National Bank of Ethiopia

National Bank of Ethiopia

1

2017/18 Annual Report

Governor’s Note

1. The Ethiopian economy registered 7.7 percent growth in 2017/18, slower than the 10.9

percent expansion recorded in the previous year. This growth was attributed to 12.2 percent

rise in industrial output, 8.8 percent expansion in service sector and 3.5 percent growth in

agriculture.

Consequently, the share of industry in GDP rose to 27 percent in 2017/18 from about 26

percent in 2016/17 while that of service increased slightly to 39.2 percent from 38.8 percent

in 2016/17. In contrast, the share of agriculture fell to 34.9 percent in 2017/18 from 36.3

percent during the same period. This gradual but steady shift in the structure of the economy

reflects the government’s policy direction of developing manufacturing sector and promoting

export-led growth while continuing to give due attention to modernizing the agriculture

sector which has dominated the country’s economic base for years.

2. The robust and sustained economic growth recorded over the last 15 years has led to

improvements in income inequality and poverty reduction. Accordingly, per capita income

has continuously increased and reached USD 883 in 2017/18. Poverty has declined to 22

percent from 38.7 percent in 2004/05. Investment to GDP ratio has increased to 34.1 percent

while that of domestic savings rose to 22.4 percent.

3. Despite the recent uptick, inflation has been kept within single digit level in 2017/18 largely

aided by tight monetary and prudent fiscal policy stance. Yet, the annual average headline

inflation rose to 13.1 percent in 2017/18 from 7.2 percent a year earlier due to the rise in both

food and non-food inflation. Similarly, annual headline inflation went up to 14.7 percent

from 8.8 percent owing to 6.7 percentage point and 4.9 percentage point increase in food

inflation and non-food inflation respectively.

4. Fiscal policy continued to focus on increasing tax revenue by strengthening tax

administration and enforcement, while covering a greater proportion of government

expenditures from domestic resources. These government expenditures have largely been

geared towards enhancing capital expenditure and pro-poor social spending programs and

promoting safety nets. Thus, domestic revenue recorded a 5.1 percent annual growth while


2


general government expenditure showed a 7.6 percent increment resulting in a budget deficit

equivalent to 3 percent of GDP, higher than 2.8 percent of GDP target set in the GTP II plan.

5. The National Bank of Ethiopia (NBE) with a view of maintaining inflation at low and single

digit level, has kept the growth of reserve money within the target by closely monitoring

movements in domestic credit, including direct advance to the government. The Bank has

also ensured the stability and predictability of the interest rate by setting the minimum

deposit rate while allowing lending rate to be determined by market forces. This policy has

resulted in increased saving mobilization and investment activities throughout the fiscal year.

6. Ethiopia has maintained managed float exchange regime to ensure the competitiveness of the

local currency. Accordingly, the Birr was allowed to depreciate by 16.5 percent in nominal

terms against the US Dollar by end 2017/18. In contrast, the real effective exchange rate

appreciated by 5.9 percent largely due to 15 percent devaluation of the Birr against US dollar

in October 2017.

7. The Ethiopian financial sector has remained safe, sound, well capitalized and profitable. As

a result, commercial banks opened 500 new branches in 2017/18 alone which increased the

total number of branches to 4,757 from 4,257 a year ago. The banks also increased their

deposit mobilization by 23.6 percent, loan collection by 14.9 percent and loan disbursement

by 5.9 percent. Their non-performing loan was within the required ceiling of 5 percent.

Similarly, insurance companies and microfinance institutions have scaled up their services

by expanding their network and product diversification. Capital goods finance companies

have also stepped up their operations showing visible signs of improvement.

8. Moreover, the implementation of financial inclusion strategy has resulted not only in terms of

increased financial intermediation but also in enhancing the use of electronic money and new

financial products. This strategy is expected to further improve access to finance and

financial inclusion for a greater proportion of the society which is currently outside the reach

modern financial services. To mitigate potential risks associated with this process of

modernization, NBE has strengthened its monitoring and supervisory operation using

international standard toolkits.


3



4


I. The overall Economic Performance

1.1 Economic Growth1

The Ethiopian economy which had showed

9.3 percent average annual growth during

2013/14 - 2017/18 fiscal years, recorded 7.7

percent growth in 2017/18 fiscal year,

slower than the growth rate registered in the

previous year owing to growth deceleration

in agriculture and industry sectors.

The growth rate of real GDP was lower by

3.4 percentage point than the base case

scenario of GTP II target set for the fiscal

year. Yet, it was significantly higher than

the 3.1 percent average growth estimated for

Sub-Saharan Africa (World Economic

Outlook Update, October 2018).

1 The real values of the economic sectors in

2016/17and 2017/18 are computed based on the

2015/16 base year; while that of the earlier years are

based on 2010/11 base year. As a result, there will be

some adjustments when the rebasing of National

Accounts Statistics is finalized.

The growth in real GDP was mainly

attributed to 8.8 percent growth in services,

3.5 percent in agriculture and 12.2 percent in

industrial sectors (Table 1.1).

Nominal GDP per capita rose to USD 883,

depicting marginal improvement over the

previous year.

The Ethiopian economy is targeted to grow

11 percent in 2018/19 fiscal year compared

to 3.7 and 3.8 percent growth forecast of

the IMF for world economy and Sub-

Saharan Africa (SSA), respectively (WEO,

October 2018).


