08/09 10/11

(In M

illio

ns o

f Birr

)

Fig IV.1: Major Components of Broad Money(2002/03 - 2011/12)

Currency Outside Banks Net Demand Deposit Quasi- Money

Broad Money

Year

Source: NBE


42

Table 4.2: Factors Influencing Broad Money(In Millions of Birr)

Particulars

Year Ended June 30 Annual Percentage Change

2008/09 2009/10 2010/11 2011/12 2008/09 2009/10 2010/11 2011/12External 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 56.7Other 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 30.3Source: NBE

Source: NBE


7

4.1.2. Developments in Reserve Money and Monetary Ratios

During the year under review, reserve

money or base money went down by 4.4

percent over last year due to 32.6 percent

decline in deposits of banks at the NBE

offsetting a 17.1 percent rise in currency

in circulation. The drop in reserve

money was also attributed to a 35.3

percent decline in NBE’s net foreign

asset outweighing12.2 percent rise in

domestic credit. Excess reserves of

commercial banks decreased to Birr 3.7

billion from Birr 7.3 billion last year

reflecting the slow down in deposits of

commercial banks at the NBE as a result

of their active participation in the

weekly T-bills market.

The ratio of M2/GDP, an indicator of

financial deepening, went up by 13.7

percent to 0.32 percent in 2011/12,

partly indicating the tight monetary

policy measures taken in order to

mitigate the inflationary pressure.

Compared to last year same period, the

money multiplier defined as narrow

money to reserve money and broad

money to reserve money also slightly

increased reflecting increased deposit

mobilization by commercial banks.


44

Table 4.3: Reserve Money and Monetary Ratios(In Millions of Birr)

Particulars

Year Ended June 30 Annual Percentage Change

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 36.3Other 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


45

4.2. Developments in Interest Rate

In 2011/12 the minimum interest rate on

saving deposit was 5 percent and the

maximum 5.75 percent. Consequently,

average interest rate on savings deposit

remained at 5.4 percent.

On the other hand, the weighted annual

average interest rate on time deposit

increased to 5.73 percent from 5.49

percent last year. Average lending rate,

however, remained at 11.88 percent.

All rates including yield on T-Bills were

negative against the year-on-year

headline inflation of 20.9 percent during

the review fiscal year.


46

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 bankdeposits that would pay higher interest rate on time and demand deposits, rather than the change in interest rate.


47

0.002.004.006.008.00

10.0012.0014.00

Val

ue in

%

Years

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

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

Ethiopia are banks, insurance companies and

micro-finance institutions. The number of

banks operating in the country during the

fiscal year reached 17, of which 14 were

private, and the remaining 3 state-owned.

During the fiscal year, 319 new 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

declined from 65,415.834 people to 62,063.6

in 2011/12.

The significant branch expansion was

undertaken by Commercial Bank of Ethiopia

(CBE) (142 branches), followed by

Construction & Business Bank (50

branches), United Bank (19 branches),

4 Taking total population 84 million


48

Abay Bank (17 branches), Awash

International Bank (16 branches) and Buna

International Bank (14 branches). Hence, the

share of private banks branch network was

47.6 percent at the end of 2011/12 slightly

down from 50.2 percent last year due to

aggressive branch expansion by CBE.

The number of bank branches in Addis

Ababa, reached 430 showing 23.2 percent

growth last year, indicating the booming

economic activities in the central city.

Following significant capital injection by

private banks, mainly Nib International Bank

(Birr 259 million), Dashen Bank (Birr 229

million), Wegagen Bank (Birr 176 million),

Bank of Abyssinia (Birr 159 million) and

Awash International Bank (Birr 153

million), the total capital of the banking

industry increased by 12.9 percent to Birr 18

billion by the end of June 2012. As a result,

the share of private banks in total capital

rose to 49.3 percent from 45.3 percent same

period last year. On the other hand, the share

of public banks in total capital was 50.7

percent with CBE taking up to 34.6 percent.

In the meantime, the number of insurance

companies increased to 15 from 14 last year.

The number of branches also rose to 243

following the opening of 22 additional

branches. Major expansion of branches was

undertaken by Berhan Insurance S.C. (6

branches) followed by Ethiopian Insurance

Corporation (5 branches), Oromia Insurance

S.C. and Tsehay Insurance S.C. each with

three branches.

About 53.1 percent of insurance branches

were located in Addis Ababa. Ownership

wise, private insurance companies accounted

for 81.1 percent of the total branches.


49

At the same time, the total capital of

insurance companies increased by 25.6

percent to Birr 1.2 billion in 2011/12. Private

insurance companies accounted for 73.3

percent of the total capital while one public

insurance company alone accounted for 26.7

percent.

Source: Commercial Banks


50

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)

Banks

Branch Network Capital

2010/11 2011/12 2010/11 2011/12

Regions AddisAbaba Total %

Share Regions AddisAbaba Total %

ShareTotalCapital

%Share

TotalCapital

%Share

1. Public BanksCommercial Bank ofEthiopia 323 94 417 43.0 448 111 559 43.4 6,262.0 39.3 6,231.0 34.6Construction & BusinessBank 17 17 34 3.5 53 31 84 6.5 277.0 1.7 363.0 2.0Development Bank ofEthiopia 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 BanksAwash 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 6.9Cooperative Bank ofOromiya 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


51

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

No. Insurance Companies

Branch Capital

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

A.A Regions Total A.A Region

s Total A B B/A

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 25.6Source: Insurance Companies

Note: A.A represents Addis Ababa


52

Source: Insurance Companies

By the end of 2011/12, the number of

Micro-finance Institutions (MFIs) operating

in the country was 33. Their total capital and

total asset remarkably increased by 27.5 and

31 percent and reached Birr 3.8 billion and

Birr 13.3 billion, respectively.

Similarly their deposit mobilization and

credit extension have witnessed a significant

growth. Compared to last year, their

deposits went up by 44.2 percent to Birr 5.4

billion while their credit provision rose by

32.9 percent to Birr 9.3 billion.

The four largest MFI namely Amhara,

Dedebit, Oromia and Omo Crediit and

Savings institution accounted for 75.4

percent of the total capital, 88.0 percent of

the savings, 82.7 percent of the credit and

82.7 percent of the total assets of MFIs at

the end of 2011/12, reflecting the existence

of low competition in the industry.


53

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

banking system in the form of deposit,

loan collection and borrowing increased

by 16.6 percent and reached Birr 89.2

billion at the end of 2011/12.

Spurred by remarkable branch

expansion, deposit liabilities of the

banking system reached Birr 187.3

billion reflecting annual growth rate of

33.3 percent over last year. Component

wise, time deposits registered a

significant increase (143 percent)

followed by demand deposits (30.2

percent), and saving deposits (27.8

percent). Demand deposits accounted for

49.3 percent of the total deposits

followed by saving deposits (44 percent)

and time deposit (6.7 percent).

The surge in demand deposit over saving

deposit indicates the relative increase in

transaction demand for money. At the

same time the rise in saving deposits

reflects the ever growing financial

intermediation of banks

Despite the opening of 127 new branches

by private commercial banks, the share

of private banks in deposit mobilization

slightly went down to 31.9 percent from

33.3 percent last year. CBE alone

mobilized 65.9 percent of the total

deposit due to its wider branch network.

Raising funds through borrowing by the

banking industry was not an important

source of resource mobilization as most

of the banks were sufficiently liquid due

to the surge in deposit mobilization and


54

collection of loans. As a result, total

outstanding borrowing at the end of the

fiscal year reached Birr 16.9 billion

in2011/12 up from Birr 9.7 billion a year

earlier. Of the total borrowing, domestic

sources accounted for 93.9 percent, while

foreign sources took the remaining

balance.

Loan collection by the banking system

stood at Birr 35.2 billion 15.2 percent

higher than last year. More than half of

52.5 percent of the loan was collected by

public banks


55

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

(In Million Birr)

Particulars

2009/10 2010/11 2011/12PercentChange

PublicBanks

PrivateBanks

Total(A)

PublicBanks

PrivateBanks

Total(B)

PublicBanks

PrivateBanks 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 ResourcesMobilized (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)

Particulars

2009/10 2010/11 2011/12B/A C/B

A B CA. 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

T o t a l 98633.3 140531.8 187290.7 42.5 33.3B. Borrowings

-Local 4665.6 8666.5 15898.9 85.8 83.5-Foreign 978.7 1019.4 1034.1 4.2 1.4

T o t a l 5644.2 9686.0 16933.1 71.6 74.8Source: Commercial Banks &Staff Computation


56

4.3.2 New Lending Activities.

Despite the tight monetary policy

measures followed by the National Bank

of Ethiopia, the fiscal year witnessed a

32.9 percent increase in fresh loan

disbursements by banks, (including DBE)

which reached Birr 56.1 billion in

2011/12. This was attributed to enhanced

deposit mobilization and loan collection

of the banks. Of the total new loans

disbursed by the banking system, 34.1

percent was by private banks and

remainder by public banks. The ratio of

new loan disbursement of private banks

to their total deposit was 32.1 percent

while that of public banks was 29

percent.

Regarding loan allocation by sector, 29.4

percent went to industry followed by

agriculture (25.3 percent) and domestic

trade (17.3 percent), with other sectors

taking up the remaining balance. The

share of the new loan disbursement to

real sector (agriculture, industry and

housing & construction) rose from 51.2

percent last year to 63.8 percent in

2011/12 reflecting the shift in loan from

trade and other short term loans towards

the production sector.

Source: Commercial Banks and DBE


57

Table.4.10: Loans and Advances by Lenders 1/ At June 30, 2012(In Million Birr)

Lenders

2010/11 2011/12

Percentage ChangeD* C* O/S* D* C* O/S*

A B C D E F D/A E/B F/CA. 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 57.0B. Private Banks

4 Awash International Bank 4654.0 4257.3 3994.8 2467.2 2204.7 5511.6 -47.0 -48.2 38.05. Dashen Bank 2912.0 2748.1 6141.7 3632.4 3380.4 8042.0 24.7 23.0 30.96. Bank of Abyssinia 2497.9 2338.4 3315.9 2101.7 1998.0 3897.7 -15.9 -14.6 17.57. Wegagen Bank 2612.0 2640.7 2910.0 2556.5 2370.4 3565.7 -2.1 -10.2 22.58. United Bank 2557.1 2287.4 3277.0 2358.1 2228.6 4085.4 -7.8 -2.6 24.79. Nib International Bank 1645.0 1724.9 2766.5 2093.4 1755.5 3708.2 27.3 1.8 34.010. Cooperative Bank of Oromia 660.2 703.6 799.5 669.0 407.4 1383.5 1.3 -42.1 73.111. Lion International Bank 472.9 514.8 677.0 568.8 454.6 970.8 20.3 -11.7 43.412. Oromia International Bank 649.4 465.4 645.2 786.7 745.8 1012.7 21.2 60.2 57.013. 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 & DBE1. O/S Credit excludes lending to central governmentD*=Disbursement, C*=Collection, O/S*= Outstanding Credit


58

Table 4.11: Percentage Share of Loans and Advances by Lenders at June 30, 2012(In Million Birr)

Lenders

2010/11 2011/12

Percentage changeD* C* O/S* D* C* O/S*

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 Banks4 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 & DBED*=Disbursement, C*=Collection, O/S*= Outstanding Credit

4.3.3 Outstanding Loans

Total outstanding credit of the banking

system including the central government

increased by 49.8 percent and reached

Birr 116.3 billion at end June 2012. Gross

outstanding claims on the central

government and public enterprises surged

by 65.2 and 102.3 percent, while claims

on the private sector including

cooperatives rose by 32 and 64.1 percent,

respectively.

The sectoral distribution of outstanding

loans indicated that credit to Industry

accounted for 28.8 percent followed by

international trade (21.5 percent) and

agriculture (14.8 percent).


59

Table 4.12: Loans & Advances by Economic Sectors 1

Economic Sectors2010/11 2011/12 Percentage Change

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 49.8Source: Commercial Banks including DBE & Staff Computation

D*=Disbursement, C*=Collection, O/S*= Outstanding Credit1/ includes lending to central government


60

Source: Commercial Banks including DBE & Staff Computation

Table 4.13: Loans and Advances by Borrowers1atst June 30, 2012(In Million Birr)

Borrowing Sector

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

Percentage changeO/S* O/S* O/S* D* C* O/S*

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 49.4Source: Commercial Banks including DBE & Staff Computation

D*=Disbursement, C*=Collection, O/S*= Outstanding Credit1/ Includes lending to central government


61

4.4 Financial Activities of NBE

By the end of 2011/12, outstanding

claims of NBE on the central government

reached Birr 55.56 billion of which direct

advances stood at Birr 46.3 billion or

83.3 percent of the total claim, while

bond holdings accounted for the

remaining 16.7 percent. By the end of

2011/12, the outstanding claim of NBE

on DBE rose from Birr 9.3 billion to Birr

12.5 billion.

Regarding liabilities of NBE, total

deposits at the NBE dropped by 24.4

percent to Birr 30.8 billion due to lower

deposits of financial institutions and

central government.

Table 4.14: Financial Activities of National Bank of Ethiopia at the Close of June 30, 2012(In Million Birr)

Particulars

2009/10 2010/11 2011/12 % Change

A B C B/A C/B

Loans and Advances (1+2) 45,522.8 61,864.6 68,064.5 35.9 10.01.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 -24.43.1 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

primary market where securities are

transacted on a weekly basis. There is no

secondary market for the security.

Government bonds are also occasionally

issued to finance government

expenditures and/or to absorb excess

liquidity in the banking system.


62

4.5.1 NBE Treasury Bill Market

The amount of Treasury-bills offered to

the weekly auction market during the

fiscal year reached Birr 96.5 billion,

depicting 15.7 percent annual growth

while total demand increased by 38.4

percent.

The amount of T-bills sold during the

year was Birr 74.7 billion (96.8 percent

of total demand), depicting a 42.8 percent

rise.

Albeit improved participation of banks in

the T-bill market, non-bank institutions

continued to dominate in the market by

holding 88.1 percent of the total

outstanding T-bills. At the end of

2011/12, the total outstanding T-bills

went up by 85.4 percent to Birr 20

billion.

The average weighted yield for all types

of bills increased to 1.87 from 1.13

percent last year. The yields for 28-days,

91-days and 182 days T-bills grew by

73.5, 17.9 and 83.2 percent, respectively

over last year.