5


Table 1.1: Sectoral Contributions to GDP and GDP Growth2

(In Billions of Birr)

Items

2012/13

2013/14

2014/15 2015/16 2016/17 2017/18

Sector

Agriculture 238.8 251.8 267.8 544.1 580.4 600.9

Industry 73.9 86.5 103.7 343.9 413.8 464.4

Services 259.0 292.0 325.0 575.9 619.3 673.9

Total 571.7 630.3 696.5 1,463.9 1,613.5 1,739.2

Less FISIM 3.0 4.0 4.0 14.5 17.0 19.8

Real GDP 568.0 627.0 692.0 1,449.4 1,596.5

1,719.5

Growth in Real GDP 9.9 10.3 10.4 8.0 10.1 7.7

Per capita GDP (USD) (Nominal) 559.0 640.0 725.0 815.0 876.0 883.0

Growth rate in Per capita GDP 6.8 14.4 13.4 9.5 7.5 0.9

Mid-year population(in millions) 84.8 87.0 89.1 91.2 93.4 95.5

Share in GDP (in %)

Agriculture 42.0 40.2 38.7 37.5 36.3 34.9

Industry 13.0 13.8 15.0 23.7 25.9 27.0

Services 45.5 46.6 47.0 39.7 38.8 39.2

Agriculture

Absolute Growth 7.1 5.4 6.4 2.3 6.7 3.5

Contribution to

GDP growth 3.1 2.3 2.5 0.9 2.5 1.3

Contribution in % 31.2 22.3 24.0 11.3 24.6 16.5

Industry

Absolute Growth 24.1 17.0 19.8 20.6 20.3 12.2

Contribution to

GDP growth 2.8 2.2 2.7 3.1 4.8 3.1

Contribution in % 27.9 21.4 26.0 38.8 43.8 40.7

Services

Absolute Growth 9.0 13.0 11.2 8.7 7.5 8.8

Contribution to

GDP growth 4.1 5.8 5.2 4.0 3.0 3.4

Contribution in % 41 56.3 50.0 50.0 27.2 43.9

Source: Planning and Development Commission

2 The real values of the economic sectors in 2016/17 and 2017/18 are computed based on the 2015/16 base year;

while that of the earlier years are based on 2010/11base year.


6


Fig.I.1: Real GDP Growth by Major Sectors


During 2017/18, agricultural output depicted

3.5 percent growth which is lower from 6.7

percent growth registered in the previous

year. Similarly it is 4.4 percentage point

lower than the 7.9 percent target for the

fiscal year.

The total grain production reached 306.1

million quintals showing 5.4 percent

increment over the previous year. Of which,

cereal production accounted for 87.5

percent, pulses 9.7 percent and oil seeds 2.8

percent. Cereals production went up by 5.5

percent over the preceding year owing to 0.1

percent increase in cultivated land area and

improvement in productivity. Similarly, the

production of pulses and oilseeds improved

by 5.8 and 1.9 percent respectively; due to

3.1 and 5.1 percent expansion in cultivated

land area respectively (Table1.2).

The total cultivated land of crop production

increased marginally by 0.8 percent to 12.7

million hectares, of which cultivated land of

cereals production covered 80.7 percent,

while pulses and oil seeds 12.6 and 6.7

percent respectively (Table 1.2).

0.0

5.0

10.0

15.0

20.0

25.0

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Agriculture

Industry

Service

Real GDP


7


Table1.2: Estimates of Agricultural Production and Cultivated Areas of Major Grain

Crops for Private Peasant Holdings-Meher Season

[Area in thousands of Hectares and Production in thousands of quintals]

Agricultural

Production

2014/15 2015/16 2016/17 2017/18

Cultivated

Area

Total

Production

Cultivated

Area

Total

Production

Cultivated

Area

Total

Production

Cultivated

Area

Total

Production

Cereals 10,144 236,077 9,974 231,288 10,219 253,847 10,232 267,789

(Annual %

Change) 3.0 9.4 -1.7 -2.0 2.5 9.8 0.1 5.5

Pulses 1,558 26,718 1,653 27,693 1,550 28,146 1,598 29,785

(Annual %

Change) -10.6 -6.5 6.1 3.6 -6.2 1.6 3.1 5.8

Oilseeds 856 7,601 859.1 7,848.1 805 8,392 846 8,550

(Annual %

Change) 4.9 6.9 0.4 3.3 -6.3 6.9 5.1 1.9

Total 12,558 270,396 12,486 266,829 12,574 290,386 12,676 306,124

(Annual %

Change) 1.2 7.5 -0.6 -1.3 0.7 8.8 0.8 5.4

Source: Central Statistical Agency (CSA)

The share of agriculture in GDP declined to

34.9 percent in 2017/18 from 36.3 percent of

a year ago. This was marginally lower than

the 35.4 percent GTP II target set for the

fiscal year. Likewise, its contribution to

GDP growth declined to 16.5 percent from

24.6 percent (Table 1.1). The major output

of the agricultural sector was crop

production, comprising 65.3 percent,

followed by animal farming & hunting (25.6

percent) and forestry (8.8 percent). In terms

of growth, crop production increased by 4.7

percent while that of animal farming &

hunting and forestry rose by 0.6 and 3.5

percent, respectively (Table 1.3).