63

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

Source: NBE

Particulars2009/10 2010/11 2011/12 Percentage Change

A B C C/A C/B

Number of Bidders 280 220 406 45.0 84.5Amount 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 9.96991-day bill 27,553.755 22,159.875 28,691.740 4.130 29.476182-day bill 3,944.260 2,965.150 9,748.000 147.144 228.752364-day bill 5,066.000 - -

Amount Supplied (Mn.Birr) 55,203.315 83,390.670 96,511.875 74.8 15.728-day bill 15,110.000 41,575.900 40,023.990 164.884 -3.73391-day bill 28,150.495 35,152.630 35,435.585 25.879 0.805182-day bill 11,942.820 6,662.140 16,652.300 39.434 149.954364-day bill 4,400.000 - -

Amount Sold (Mn.Birr) 41,736.415 52,316.025 74,694.810 79.0 42.8Banks 13,902.000 20,271.275 24,212.670 74.167 19.443Non-Banks 27,834.415 32,044.750 50,482.140 81.366 57.536

Average Weighted Price forSuccessful bids(Birr) 97.017 99.745 98.556 1.586 -1.192

28-day bill 99.943 99.886 99.806 -0.137 -0.08091-day bill 99.757 99.703 99.653 -0.105 -0.051182-day bill 91.352 99.645 97.254 6.461 -2.400364-day bill 97.513 - -

Average Weighted Yeild forSuccessful bids(%) 0.786 1.126 1.866 137.299 65.671

28-day bill 0.750 1.460 2.533 237.809 73.49791-day bill 0.976 1.186 1.399 43.336 17.944182-day bill 0.633 0.732 1.342 112.004 83.201

364-day bill 2.189 - -Outstanding bills at the end ofperiod(Mn.Br.) 11,566.200 10,796.620 20,011.860 73.020 85.353

Banks 4,400.000 900.000 2,383.500 -45.830 164.833Non-Banks 7,166.200 9,896.620 17,628.360 145.993 78.125


64

4.5.2 NBE Bill Market

On April 4, 2011, NBE introduced NBE

Bill to mobilize resource from banks to

help long term financing of some priority

sectors identified as the driving forces for

over all economic growth. Since its

introduction total NBE bill purchased by

the banking sector reached Birr 12.84

billion at the end of the fiscal year.

Source: NBE

0.00

0.50

1.00

1.50

2.00

2.50

3.00

0.00

20000.00

40000.00

60000.00

80000.00

100000.00

120000.00

Valu

e in

Mill

ions

of B

irr

Year

Fig IV.9:Treasury Bills Auction Result

Demand Supply Average Weighted Yield


65

4.5.3. Bonds Market

In recent years, following the strong

growth in economic activities and real

income, there was strong demand for

corporate bonds. As a result, corporate

bond holdings of CBE increased by 53.5

percent to Birr 61.8 billion in 2011/12

from Birr 40.3 billion a year ago.

Corporate bonds of EEPCO accounted

for 79.2 percent, regional states and DBE

17.8 percent and 3 percent, of total bond

holdings by CBE.

Public institutions and regional

governments are the sole issues of

corporate bonds.

Table 4.16: Disbursement, Redemption and Outstanding of Coupon and Corporate BondPurchases by the Banking System at the end of June 30, 2012

(In Millions of Birr)

Particulars

AnnualPercentage

Change2010/11 2011/12

B/AA B

1. Corporate Bond Purchases by holders 18,157.0 23,501.0 29.4EEPCO 13,000.0 19,300.0 48.5Regional governments 3,007.0 4,101.0 36.4Development Bank of Ethiopia 2,150.0 100.0 -95.3Private Sector2. Redemption of Bonds by Clients 5,611.7 1,740.3 -69.0EEPCO 0.0 0.0 0.0Regional governments 1,167.1 1,740.3 49.1Development Bank of Ethiopia 4,444.6 0.0 -100.0Private Sector3. Outstanding Bonds by Clients 40,258.3 61,786.7 53.5EEPCO 29,600.0 48,900.0 65.2Regional governments 8,858.3 11,015.8 24.4Development Bank of Ethiopia 1,800.0 1,870.9 3.9Private SectorSource: Commercial Bank of Ethiopia


66

4.5.4. Inter-bank Money Market

The interbank money market was not active

in Ethiopia due to the existence of excess

reserves in the banking system.

Accordingly, no inter-bank money market

transaction has been conducted since April

2008. Since the introduction of the

interbank money market in September

1998, merely twenty three transactions to

the tune of Birr 259.2 million were

conducted with interest rates ranging

between 7 to 11 percent per year. The

maturity period of these loans widely

spanned from overnight to 5 years.

Table 4.17: Interbank Money Market Transactions up to June 30, 2012

Borrower Lender

AmountBorrowed (In

Thousand Birr)Interest Rate

%Date of

TransactionMaturity

PeriodNib 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 ,, 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 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


67

V. DEVELOPMENTS IN EXTERNAL SECTOR

5.1 Overall Balance of Payments

The overall balance of payments in

2011/12 recorded a deficit of USD 972.8

million in contrast to USD 1.4 billion

surplus registered in the preceding year.

The trade deficit also widened by 43.6

percent during the review period owing to

a 34 percent growth in merchandise

imports compared to moderate increase

(14.8 percent) in merchandise exports.

Meanwhile, although net private transfers

improved in the same period, the current

account deficit worsened to USD 2.8

billion from USD 210.6 million in the

previous year. As a result, net transfers to

GDP ratio declined to 11.8 percent from

14.7 percent a year ago.


68

Table 5.1: Balance of Payments(In Millions of USD)

S/NParticulars 2009/10 2010/11 2011/12 Percentage Change

A B C B/A C/B1 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 -1.0Other 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 34.0Fuel 1,310.7 1,659.3 2,124.7 26.6 28.0Cereals 513.1 196.0 652.5 -61.8 232.9Aircraft 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 8.7Imports 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 38.4O/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 18.2o/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 -33.16 121.48445Current account balance (excludingofficial 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 1,229.3Current account balance as %ageof GDP -4.0 -0.7 -6.6

9 Capital account 1,996.2 2,535.5 2,119.8 27.0 -16.4Off. 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 -972.812 Financing -316.6 -1,384.2 972.813 Reserves (-; Increase) -304.6 -1,375.8 980.8

14 Central Bank (NFA) 57.8 -932.2 846.5Asset -397.7 -1,065.0 810.0Liabilities 455.5 132.8 36.6

15 Commercial banks (net) -362.4 -443.6 134.3

16 Debt Relief -12.0 -8.4 -8.0Principal 9.8 7.8 6.7Interest 2.2 0.6 1.3

Source: NBE Staff Compilation


69

Table 5.2: Components of External Trade as Percentage of GDP

Particulars

2009/10 2010/11 2011/12 Percentage Change

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 -8.4Source: NBE Staff Compilation

Source: NBE Staff Computations


70

5.2 Developments in Merchandise Trade

The deficit in merchandise trade during

2011/12 was widened by 42.8 percent to

USD 7.9 billion, relative to the preceding

fiscal year mainly due to higher growth in

total imports than total exports.

Compared to same period last year,

export to GDP ratio and import to GDP

ratios was declined by 1.3 and 0.4

percentage points respectively from 8.7

percent and 26.3 percent last year.

5.2.1 ExportsTotal export proceeds during 2011/12

amounted to USD 3.15 billion, about 14.8

percent higher than the previous fiscal

year. The growth was largely attributed to

increased earnings from oilseeds (44.6

percent), gold (30.5 percent), live animals

(40 percent), pulses (15.8 percent), flower

(12.4 percent), meat & meat products

(24.5 percent), fruits and vegetables (42.7

percent), leather & leather products (5.9

percent), and chat (0.8 percent).

Earnings from export of oilseeds grew by

44.6 percent and reached USD

472.3 million, as a result of significant

increment in volume of export (44.6

percent) and marginal improvement in

international price (0.03 percent).

Revenue from gold rose by 30.5 percent

annually to USD 602.4 million driven by

9 percent growth in volume and 19.7

percent increase in international price.

Revenue from gold accounted for 19.1

percent of total export earnings.

Export of live animals earned USD 207.1

million, depicting a 40 percent growth

over the preceding year owing to a rise in

the volume of exports (28.4 percent) and

higher international price (9 percent).

Earnings from live animals contributed

6.6 percent of the total merchandise

export proceeds.

Driven by marginal improvement in the

volume of export (0.7 percent) and

moderate rise in international price (15

percent); export proceeds from pulses

increased by 15.8 percent to USD 159.7

million accounting for 5.1 percent of the

total merchandise exports.


71

Earning from flower was USD 197

million, 12.4 percent higher than a year

ago owing to 12.6 percent growth in

volume despite 0.2 percent decline in

world price. The share of flower export

in total export revenue was 6.3 percent,

down from 8.5 and 6.4 percent in the last

consecutive two years, respectively.

Similarly, earnings from export of meat

& meat products rose by 24.5 percent to

USD 78.8 million as a result of 4.7

percent growth in volume and 19 percent

increase in international price. As a

result, revenue from this export item

accounted for 2.5 percent of the total

export, earnings.

Earnings from export of fruits and

vegetables at USD 44.9 million showed a

42.7 percent annual growth driven by

higher volume of exports (34.9 percent)

and international price (5.8 percent).

Fruits and vegetables export accounted

for 1.4 percent of the total export

revenue.

Table 5.3: Values of Major Export Items(In Millions of USD)

Particulars

2009/10 2010/11 2011/12Percentage

ChangeValue Share(%) Value Share

(%) Value Share(%)

A B C C/B C/A

Coffee 528.3 26.4 841.8 30.6 833.1 26.4 -1.0 57.7Oilseeds 358.5 17.9 326.6 11.9 472.3 15.0 44.6 31.7Leather & Leather products 56.4 2.8 103.8 3.8 109.9 3.5 5.9 95.0Pulses 130.1 6.5 137.9 5.0 159.7 5.1 15.8 22.7Meat & Meat Products 34.0 1.7 63.3 2.3 78.8 2.5 24.5 131.8Fruits & Vegetables 31.5 1.6 31.5 1.1 44.9 1.4 42.7 42.8Live Animals 90.7 4.5 147.9 5.4 207.1 6.6 40.0 128.2Chat 209.5 10.5 238.3 8.7 240.3 7.6 0.8 14.7Gold 281.4 14.0 461.7 16.8 602.4 19.1 30.5 114.1Flower 170.2 8.5 175.3 6.4 197.0 6.2 12.4 15.7Others 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 57.4Source: Ethiopian Revenue and Customs Authority

Leather & leather products earned USD

109.9 million, about 5.9 percent higher

than the previous year. This increment

ascribed to a 23.4 percent rise in

international price despite 14.2 percent

decline in volume. However, their share

in the total export declined to 3.5 percent

from 3.8 percent in the previous period.


72

Export of chat rose slightly by 0.8 percent

and reached USD 240.3 million owing to

marginal increase in volume and

improved price. The share of Chat in total

export was 7.6 percent.

Revenue, from export of coffee declined

by 1 percent in 2011/12 and amounted to

USD 833.0 million. This slight fall in

export proceeds from coffee was solely

attributed to the 13.6 percent decline in

volume of export despite higher price. As

a result, the share of coffee in total

exports went down to 26.4 percent from

30.6 percent last year.

Source: Ethiopian Revenue and Customs Authority


73


Table 5.4: Volume of Major Exports(In Millions of K.G.)

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 30.1Source: Ethiopian Revenue and Customs Authority


74

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 ChangeA 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 -11.1Source: Calculated from Tables 5.3 and 5.4


75


5.2.2. Imports

Compared to last year, total merchandise

import in 2011/12 surged by 33.8 percent

to USD 11.06 billion owing to growth in

imports of consumer goods (53.9

percent), fuel (28.1 percent), and semi-

finished goods (59.4 percent), capital

goods (7.4 percent) and raw materials

(8.4 percent).

Imports of consumer goods rose

considerably by 53.9 percent mainly due

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

percent from 27.8 percent in the

preceding year.

Similarly, fuel import bill rose by 28.1

percent in 2011/12 and amounted to USD

2.12 billion. This was due to higher

volume of export (20.4 percent) and

improvement in international fuel price

(16.6 percent)5. As a result, the share of

fuel in total import bill went down to 19.2

percent from 20.1 percent recorded last

year same period.

5 Information on international fuel price wasobtained from U.S. Energy InformationAdministration


76

Meanwhile, import of capital goods

increased by 7.4 percent over the

previous year and amounted to USD 2.96

billion. The increase was due to a rise in

import of transport goods (17.7 percent),

agricultural goods (87.9 percent) and

industrial goods (1.4 percent). Capital

goods import accounted for 26.8 percent

of the total import during the period.

Import bill of semi-finished goods was

USD 1.96 billion, which was 59.4 percent

higher than last year. Import of fertilizer

surged by 76.6 percent and reached USD

604.6 million, driven by the rising global

prices and increased volume of imports.

During that time, raw material imports

rose by 8.7 percent relative to the

preceding year and constituted 1.8

percent of the total imports.

Table 5.6: Value of Imports by End Use(In Millions of USD)

Categories

2009/10 2010/11 2011/12Percentage

ChangeValueShare(%) Value

Share(%) Value

Share(%)

A B C C/B C/ARaw Materials 212.4 2.6 183.7 2.2 199.7 1.8 8.7 -6.0Semi-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 76.6 142.4Fuel 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 59.5Others 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 2.6Transport 509.8 6.2 688.1 8.3 809.7 7.3 17.7 58.8Agricultural 59.8 0.7 63.6 0.8 119.5 1.1 87.9 99.8Industrial 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 40.4Durables 865.0 10.5 868.5 10.5 1,105.3 10.0 27.3 27.8Non-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 33.8Source: Ethiopian Revenue and Customs Authority


77

5.2.3 Direction of Trade

Ethiopia’s merchandise exports have vast

market in Europe, accounting for 47.1

percent of the total merchandise exports.

Within European countries, Switzerland,

accounting for about 38.6 percent of the

total exports, was the largest market

mainly for gold. Germany, the second

important market in the continent

accounting for 20.7 percent, mainly

imported coffee, textile & garments,

flower and leather & leather products.

The Netherlands, constituting 14.6

percent of Ethiopia’s export to Europe,

was an important export destination

primarily for flower, gold, vegetable and

coffee. Italy with 5.4 percent of the total

Ethiopian exports to the Europe was the

market for coffee, leather & leather

products, textile & garment and pulses.

About 30 percent of the total Ethiopian

exports were shipped to Asian market, of

which China accounted for 34.6 percent,

Saudi Arabia 21.7 percent, United Arab

Emirates 8.1 percent, Israel 6.4 percent

and Japan 4.8 percent. The prime export

items shipped to China included oilseeds,

leather & leather products, mineral

products, natural gums and vegetables.

Coffee, meat & meat products, oilseeds,

live animals and flower were exported to

Saudi Arabia. Meat & meat products,

pulses, live animals, oilseeds, vegetables,

natural gum, flower and food were the

major export products sold to United

Arab Emirates. Israel bought mainly

oilseeds, coffee and vegetables while

Japan imported mainly coffee, oilseeds,

and flower.

Meanwhile, about 18.9 percent of

Ethiopia’s total exports went to African

nations of which Somalia, Sudan,

Djibouti, and Egypt together accounted

for 93.3 percent of the total exports to the

continent. Exports to Somalia mainly

included vegetables, live animals and

chat. Live animals, coffee, pulses and

spices were the main exports to Sudan.

Djibouti imported vegetables, live

animals, chat, textile & garments, fruits

and pulses whilst Egypt bought live

animals, oilseeds, meat & meat products

and pulses.

Ethiopia’s exports to American accounted

for 3.4 percent of the total export during


78

2011/12 of which United States and

Canada together made up 92.5 percent.

The United States imported mainly

coffee, oilseeds, mineral products and

leather & leather products while Canada

mainly bought coffee.