The industrial sector showed 12.2 percent

output growth and registered 27 percent

share in GDP. The sector contributed 40.7

percent to the overall economic growth

during the fiscal year (Table1.1). Its

performance was lower than GTP II target

of 20.6 percent, while its share is higher than

the 19.4 percent share targeted for the same

period.


8


Manufacturing sector increased by 5.5

percent and constituted about 25.3 percent

of the industrial output. Construction

industry, on the other hand, accounted for

71.4 percent of the industrial output and

expanded by 15.7 percent signifying the

leading role of the construction sector in

terms of roads, railways, dams and

residential houses expansion.

Electricity & water and mining & quarrying

had 2.6 and 0.7 percent contribution to

industrial production, respectively (Table

1.3).

Service sector continued to dominate the

economy as its share in GDP rose to 39.2

percent while its contribution to the GDP

growth increased to 43.9 percent (Table

1.1). The sector showed 8.8 percent growth

largely owing to the expansion of wholesale

& retail trade (12.3 percent), public

administration & defense (8.9 percent),

hotels & restaurants (6.5 percent), transport

& communication (6.4 percent) and real

estate, renting & business activities (6.2

percent) (Table 1.3).


9


Table 1.3: Growth and Percentage Distribution of Major Agricultural, Industrial and Service

Sub-sectors

Sectors 2013/14 2014/15 2015/16 2016/17 2017/18

Gro

wth

rat

e

Crop 6.6 7.2 3.4 8.2 4.7 Animal Farming and

Hunting 2.1 4.7 -1.5 4.2 0.6

Forestry 4.2 3.5 2.2 3.6 3.5

Fishing 32.5 30.6 0.1 0.5 11.3

Sh

are

in

Ag

ricu

ltu

re

Crop 70.6 71.1 63.6 64.5 65.3 Animal Farming and

Hunting 20.6 20.3 27.0 26.4 25.6

Forestry 8.7 8.4 9.1 8.8 8.8

Fishing 0.2 0.2 0.3 0.2 0.3

Gro

wth

rat

e Mining and Quarrying (3.2) (25.6) (3.3) -29.8 -20.8

Manufacturing 16.6 18.2 18.4 24.7 5.5

Electricity and Water 6.8 4.5 15.0 4.9 3.3

Construction 23.9 31.6 25.0 20.7 15.7

Sh

are

in

Indu

stry

Mining and Quarrying 9.1 5.7 1.8 1.0 0.7

Manufacturing 33.4 33.0 25.9 26.9 25.3

Electricity and Water 7.6 6.6 3.2 2.8 2.6

Construction 49.9 54.8 69.1 69.3 71.4

Gro

wth

rat

e

Whole Sale and Retail

Trade 17.7 12.3 8.2 6.5 12.3

Hotels and Restaurants 26.6 29.6 15.6 0.1 6.5 Transport and

Communications 12.7 13.3 13.7 15.1 6.4

Real Estate, Renting and

Business Activities 3.9 4.1 3.7 4.4 6.2 Public Administration and

Defense 11.0 6.0 7.4 13.2 8.9

Others* 8.1 7.3 7.5 6.4 6.8

Sh

are

in S

erv

ice

Whole Sale and Retail

Trade 35.3 35.7 35.1 34.8 35.9

Hotels and Restaurants 9.7 11.3 7.2 6.7 6.6 Transport and

Communications 10.1 10.2 12.2 13.1 12.8

Real Estate, Renting and

Business Activities 16.9 15.8 11.6 11.3 11.0 Public Administration and

Defense 10.8 10.3 10.8 11.4 11.4

Others* 17.2 16.6 23.0 22.7 22.3


* Includes: financial intermediation, education, health and social work, private households with employed persons and other

community, social and personal services.


10


1.2. GDP by Expenditure Components

Total consumption expenditure (public and

private) in percent of GDP declined to 75.7

percent in 2017/18 from 77.6 percent in the

preceding year owing to 1.0 percentage

point in private consumption expenditure to

GDP ratio and 0.9 percentage point drop in

government final consumption expenditure

to GDP ratio.

As a result, gross domestic saving to GDP

ratio rose to 24.3 percent from 22.4 percent

and slightly lower than the 24.6 percent GTP

II target for the fiscal year (Table 1.4).

While domestic saving accelerated by 30.7

percent, total consumption expenditure

increased by 17.2 percent during the fiscal

year.

Meanwhile, gross capital formation to GDP

ratio stood at 34.1 percent depicting 4.3

percentage point contraction over the

previous year and domestic absorption to

GDP ratio was 109.8 percent.


11


Table: 1.4: Expenditure on GDP and Gross Domestic Savings

(Percentage of GDP)

Year

Domestic

Absorption Consumption Expenditure

Gross

Capital

Formation

Resource

Balance

Exports of

Goods &

Services

Imports of

Goods &

Services

Gross

Domestic

Savings Total Govt. Pvt.