Africa18.9%

Europe47.1%

America3.4%

Asia30%

Oceania0.6%

Fig VI.6 Export by Destinations

Source: NBE staff compilation


79

Concerning Ethiopia’s imports, about

65.4 percent of the total merchandise

imports in 2011/12 originated from Asia,

23 percent from Europe, 6.2 percent from

America and 5.1 percent from Africa.

Among Asian countries, China accounted

for 25.4 percent, Saudi Arabia 21.2

percent, India 12.8 percent, Kuwait 6.6

percent, Japan 6.3 percent, and Indonesia

3.9 percent. The prime imports from

China included machinery & aircraft,

metal and metal manufacturing, road &

motor vehicles, electric materials,

clothing, textiles and rubber products.

Petroleum products were the major

imports from Saudi Arabia which

accounted for 67 percent of the total

petroleum import of the nation in

2011/12.

The share of European countries in total

imports was just 23 percent, of which

79.4 percent came from six countries;

namely, Italy (15.4 percent), Turkey (14.7

percent), Russia (14.1 percent), Ukraine

(12.3 percent), Germany (7.1 percent)

and France (5.8 percent). Machinery &

aircraft, road & motor vehicles, grain,

metals & metal manufacturing and

electrical materials were imported from

Italy. Metal & metal manufacturing,

machinery & aircraft and electrical

materials were bought from Turkey. The

major imports from Russia were grain

and fertilizer while fertilizer, metal &

metal manufacturing, road & motor

vehicles and grain were the principal

imports from Ukraine. Machinery &

aircraft, road & motor vehicles, metal &

metal manufacturing, medical &

pharmaceutical and electrical materials

import were imported from Germany.

Electrical materials, machinery & aircraft

and metal & metal manufacturing were

imported from France. Spain mainly

exported electrical materials, road &

motor vehicles, metal & metal

manufacturing and machinery & aircraft

to Ethiopia.

About 85.1 percent of Ethiopian imports

from America were from USA and

Brazil. These imports mainly include

glass & glass ware, machinery & aircraft,

road & motor vehicles, grain and medical

& pharmaceutical imports.

African countries were the sources of 5.1

percent of the total Ethiopian imports.

The major imports were from Morocco

(32.1 percent), South Africa (20.9

percent), Sudan (19.4 percent), and Egypt

(15.9 percent) which altogether accounted


80

for 88.3 percent of the total import from

Africa. Import from Morocco was mainly

fertilizer. Road & motor vehicles, food &

live animals, machinery & aircraft,

medical and pharmaceutical products,

metal & metal manufacturing, paper &

paper manufacturing, fertilizer, grain and

beverages were the major imports from

South Africa. Petroleum products were

the main import from Sudan. Imports

from Egypt included metal & metal

manufacturing, petroleum products,

rubber products, food & live animals,

paper & paper manufacturing.

Africa5.1% Europe

23%

America6.2%

Asia65.4%

Oceania0.2%

Fig. VI. 7 Import by Origin

Source: NBE staff compilation

5.3 Services and Transfers

5.3.1 Services

In 2011/12, net services account recorded

USD 74.9 million inflow, showing 89.1

percent fall compared to the preceding

year on account of higher net payments

and decline in government and travel

services.

5.3.2 Unrequited Transfers

Net transfers in 2011/12 improved by 9.3

percent, owing to 52.2percent increment

in NGO transfers (both cash and food aid)

and 3.2 percent private individual

transfers mainly cash component. Official

transfers, however tended to decline.


81

Table 5.7 Services Accounts

(In Millions of USD)

S/N Particulars2009/10 2010/11 2011/12 Percentage Change

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 71.75 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 8.7Travel 360.1 722.7 680.9 100.7 -5.8Transport 1 1,101.3 1,319.8 1,690.8 19.8 28.1Gov't 2 252.6 262.0 212.1 3.7 -19.0Other 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

9Net Services(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 3.912 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 38.4Source: MOFED, Transport and Telecommunication Companies, NBE- FEMEMD and Staff Compilation.


82

Table 5.8 Unrequited Transfers

(In Millions of USD)

No. Particulars

2009/10 2010/11 2011/12 PercentageChange

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

percent owing to lower grants from both

international financial institutions and

bilateral donors. Cash component of

official transfers declined by 9.2 percent to

USD 1.7 billion while food aid increased to

USD 119.8 million compared to USD 30.1

million in the previous year.

5.4. Current Account

As a result of widening trade balance,

decline in net services and public transfers,

the current account deficit widened to USD

2.8 billion in 2011/12 from USD 210.6

million deficits recorded last fiscal year.


83

5.5 Capital Account

In 2011/12, the balance in capital account

showed a surplus of USD 2.12 billion,

about 16.4 percent lower than that of last

year owing to a fall in official and other

public long term net capital inflows

Likewise, foreign direct investment

declined by 13.7 percent compared to last

year.

5.6 Changes in Reserve Position

Net foreign assets of the banking system at

the end of 2011/12 recorded a reserve

drawdown of USD 972.8 million, due to

decreases in the net foreign assets of NBE

and commercial banks. The gross

international reserve of NBE was adequate

to cover 1.9 months of imports of goods

and non-factor services.

5.7 External Debt

External debt stock of the country at the

end of 2011/12 amounted to USD 8.8

billion, depicting a 20.9 percent increase

over the preceding year. This was attributed

largely to higher debt owed to multilateral

(USD 4 billion) and bilateral creditors

(USD 2.2 billion). Hence, the country’s

external debt stock to GDP ratio rose to

26.5 percent from 23.1 percent in

2010/11. Debt stock to total receipts from

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

showed a 23.9 percent annual growth. Of

the total debt stock, 45.3 percent was owed

to multilateral and 25.2 percent to bilateral

creditors.

The country’s external debt burden as

measured by debt services to export of

goods and services ratio increased to 7.1

percent from 3.6 percent in the same period

last year.


84

Table 5.9: External Public Debt

(In Million of USD)

Particulars

2009/10 2010/11 2011/12Percentage

Change

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 14.9Debt stock to export of goods and non-factorservices 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 -72.6 106.7Source: MoFED1/ Ratio of debt service to receipts from export of goods and non-factor servicesNote: Outstanding as at end period.

Developments in Foreign Exchange Markets

Developments in Nominal Exchange Rate

In the inter-bank foreign exchange market,

the average weighted exchange rate of the

Birr depreciated by 7.1 percent year-on-

year to reach Birr 17.2536/USD

(Table 5.9). Similarly, the Birr weakened

in the parallel foreign exchange market to

Birr17.9883/USD on average, showing 8.8

percent annual depreciation.

8.8 percent annual depreciation.


85

As a result, the average spread between

the official and parallel market rates

widened to 4.3 percent from 2.6 percent

the previous year, mainly due to relatively

faster depreciation of the Birr in the

parallel market.

Table 5.9 Inter-Bank and Parallel Forex Market Exchange Rates

Period

AverageWeighted

Rate

Amount Traded inmillions of USD Number of Trades

Average Ratesin Parallel

MarketTotalo/w Among

CBs Total o/w Among CBs

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 18.4900Source: NBE, Foreign Exchange Monitoring & Reserve Management Directorate and staff compilation

Reflecting the depreciation of the

exchange rate of the Birr in the inter-bank

foreign exchange market, the average

retail buying and selling rates of forex

bureau also depreciated by 2.6 percent

each and stood at Birr 17.2531/USD and

Birr 17.6002/USD, respectively.

The average premium between forex

bureau’s buying and selling rates,

however, remained stable at 2 percent

(Table 5.13).