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

2004/05 116.5 90.5 13.3 77.3 26.0 (20.6) 15.3 35.8 9.5

2005/06 119.3 91.7 13.1 78.7 27.6 (22.9) 14.0 36.9 8.3

2006/07 111.9 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

2010/11 114.9 82.8 10.3 72.4 32.1 (14.9) 16.7 31.5 17.2

2011/12 117.9 80.8 8.3 72.5 37.1 (17.9) 13.8 31.6 19.2

2012/13 116.5 82.4 9.0 73.5 34.1 (16.5) 12.5 29.0 17.6

2013/14 117.5 79.5 9.2 70.2 38.0 (17.5) 11.6 29.1 20.5

2014/15 117.5 78.1 9.0 69.0 39.4 (20.9) 9.4 30.3 21.9

2015/16 115.0 77.6 11.1 66.5 37.3 (19.3) 7.8 27.1 22.4

2016/17 116.1 77.6 11.1 66.5 38.4 (15.8) 7.6 23.5 22.4

2017/18 109.8 75.7 10.2 65.5 34.1 (14.4) 8.4 22.8 24.3

Average

2013/14-

2017/18 115.2 77.7 10.1 67.5 37.5 (17.6) 9.0 26.6 22.3

Average

2008/09-

2017/18 115.7 81.2 9.7 71.4 34.5 (17.5) 11.0 28.5 18.8



12


1.3: Micro and Small-Scale Enterprises

During 2017/18 alone, a total of 144,107

new micro and small scale enterprises

(MSEs) were established which employed

about 187.9 thousand people. These

enterprises received more than Birr 8.6

billion in loans.

Table 1.5: Numbers, Amount of Credit and Jobs Created through MSEs (Credit in Millions of Birr)

Source: Federal Urban Job Creation and Food Security Agency

Particulars 2015/16 2016/17 2017/18

No. of MSE's

190,587 157,768 144,107

Amount of credit

5,366.55 7,075.77 8,633.71

No of Total

employment 1,665,517 1,172,678 187,945


13


Table 1.6: Numbers, Amount of Credit and Jobs Created through MSEs by Region

(Credit in Millions of Birr)

Source: FeUJCFSA

In terms of regional distribution, 28.2

percent of the newly established MSEs

were located in Amhara followed by

Oromia (24.2 percent), Tigray (21.9

percent), SNNPR (16.2 percent) and Addis

Ababa (6.6 percent). With respect to total

loans, SMEs in Amhara received 28.7

percent, Addis Ababa 21.5 percent, Tigray

17.3 percent, Oromia and SNNPR each

11.6 percent and Somalia 5.8 percent.

Of the total jobs created by the newly

established SMEs, about 42.1 percent was

in Oromia, 20.2 percent in Amhara, 20

percent in SNNPR, 9.4 percent in Tigray

and 3.5 percent in Addis Ababa.

Addis

Ababa Oromia SNNPR Amhara Tigray

Dire

Dawa

Hara

ri

Benish

angul Somali Gambela Afar Total

No. of

MSEs 9,564 34,886 23,374 40,674 31,556 917 348 568 1,600 547 73 144,107

Amount

of credit 1,855.0 1,005.6 1,004.9 2,479.1 1,497.1 143.1 44.6 52.3 499.8 21.7 30.5 8,633.7 No. of

total

Employm

ent

created by

MSEs 6,563 79,044 37,679 37,982 17,630 3,380 572 390 2,427 1,112 1,166 187,945

Regional Percentage Share

No. of

MSEs 6.6 24.2 16.2 28.2 21.9 0.6 0.2 0.4 1.1 0.4 0.1 100

Amount

of credit 21.5 11.6 11.6 28.7 17.3 1.7 0.5 0.6 5.8 0.3 0.4 100 No. of

total

Employm

ent

created by

MSEs 3.5 42.1 20.0 20.2 9.4 1.8 0.3 0.2 1.3 0.6 0.6 100


14


Fig.I.1: Yearly Distribution of Numbers of MSEs during 2017/18

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

Source: FeUJCFSA

Fig.I.2: Yearly Distribution of Amount of Credit during 2017/18

0.0

500.0

1000.0

1500.0

2000.0

2500.0

3000.0

Mil

lion

s o

f B

irr

Source: FeUJCFSA


15


Fig.I.3: Yearly Distribution of Employment Created during 2017/18

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

Source: FeUJCFSA

1.4. Access to Water Supply

During the review period, the proportion

of people having access to potable water

supply improved by 5.1 percentage point

to 71 percent (74 percent rural and 60

percent urban population); relative to 66

percent (68 percent rural and 55 percent

urban people) coverage a year earlier

(Table 1.7). In other words, rural areas

had relatively better access than the

urban areas due to difference in newly

depicted standards by the ministry of

water, Irrigation and Energy.

Against GTP II annual target for the year

2017/18, urban and rural potable water

supply coverage showed 5 and 1

percentage point shortfall respectively.

GTP II has set potable water supply

coverage at national level for the fiscal

year at 73 percent which is 2 percentage

point higher than actual.

In terms of percentage of people with

access to potable water, Afar region had

54 percent accessibility to potable water

registered the lowest percentage while

that of Amhara performed better with

(82 percent) followed by Somali (77

percent), Harari (67 percent), Gambella

(66 percent) and Oromia (64 percent

each). Except for Addis Ababa and

Tigiray access to potable water shows

improvements in all regions.


16


In Addis Ababa accesses for potable

water drops from 92 percent to 61

percent owing to the standards for

computation shifts from 100

litter/capita/day to 110 litter/capita/day.

In the same way, in Tigray it shows

downward movements by 6.1 percent the

reason for annually decline is the size of

population increases; while additional

access for potable water is not show

improvement accordingly.

In terms of access to potable water in

urban areas, SNNPR had the leading

share of 80 percent followed by Amhara

& Somali (74 percent each), Harari (65

percent), Oromia (62 percent). On the

other hand, the least performers are Ben-

gumuz (42 percent) followed by

Gambella (43 percent) and Afar and

Tigray (54 percent each).

Despite some improvements in access to

potable water in rural areas, Afar and

SNNPR registered the lowest

performance 54 and 55 percent

respectively.

On the other hand, Dire Dawa and

Amhara saw the highest performance of

84 percent each followed by Somali (77

percent), and Gambella (75 percent).


17


Table 1.7: Percentages of People with Access to Potable Water by Region

Regions

2016/17 2017/18

Change in percentage point Rural Urban Total Rural Urban Total

A B C D E F D-A E-B F-C

Tigray 67 56 65 61 54 59 -6.4 -1.9 -6.1

Afar 45 48 46 54 54 54 8.5 6.1 8.0

Amhara 76 69 75 84 74 82 7.8 4.8 7.2

Oromia 61 51 59 64 62 64 3.0 11.2 4.8

SNNPR 51 75 52 55 80 58 3.6 5.1 5.6

Somali 67 65 66 77 74 77 10.0 9.0 11.0

B.Gumuz 60 50 58 66 42 61 6.4 -7.8 3.2

Gambella 74 41 64 75 43 66 0.9 2.1 8.8

Harar 65 66 66 68 65 67 3.0 -1.0 0.5

D. Dawa 78 0 0 84 0 6.4 0.0 0.0

AA 0 92 92 0 61 61 0.0 -31.0 -31.0

Total 68 55 66 74 60 71 5.9 5.2 5.1

Source: Ministry of Water, Irrigation and Energy and NBE Staff Computation

Fig.I.5: Access to water supply by Region

0

20

40

60

80

100

Rural

Urban

Total

Source: Ministry of Water, Irrigation and Energy; and NBE Staff Computation


18

1.5 Road Sector Development

1.5.1 Road Network

In 2017/18, total road network reached

126,773 Km, showing a 5.5 percent

annual expansion. The country’s total

road network was consisted of 56,732.4

Km (44.8 percent) Woreda road, 35,985

Km (28.4 percent) rural road, 28,699

Km (22.6 percent) federal road and

5,357 Km (4.2 percent) urban road. The

Federal road included 15,886 Km (55.4

percent) asphalt and 12,813 Km (44.6

percent) gravel.

Asphalt road network accounted for

about 12.5 percent of the road network

which was lower than 14.5 percent

GTPII target set for the fiscal year.

During the review period, rural road

network, administered by regional

authorities, showed a 7.8 percent annual

growth and reached 35,985 Km while

Woreda road stood at 56,732 Km (Table

1.8).


19


Table 1.8: Classification of Road Network

(Length in km)

Federal Road

Rural road Woreda road * Urban Roads Total** Year Asphalt Gravel

Paved Cobel

Unpa

ved

Length Growt

h rate

Lengt

h

Growth

rate

Lengt

h

Growth

rate

Length Growth

rate

Length Length Lengt

h

Length Growt

h rate

2004/05

4,972

7.3

13,640

(1.9)

18,406

2.5 NA NA NA NA

37,018

1.4

2005/06

5,002

0.6

14,311 4.9

20,164

9.6 NA NA NA NA

39,477

6.6

2006/07

5,452

9.0

14,628 2.2

22,349

10.8

57,764 - NA NA NA

42,429

7.5

2007/08

6,066

11.3

14,363

(1.8)

23,930

7.1

70,038 21.2 NA NA NA

44,359

4.5

2008/09

6,938

14.4

14,234

(0.9)

25,640

7.1

85,767 22.5 NA NA NA

46,812

5.5

2009/10

7,476

7.8

14,373 1.0

26,944

5.1

100,385 17.0 NA NA NA

48,793

4.2

2010/11

8,295

11.0

14,136

(1.6)

30,712

14.0

854 (99.1) NA NA NA

53,997

10.7

2011/12

9,875

19.0

14,675 3.8

31,550

2.7

6,983 717.7 NA NA NA

63,083

16.8

2012/13

11,301

14.4

14,455

(1.5)

32,582

3.3

27,628 295.6 NA NA NA

85,966

36.3

2013/14

12,640

11.8

14,217

(1.6)

33,609

3.2

39,056 41.4 NA NA NA

99,522

15.8

2014/15

13,551

7.2

14,055

(1.1)

30,641

(8.8)

46,810 19.9

1,693 850

2,814

110,414

10.9

2015/16

14,632

8.0

13,400

(4.7)

31,620

3.2

48,057 2.7

1,693 NA

3,664

113,066

2.4

2016/17

15,886

8.6

12,813

(4.4)

33,367

5.5

52,748 9.8

1,693 NA

3,664

120,171

6.3

2017/18

15,886 -

12,813 -

35,985

7.8

56,732 7.6

1,693 2,814

850

126,773

5.5

Source: Ethiopian Roads Authority

* Includes community road, which was replaced by woreda road and registered as new road in 2010/11

** Total road length does not include community road length till 2010/11as it is non-engineered road; but it includes

woreda road.


20


1.5.2 Road Density

At the end of 2017/18, road density per

1,000 square Km increased to 115.2 km

from 109.2 km a year ago depicting a 5.5

percent improvement over the previous

year.