86

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

Currency

2009/10 2010/11 2011/12 Percentage change

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 2.3Source: Staff Compilation

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

Currency

2009/10 2010/11 2011/12 Percentage change

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 34.1Source: Staff Compilation


87

During the review year, the end period

mid market exchange rate of the US

dollar appreciated against major

international currencies. The highest rate

of appreciation was against Euro (13.7

percent) and Swiss Frank (13.5 percent),

followed by Swedish Kroner (9.6

percent), Canadian Dollar (5.2 percent),

SDR (4.8 percent) and Pound sterling

(2.9 percent).

However, the US dollar has shown slight

depreciated vis-à-vis Japanese Yen, while

it remained stable with respect to Djibouti

Frank, Saudi Riyal and UAE Dirhams

(Table 5.10).

Since USD is an intervention currency in

Ethiopia, the end period exchange rate of

the Birr also followed similar patterns as

it appreciated against Euro (9.6 percent),

Swiss Frank (9.3 percent), Swedish

Kroner (5.2 percent), Canadian Dollar

(0.5 percent) and SDR (0.2 percent). The

Birr also showed annual depreciation of 7

percent against Japanese Yen and 4.9

percent against Djibouti Frank, Saudi

Riyal and UAE Dirham each (Table 5.

11).

5.8.2. Movements in Real Effective Exchange Rate

Following the decline in its rate of

depreciation, the real effective exchange

rate (REER) appreciated by 22 percent in

2011/12 against 10.8 percent depreciation

in the preceding year, mainly due to

higher domestic inflation (Table 5.12).

The nominal effective exchange rate,

however, depreciated by 5.2 percent

compared to 20.6 percent depreciation in

2010/11 as domestic annual inflation

tended to slow down from 38 percent to

20.5 percent during the review period.


88

Table 5.12: Trends in Real and Nominal Effective Exchange Rates

Year REERI NEERI

Percentage Change

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 -5.24Source: 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-

bank foreign exchange market during

2011/12, about 68.7 percent higher than last

year. Of the total transactions, USD 90.9

million (or 60 percent) was among

commercial banks while the remaining USD

61.3 million was supplied by the NBE (Table

5.9).

Meanwhile, foreign exchange purchase of

forex bureau of commercial banks declined

by 32.5 percent to USD 134.6 million. Their

sales of foreign exchange, however, surged

from USD 19.7 million in 2010/11 to USD

88 million in 2011/12 (Table 5.13).


89

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

(In Millions ofUSD)

Name of Forex Bureau


A B C D E F E/C F/D

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 -72.7 389.6Construction & BusinessBank 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 2.6Source: Staff Compilation


90

GENERAL GOVERNMENT FINANCE

Government Finance

The overall fiscal performance of the

general government in 2011/12 resulted

in a deficit of Birr 21.5 billion, which

was less than Birr 24.7 billion

(excluding grants) recorded in 2010/11.

Total revenue (including grants)

depicted a 35.1 percent growth in

2011/12 as compared to the preceding

year. Thus revenue to GDP ratio

increased to 14.0 percent from 13.7

percent a year ago.

Meanwhile, general government

expenditure rose by 32.6 percent during

the review period as all of its

components showed significant

increases. The ratio of expenditure to

GDP became 16.9 which was marginally

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 28.32011/12 -1.2 1.9 25.7 39.5 45.6 16.9 14.0 48.8Source: Staff ComputationPD = Primary DeficitIP/RR = Share of interest payments in Recurrent revenueDdebt/GDP = Ratio of Domestic Debt to GDPR(Debt) = Growth rate of Domestic DebtR(GDP) = Growth rate of GDP at current market priceExp/GDP = Ratio of General Government Expenditure to GDRev/GDP = Ratio of General Government Revenue to GDPR(OR) = Growth rate of ordinary Revenue


91

6.2 Revenue and Grants

Under the review period, Birr 115.6

billion (including grants) was collected

from various sources. The performance

against the plan was 94.4 percent.

Total revenue (including grants) depicted

a 35.1 percent annual growth as a result

of improved tax collection and

administration like application of cash

registration machines, enhanced capacity

building, improved awareness of tax

payers and economic growth.

Domestic revenue reached Birr102.9

billion showing102 percent growth over

last year. Of the total domestic revenue,

about 83.4 percent was generated through

taxes and 16.6 percent through non-taxes.

Tax revenue rose by 45.4 percent in the

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

of rural and urban land use fee, however,

was only 3.4 percent.

Revenue from indirect taxes was Birr

56.9 billion and its share in total tax

revenue reached 66.3 percent. About 59.0

percent of the indirect tax revenue was

generated through import duties whose

share grew by about 41.4 percentage

points over last year.

Non-tax revenue reached Birr 17.1 billion

showing a 68.9 percent increment vis-à-

vis preceding year largely due to higher

income from government investment and

property sales.

On the other hand, external grants

dropped by a 22.4 percent compare to a

year earlier.


92

0

20000

40000

60000

80000

100000

120000

140000

In m

illi

on B

irr

Fiscal Year

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

Total Revenue and Grants Tax Revenue Direct tax revenue

Indirect tax revenue Non-tax revenue Grants


93

6.2 Summary of General Government Revenue by Components(In Million of Birr)

Particulars

2010/11 2011-12Percentage

ChangePerform-

anceRateA [B] C

[C/A]Pre. ActRevisedBudget Pre. Act [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 9178.5 105.1 212.93.3 Reimb. And PropertySales 194.0 364.2 451.0 132.5 123.83.4 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 dividend4/ Other extra ordinary, miscellaneous, pension contribution and otherrevenue


94

6.3 Expenditure

Total general government expenditure in

2011/12 reached Birr 124.4 billion

compared with Birr 93.8 billion a year

ago. The growth was attributed to higher

out lays in all its components. Hence the

share of expenditure in GDP showed a

marginal decline to 16.9 percent last

year.

Recurrent expenditure was Birr 51.4

billion about 26.9 percent higher than a

year ago. The largest share (41.3

percent) of the current expenditure went

to finance social and general services

and its ratio to GDP was about 5.7

percent.

Likewise, capital expenditure during the

review period increased by 36.9 percent

over the preceding year and reached Birr

73 billion largely on account of higher

spending on economic development

which accounted for 69.1 percent of the

total capital expenditure. Of the total

expenditure on economic development

34.2 percent was allotted to poverty

related programs such as education,

health and agriculture etc. Its share in

GDP stood at about 3.4 percent.

In summary, general government

expenditure performance rate was 90.0

percent of the annual budget.


95

6.3: Summary of General Government Expenditure(In million Birr)

Particulars


Change Perform-anceRate[A] [B] [C]

[C/A]Pre

actualRevisedBudget Pre actual [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 - - - - -


6.4: Deficit Financing

General government budgetary operation

including grants resulted in a deficit of

Birr 8.7 billion in 2011/12. This was 6.6

percent higher than the deficit recorded a

year earlier. Fiscal deficit as a

percentage of GDP was 1.2 percent.

About 74.6 percent of the deficit was

financed through net external borrowing.

The remaining balance was covered

through net domestic borrowing and

privatization receipts.


96

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.019

96/9

7

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

In P

erce

nt o

f GD

P

Fiscal Year

Fig.6.3 Trends in General Government Expenditure and Revenue(% of GDP)

Expenditure/GDP Revenue/GDP

Source MoFED


97

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

Particulars


Changeperformance

rate

[A] [B] [C]

[C/A] [C/B]Pre. ActRevisedBudget Pre. Act

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)



98

VII. INVESTMENT

The Ethiopian Investment Agency and

Regional Investment Offices licensed

62,068 investment projects with an

aggregate capital of Birr 1.2 trillion in the

period between 1992/93 – 2011/12. Of these

projects, 52,462 (84.5 percent) were

domestic, 9,498 (15.3 percent) foreign and

108 (0.2 percent) public. In terms of capital,

Birr 483.4 billion (39.5 percent) was from to

domestic investors, Birr 466.2 billion (38.1

percent) from foreign investors and Birr

275.2 billion (22.5 percent) from the public

sector (Table 7.1).