Meanwhile, road density per 1,000

populations was 1.27 km which shows

slightly down ward movement by 1.6

percent when compared with 1.29 km a

year ago.

Table 1.9: Road Densities

Year Road Density /1000 person

Road density /1000 sq.

km

2004/05

0.50

33.70

2005/06

0.53

35.90

2006/07

0.55

38.60

2007/08

0.56

40.30

2008/09

0.57

42.60

2009/10

0.60

44.40

2010/11

0.65

48.30

2011/12

0.75

57.30

2012/13

1.00

78.20

2013/14

1.10

90.50

2014/15

1.20

100.40

2015/16

1.23

102.80

2016/17

1.29

109.20

2017/18

1.27

115.20

Growth rate

-1.6

5.5



21


1.5.3 Road Accessibility

In 2017/18, annual average distance

from all-weather roads declined by 6.5

percent from 4.6 km in 2016/17 to 4.3

km. Similarly, the proportion of area

more than 5km from all-weather roads

dropped to 31.6 percent from 33.5

percent last year (Table 1.10).

Exclusively 73 percent of the asphalt

road and 66 percent of the gravel road

were in good condition during 2017/18

(Figure I.6).

Table 1.10: Road Accessibility

Indicator

2016/17

2017/18

Percentage

change

Proportion of area more than

5Km from all-weather road

33.5 31.6 -5.7

Average distance from all-

weather roads 4.6 4.3 -6.5


Fig.I.6: Status of Road


0

10

20

30

40

50

60

70

80

2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Percen

tag

e Asphalt Roads in Good Condition

Gravel Roads in Goods Condition

Rural Roads in Good Condition

Total Roads Network in Good

Condition


22


1.5.4 Road Sector Financing

Construction and maintenance of roads

remained one of the key investments for the

Ethiopian government over the past decade.

In 2017/18, total investment in road

construction and expansion (excluding urban

road) declined by 2.4 percent to Birr 33.1

billion from Birr 33.9 billion a year earlier

(Table 1.11 and fig.I.7).

Investment in the Federal road construction

and expansion accounted for 77.6 percent of

the total road investment capital and reached

at Birr 25.6 billion, while regional roads

constituted 11.5 percent followed by

Woreda road (11 percent). There was no

investment in urban road construction and

expansion during the period (Table 1.11)

and (Fig.1.7).

Table 1.11: Investments in the Road Sector (In millions of Birr)

Road type

2016/17 2017/18

Percentage

change A

Share (In

%) B

Share

(In %)

Federal roads 28,797.7 84.8 25,695.7 77.6 -10.8

Regional road 2,756.2 8.1 3,794.6 11.5 37.7

Woreda road 2,392.2 7.0 3,638.7 11.0 52.1

Urban road* NA - NA - -

Total 33,946.1 100.0 33,129.0 100.0 -2.4 Source: Ethiopian Roads Authority * All municipalities’ maintenance.


23


Fig.I.7፡ Investment in Road Construction and Expansion


1.7. Telecommunication

Telecommunication is one of the prime

support services needed for rapid growth

and modernization of various sectors of

the economy. Expansion of infrastructure

development such as telecommunication

would have significant impact on

attracting investment, creating market

opportunities, enhance competitiveness

and boost regional economic integration.

Cognizant of this fact, the Ethiopian

government has made major investment

for improving service quality, expansion

of service coverage and enhancing

institutional capacity in the telecom

sector. As a result, Ethio Telecom has set

ambitious targets to enhance customer

acquisition, customer satisfaction and

provision of quality services to

customers.

During 2017/18 fiscal year, the number

of mobile subscribers declined by 30.4

percent to 40.4 million from 58 million

a year ago; the reason for the decline is

the decision to clear inactive1 customers

for the long time; thus only active

customers of specified service are

included.

The lion share of mobile subscribers is

from pre-paid subscribers comprising

99.5 percent; while the remaining 0.5

0100002000030000400005000060000700008000090000

100000

In M

illio

ns o

f B

irr

Federal Road

Regional Road

woreda Road

Urban Road

Total

Investment


24


percent is post-paid mobile subscribers.

Similarly, the numbers of fixed line

subscribers marginally declined by 1

percent due to inactive customers are not

included.

On the other hand, the number of

internet subscribers surged by 8.4 percent

and reached 17.8 million from 16.5

million recorded in 2016/17 (Table 1.13).

3Table 1.13: Number of Subscribers

Service Type 2016/17 2017/18

Percentage

Change

I. Fixed line 1,169,625 1,157,779 -1.0

II. ALL MOBIL 58,080,626 40,409,751 -30.4

Total mobile pre-paid 57,784,164 40,213,723 -30.4

Total Mobile post-paid 296,462 196,028 -33.9

III. Total data and Internet 16,505,225 17,883,439 8.4

Broadband (EVDO,

WCDMA, ADSL) 6,902,902 8,920,159 29.2

Narrowband (1X, dialup,

ADSL*< 256K) 276,294 243,629 -11.8

GPRS 9,326,029 8,719,651 -6.5

Grand Total 59,899,089 117,744,159 96.6

Source: Ethio-Telecom

*CDMA (Code Division Multiple Access), GSM (Global System for Mobiles),GPRS (General Packet Radio

Service)and ADSL (Asymmetric Digital Subscriber Line)

Inactive customers imply those customers who didn’nt use their sim cards for two

consequative years or more.