In 2011/12, a total of 5,649 investment

projects with a combined capital of Birr

146.2 billion were approved.

Domestic investment accounted for more

than 89 percent of the total projects

approved during the review period.

The number of foreign projects reached 604

which were 36.6 percent lower than the

same period last year.

With regard to investment capital, domestic

private projects which made up Birr 59.3

billion or 41 percent while foreign

investment projects accounted for Birr 84

billion (or 57.5 percent) of the total

approved investment capital the rest

investment was carried out by the

government.

Upon commencement of operation, the

approved investment projects are expected

to create job opportunities for 147,400

permanent and 375,657 casual workers

(Table 7.2).


99

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

(Investment capital in millions of Birr)

Fiscal Year

Domestic projects Foreign Projects Public Projects Total Projects

No. ofProjects

InvestmentCapital

No. ofProjects

InvestmentCapital

No. ofProjects

InvestmentCapital

No. ofProjects

InvestmentCapital

1992/93 542 3,750 3 233 0 0.00 545 3,9831993/94 521 2,926 4 438 1 57.00 526 3,421

1994/95 684 4,794 7 505 2 39.00 693 5,3381995/96 897 6,050 10 434 1 6.00 908 6,490

1996/97 752 4,447 42 2,268 1 7.00 795 6,7221997/98 816 5,819 81 4,106 1 14.00 898 9,9391998/99 674 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 14,1272000/01 635 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 9,190.22002/03 1,127 9,362.9 84 3,369 6 706.11 1,217 13,437.92003/04 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 36,463.32005/06 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 93,5792007/08 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 8,807 239,524.82009/10 5,080 40,852.2 1,413 55,169 3 393.89 6,496 96,415.42010/11 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 5,649 146,168AverageAnnual 2,625 23,248 515 21,868 5 13,638 3,103 61,241Cumulative 52,462 483,427 9,498 466,156 108 275,233 62,068 1,224,818Source: Ethiopian Investment Agency


100

Source: Ethiopian Investment Agency

Source:EthiopianInvestmentAgency


101

Table 7.2 Numbers, Capital and Expected Job Opportunities

(Capital in millions of Birr)

Type of Projects Items2009/10 2010/11 2011/12 Percentage change

A B C C/A C/B

1.Total Investment

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

Casual Workers 488,330 586,380 375,657 -23.1 -35.9

2. Total Private

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

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


Casual Workers 488,162 412,117 375,504 -23.1 -8.9

3. Domestic

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

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


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

4. Foreign

Number 1,413 952 604 -57.3 -36.6

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


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

5.Public

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

Casual Workers 168 174,263 153 -8.9 -99.9Source: Ethiopian Investment Agency


102

Table 7.3 Number and Capital of Investment Projects Approved by Sector(Capital in millions of Birr)

Sectors 2009/10 2010/11 2011/12

Percentage Share to

Total in 2011/12

No. ofProjects

InvestmentCapital

No. ofProjects

InvestmentCapital

No. ofProjects

InvestmentCapital

No. ofProjects

InvestmentCapital

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

Agriculture, hunting andforestry 1,342 21,625 907 82,769 435 23,268 7.70 15.92

Real estate, renting andBusiness 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 MachineryLeasing 0 0 0 0 0 0 0 0

Wholesale, retail tradeand repair service 154 893 158 586 22 322 0.39 0.22

Transport, storage andcommunication 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 andwater supply 4 33 7 85,570 2 7,129 0.04 4.88

Public administration anddefense; compulsorysocial security 0 0 0 0 0 0 0 0Other community, socialand personal serviceactivities 75 321 87 756 46 639 0.81 0.44

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



103

7.1 Investment by Sector

About 21 percent of the approved

projects were in manufacturing; 8

percent in agriculture, hunting and

forestry; 48 percent in real estate, renting

and business activities; 13 percent in

construction and 5 percent in hotel and

restaurants.

In terms of approved investment

capital, manufacturing accounted

for 31 percent followed by

construction (20 percent),

agriculture, hunting and forestry

(16 percent) and real estate,

renting and business activities

(16 percent).



104

7.2: Distribution by Region

Of the total 5649 projects approved

in2011/12, Addis Ababa attracted 4,170

projects (73.8 percent) with Birr 62.3

billion investment capital, followed by

Amhara (612 projects with Birr 38.6

billion capital), Oromia (510 projects

with Birr 25.7 billion capital) and Dire

Dawa (134 projects with Birr 660

million capital).

Table 7.4: Number and Capital of Approved Projects by Region

(Capital in millions Birr)

Regions2009/10 2010/11 2011/12

percentage shareto Total

No. ofProjects

InvestmentCapital

No. ofProjects

InvestmentCapital

No. ofProjects

InvestmentCapital

No. ofProjects

InvestmentCapital

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

MultiregionalProjects 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 100Source: Ethiopian Investment Agency


105

VIII. INTERNATIONAL DEVELOPMENTS

8.1 International Economic Developments

8.1.1 Overview of the World Economy6

Global economic growth momentum

weakened in 2011, albeit the firming of

momentum in the global economic growth

in the final quarter of 2010 continued in the

onset of 2011. Growth has been 1.6 percent

for advanced economies (against 3.2 percent

in 2010) and 6.2 percent for emerging and

developing economies (against 7.3 percent

in 2010). As a reflection of this, the external

imbalances, which had decreased in 2009 in

the context of global financial crisis, stopped

narrowing and remained at elevated levels in

2011. The slowdown is contributed by

several factors such as; dampening of real

incomes in major advanced economies due

to rising commodity prices and the

disruption of global supply chain as a result

of the Great East Japan Earthquake.

During the period, the divergence in growth

patterns continued not only between

advanced and emerging economies but also

6 It Extracted from European Central Bank annualreport 2011& monthly reports, through January toJune, 2012 and World Economic Outlook, October2012.

among advanced economies. Emerging

economies growth remained robust in the

earlier period of 2011 but the moderation of

growth in the later part of year helped

alleviate the build-up of overheating

pressures.

In advanced economies growth has been

restrained by the continuing repair of public

and private sector balance sheets and the

persistent weaknesses in the labour and

housing markets as well as high rate of

unemployment specifically in the OECD

area.

The second half of the year is characterized

by continued deterioration of business and

consumer sentiment on account of increased

financial market stress & uncertainty, the

escalation of the sovereign debt crisis in the

euro area and the drawn-out discussions on

the US debt ceiling.


106

Table 8.1: Overview of World Economic Outlook and Projection

(Annual Percentage Change)

Particulars 2010 2011Projection

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 & DevelopingEconomies

7.46.3 5.1 5.5 5.9

World Trade Volume (goods & services) 12.6 5.9 2.8 3.8 5.5

Imports



14.98.4 6.1 6.5 7.8

Exports



13.76.6 3.6 5.5 6.9

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



6.17.2 6.1 6.1 5.5

Source: IMF, World Economic Outlook, October 2012


107

In the US, economic activities continue to

recover though at a slower pace as the real

GDP growth declined to 1.7 percent from

3.0 percent in 2010. Lower government

expenditure at both the federal and state

levels together with external factors led to

sluggish growth in the first half of 2011.

However, the economy gained momentum

in the second half of the year as private

consumption posted gains albeit low

consumer confidence and weak growth in

disposable income. Supported by strong

corporate profits and an environment of very

low interest rates, non–residential

investment continued its substantial and

positive contribution to growth, while

residential investment started to contribute

positively to GDP growth from the second

quarter of 2011.

Similarly, the pace of employment growth in

the labour market was insufficient to recover

the job losers recorded two-three years later

and markedly bring down the

unemployment rate, which averaged 8.9

percent in 2011, compared with 9.6 percent

the preceding year.

In 2011, Japan’s Economy experienced

fluctuation in real GDP due to various

factors. Sharp decline in production and

exports as well as domestic private demand

as a result of the earthquake in March and

the ensuing nuclear disaster intensely

affected its growth which led to significant

decline in real GDP in the first half of the

year. However, the economic activity has

recovered in the third quarter as the supply

constraints caused by the earthquake eased

faster than initially expected. Yet again, the

real GDP contracted following a weakening

of global demand and the disruption to

Asian trade caused by the floods in

Thailand. Japan faced the first annual deficit

in the trade balance since 1980 which is led

by weak exports, partly caused by the

appreciation of yen along with increasing

imports of raw materials following the

earthquake.

With regard to Emerging Asia, economic

growth decelerated after an exceptionally

strong expansion the year before. The

moderation in global growth considerably

reduced export growth in the second half of

the year. However, annual GDP growth was

7.3 percent, close to its long-term average as

domestic demand remained robust.


108

In China, real GDP growth, which is mainly

driven by domestic demand while the

contribution of net exports tuned negative,

declined to 9.2 percent from 10.3 percent in

2010. Domestic demand was driven by

ample liquidity built up in previous years

where as construction was sustained by the

government’s social housing program of

2011, which set out to provide 36 million

new housing units by the end of 2015.

In Latin America, real GDP growth has

declined on account of slower expansion of

domestic demand due to the tightening

monetary policy stance in most countries of

the region. Year-on-year growth was 4.9

percent in the first half for the region as a

whole compared with 6.3 percent in the

previous year. However, the decline in real

GDP growth was partly by the less negative

contribution from external demand as

private consumption continued to be the

main engine of growth and labour market

conditions remained favorable and lending

standards eased.

8.1.2 World Trade

In line with the developments in global

economic activity, a rebound in the volume

of world merchandise trade over the final

quarter of 2010 continued into the first

quarter of 2011. At the same time, the

second quarter global supply chain

disruptions caused by the natural disaster in

Japan coupled with the floods in Thailand

resulted in global trade contraction for the

first time since mid-2009. Though, the most

pronounced decline in exports being

recorded in Japan and the newly

industrialized countries in Asia, the

slowdown was distributed across regions.

Consistent with all these developments,

evidence shows that trade made minor

positive contribution to growth, in net terms.

This has great implication of the need for

some stabilization in global trade.

In the US, the current account deficit

remained almost unchanged as it stood at

about 3.2 percent of GDP in the first nine

months of the year.


109

In Emerging Asia, trade surplus narrowed to

USD 155 billion in 2011 from USD 181

billion in 2010. This is due to decline in

export growth in the second half of the year,

mainly as a result of weaker global growth,

while import growth held up relatively well

supported by robust domestic demand.

8.1.3 Inflation and Commodity Prices

In 2011, gradual increase in annual inflation

rate is observed in advanced economies

though it slightly declined at the end of the

year. The surge in oil prices continued

owing to the rise in global oil demand

coupled with the severe disruption to the oil

supply from Libya amid the political turmoil

in that region. Despite the slow down in

global growth, oil prices stayed to be strong

in the second half of 2011. The price of

Brent crude oil was 38 percent above the

average in 2010. In the contrary, the prices

of non-energy commodities declined

substantially during 2011 as it was 15

percent lower towards the end of 2011 than

at the beginning of the year.

In OECD countries, average headline

consumer price inflation was 2.9 percent up

from 1.9 percent in the preceding year.

Excluding food and energy, average

consumer price inflation stood at 1.7 percent

compared with 1.3 percent in 2010.

In the US, headline inflation was elevated

during 2011, despite the slack in product and

labor markets, due to rising food and energy

costs. The downward trend that had started

with the economic downturn in 2008 has

been reversed as annual CPI inflation was

3.1 percent in 2011 up from 1.6 percent the

year before. Excluding food and energy, CPI

inflation surged to 1.7 percent from 1

percent the previous year.

In Euro area, there was evidence of upward

pressure on overall inflation, averaging 2.7

percent in 2011, up from 1.6 percent in

2010, mainly owing to commodity prices.

Concerning the monthly profile of annual

HICP, the rate gradually increased from 2.3

percent in January to a peak of 3.0 percent

from September to November, before edging

down to 2.7 percent in December, reflecting

mainly developments in energy and other

commodity prices. According to March

2011 ECB staff macroeconomic projections,

annual HICP inflation was in a range

between 2 percent and 2.6 percent in 2011

mainly due to higher energy and food prices.


110

Japanese economy continued with its

deflationary environment as CPI inflation

remained negative throughout most of 2011.

All through the year, the Bank of Japan

maintained an accommodative monetary

stance in order to stimulate the economy and

fight deflation.

Emerging economies, inflationary pressures

remained strong in 2011. In the first half,

annual inflation rates increased on account

of the surge in food and other non food

commodity prices though the increase later

on became more broadly based. However, it

peaked in the third quarter of the year as

both imported demand and domestic

demand pressures eased. In the last quarter

of the period, annual inflation marginally

declined, prompting some central banks to

halt their monetary tightening cycle they had

begun in the second half of the preceding

year.

In China, inflation remained high mainly

driven by high commodity prices and

adverse domestic supply shocks to food

items, but eased to 3.1 percent by the end of

the year.

For Latin America, headline inflation stood

at 6.7 percent in the first half of 2011. The

solid growth performance coupled with

rising food prices resulted in a wide spread

increase in inflationary pressures, which

prompted several central banks to increase

their policy rates during this period.

8.1.4 Exchange Rate

In 2011, developments in foreign exchange

markets were the reflection of prospect for

the global economic recovery and financial

market conditions. During the year, effective

exchange rate of Euro declined moderately

with high volatility. After continuous

appreciation till April 2011, the Euro

depreciated overall against the US dollar,

Japanese Yen and Pound Sterling in the

second half of the year amid temporarily

declining volatility. On 30 December 2011,

the Euro traded at USD 1.29, JPY 100.2 and

GBP 0.84, which was 2.4 percent, 13.9

percent and 2.7 percent below its average in

2010, respectively.

However, the Euro’s subsequent decline

against these currencies was partly offset by

a strengthening against other currencies,

particularly those of central and eastern


111

European currencies. As a result, the

nominal effective exchange rate of the Euro,

as measured against the currencies of 20 of

the Euro areas most important trading

partners, declined by 2.2 percent over the

year.

By the end of 2011, in nominal effective

terms, the Euro stood at 4 percent below its

average level in 2010 and close to its

average level since 2009.

The real effective exchange rates of the Euro

based on different cost and price measures

increased during the first half of 2011 and

there after depreciated to levels close to

those prevailing at the end of 2010.

8.1.5 Capital Flows

In the course of 2011, risks to euro area

financial stability increased considerably as

the sovereign debt crisis worsened and its

harmful interplay with the banking sector

intensified. Vulnerabilities grew as the

sovereign debt crisis spread from some

smaller to some larger euro area countries in

the second half of the year.

In addition, substantial capital outflows from

emerging Asia occurred at the end of the

year as a reflection of concerns about the

global outlook which triggered financial

market volatility.


112

8.2 Implications for Ethiopia

The moderation in the global economic

activities has been partly reflected in the

external sector of Ethiopia as its momentum

of growth tended to decline.

Following the gradual global economic

recovery, total export growth slowed down

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.

[[

On the other hand, FDI dropped by 17.2

percent presumably in line with the

slowdown in global economic activities.

Furthermore, Ethiopia’s total import bill

significantly rose as a result of higher world

commodity prices. Hence, this had negative

effect on Ethiopia’s current account balance.

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