25


At the same time, the country’s

telecommunication penetration rate

(telecom density) decreased from 63

percent in 2016/17 to 43 percent in

2017/18; as well, mobile density moves

downward to 41.8 percent in 2017/18

from 61.6 percent a year ago the annually

decline was due to the exclusion of

inactive customers. While internet and

data density improved to 18.5 from 17.5

a year ago. On the other hand, fixed line

density remains unchanged and stable at

1.2 per 100 subscribers during 2017/18

(Table 1.14).

Table 1.14: Telecom Density

Tele

Density/100

Subscribers* 2012/13

2013/14

2014/15 2015/16 2016/17 2017/18

Fixed line 0.9 1 1 1.2 1.2 1.2

Mobile 27.6 33.3 43 49.8 61.6 41.8

Total 28.5 34.3 44 51 63.6 43.3

Internet and

data 5.2 7.3 10 14.7 17.5 18.5 Source: Ethio-Telecom

*Tele-density is mobile plus fixed telephone subscribers per 100 inhabitants

During the review period, international

outgoing and incoming calls in number

decreased by 8.2 and 37.6 percent

respectively. At same time, international

outgoing and incoming calls in minutes

lessen by 8.8 and 38 percent respectively.

The cause for annually decline is a

technical shift due to technological

advancement. However, the annual

traffic for local calls improved by 26.9

percent and reached 44.6 billion (Table

1.15).


26


Table 1.15: Annual Traffic for Local and International Calls

Annual Traffic 2016/17 2017/18

Percentage

Change

Mobile local traffic (In millions) 35,142

44,600 26.9

International Traffic

International outgoing calls (In number) 39,137,793 35,911,226 -8.2

International outgoing minutes 54,163,949 49,394,715 -8.8

International incoming calls (In number) 129,033,583

80,508,188 -37.6

International incoming minutes 473,617,783 293,524,005 -38.0

Source: Ethio-Telecom

Income of Ethio-telecom rose by 13.1

percent to Birr 37.6 billion in 2017/18 vis-à-

vis Birr 33.3 billion in 2016/17. At same

time, its total expenses increased to Birr

10.6 billion showing 25 percent annual

increment.

Consequently, Ethio – telecom earned a

gross profit of Birr 27 billion in 2017/18

which was 9 percent higher than the

previous year (Table 1.16).

Table 1.16: Financial Performance and Asset of Ethio -Telecom (In Millions of Birr)

Finance and Asset

2015/16

2016/17

2017/18

Percentage Change

A

B

C

C/A

C/B

Income

28,371.67

33,343.16

37,699

32.9

13.1

Expense

12,888.36

8,551.15

10,677

-17.2

24.9

Gross Profit

15,483.31

24,792.01

27,022

74.5

9.0

Assets 22,787.00 29,976.81 43,712.48 91.8 45.8

Fixed Gross

30,949.00

32,398.97

47,194

52.5

45.7

Depreciation

8,162.00

2,422.17

3,482

-57.3

43.8

Source: Ethio– Telecom


27


II. Energy Production

2.1. Electric Power Generation

Ethiopia is estimated to have hydro-power

potential of 45,000 MW, a geothermal

potential of 10,000 MW and 1.3 million

MW potential from wind farm. The

country’s generating capacity is largely

based on hydropower reservoirs as nine of

its major rivers are suitable for

hydroelectric power generation.

Considering the increasing power demand

and capacity shortfall in the system and to

have a better power generation mix, the

country has been venturing to diversify its

production of renewable energy to wind

and geothermal sources.

Adama II wind farm has a generating

capacity of 153 MW and combined with

Adama I (51MW) and Ashegoda (120

MW), the total energy production from

wind has reached 324 MW. In addition,

the construction of Aysha 300 MW wind

power project was under way.

Ethiopia is also identified as having a huge

solar energy potential due to its

geographical location near the equator. In

its bid to become a major power exporter

in East Africa and green economy, the

country is also building several

geothermal power plants.

The amount of electric power generated in

2017/18 was about 13.9 billion KWH,

showing 11 percent annual expansion.

About 95.2 percent of the electric power

was generated through hydropower, 3.7

percent from wind and 1 percent from

thermal sources.

The production of hydro power energy got

momentum as the total electric energy

generated increased to 13.2 billion KWH

from 11.7 billion KWH a year earlier

showing 12.8 percent annual increase

while energy production from wind

sources showed a down ward movement

by 33.7 percent (Table 2.1).


28


Table 2.1: Electric Power Generation in ICS and SCS

(I n ‘000 KWH)

Source

2015/16 2016/17 2017/18 Percentage Change

[A]

Share

(In %) [B]

Share

(In %) [C]

Share

(In %) [C/A] [C/B]

ICS

Hydro

Power 9,674,157.6 92.4 11,752,824.4 93.7 13,253,841.6 95.2 37.0 12.8

Thermal

Power 1,017.4 0.0 67.9 0.0 141,529.1 1.0 13,811.4 208,435.9

Geothermal

-

-

-

Wind 785,505.5 7.5 783,797.7 6.3 519,605.0 3.7 -33.9 -33.7

Sub

Total

10,460,680.5 100.0 12,536,690.0 100.0 13,914,975.8 100.0 33.0 11.0

SCS

Hydro

Power

-

-

-

Thermal

Power 4,259.1 0.0 2,837.8 0.0 2,819.0 0.0 -33.8 -0.7

Sub

Total

4,259.1 0.0 2,837.8 0.0 2,819.0 0.0 -33.8 -0.7

Total

Hydro

Power 9,674,157.6 92.4 11,752,824.4 93.7 13,253,841.6 95.2 37.0 12.8

Thermal

Power 5,276.5 0.1 2,905.6 0.0 144,348.1 1.0 2,635.7 4,867.8

Geothermal

-

-

-

Wind 785,505.5 7.5 783,797.7 6.3 519,605.0 3.7 -33.9 -33.7

Grand Total 10,464,939.6 100.0 12,539,527.8 100.0 13,917,794.7 100.0 33.0 11.0

Source: Ethiopian Electric Power


29


2.2. Volume and Value of Petroleum Imports

During 2017/18, about 3.8 million metric

tons of petroleum products worth Birr 58.6

billion were imported by the Ethiopian

Petroleum Enterprise. As compared to

previous year, total value of petroleum

imports increased by 57 percent mainly due

higher international oil prices and 9.6

percent rise in volume of petroleum imports.

Import volume of regular gasoline increased

by 21.4 percent followed by gas oil (14

percent) and fuel oil (10.6 percent), while jet

fuel dropped by 7.8 percent.

On the other hand, the value of regular

gasoline surged by 72.8 percent followed by

gas oil (64.4 percent), fuel oil (54.8 percent)

and jet fuel (31.1 percent) (Table 2.2)

(Fig.II.1 & Fig.II.2).

Table 2.2፡ Volume and Value of Petroleum Imports

(Volume in MT and Value in '000 Birr)

Petroleum

Products

2016/17 2017/18

Percentage Change Volume Value Volume Value

A B C D C/A D/B

Regular

Gasoline (MGR)

363,845.1

4,399,921.8

441,542.3

7,602,496.3 21.4 72.8

Jet Fuel

800,783.3

9,172,380.3

738,105.6

12,026,911.4 -7.8 31.1

Fuel Oil

75,283.6

657,563.3 83,268.52

1,017,928.6 10.6 54.8

Gas Oil (ADO)

2,199,354.6

23,098,209.4

2,507,672.5

37,966,651.2 14.0 64.4

Total

3,439,266.6

37,328,074.9

3,770,588.9

58,613,987.4 9.6 57.0

Source: Ethiopian Petroleum Enterprise


30


Fig.II.1: Trends in Volume of Petroleum Imports (In ‘000)

0

500

1000

1500

2000

2500

3000

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Vol

ume

in M

T

Year

MGR

Jet Fuel

Fuel Oil

Gas Oil


Fig.II.2: Trends in Value of Petroleum Imports (In ‘000)

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Val

ue in

Bir

r

Year

MGR

Jet Fuel

Fuel Oil

Gas Oil


In line with the increase in international oil

prices, domestic retail prices were also

adjusted up wards. Thus, retail prices of jet

fuel increased by 37.8 percent followed by

kerosene (15.8 percent), gas oil (8.2

percent), regular gasoline (6.8 percent) and

fuel oil (6.7 percent) (Table 2.3).


31


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

Year Quarter

Regular

Gasoline

(MGR) Fuel Oil Gas Oil Kerosene Jet fuel

2015/16

Qtr.1 17.96 13.59 16.10 14.13 16.23

Qtr.2 17.96 13.59 16.10 14.13 15.14

Qtr.3 17.06 12.59 14.81 13.00 13.95

Qtr.4 16.61 12.10 14.16 12.43 12.34

Average

17.40 12.97 15.29 13.42 14.41

2016/17

Qtr.1 16.61 12.10 14.16 12.43 13.36

Qtr.2 16.61 12.10 14.16 12.43 14.03

Qtr.3 18.32 13.46 15.76 15.25 15.74

Qtr.4 18.77 13.69 16.35 16.35 15.70

Average

17.58 12.84 15.11 14.12 14.71

2017/18

Qtr.1 18.77 13.69 16.35 16.35 15.04

Qtr.2 18.77 13.69 16.35 16.35 19.06

Qtr.3 18.77 13.69 16.35 16.35 22.59

Qtr.4 18.77 13.69 16.35 16.35 24.37

Average 18.77 13.69 16.35 16.35 20.27

Annual percentage

change

6.8

6.7

8.2

15.8

37.8


Fig.II.3: Trends in Average Fuel Price in Addis Ababa

0

5

10

15

20

25

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Birr

/Litr

e

Year

MGR

Fuel Oil

Gas Oil

Kerosene

Jet Fuel

Source: Ethiopian Petroleum Enterprise.


32


III. Price Developments

3.1. Developments in Consumer Price at National Level

The annual average headline inflation rose

to 13.1 percent in 2017/18, depicting 5.8

percentage point increase over the

preceding year owing to 9.1 percentage

point rise in food & non-alcoholic

beverages inflation and 2.1 percentage

point increase in non-food inflation (Table

3.1).

In the review period, annual average food

& non-alcoholic beverages inflation

accelerated to 16.5 percent from 7.4

percent in the previous year indicating a

9.1 percentage point annual increase due

to higher prices of bread &cereals,

vegetables, meat, fruit and food products

not elsewhere classified.

In the same period, the annual average

non-food inflation scaled up by 2.1

percentage point to 9.2 percent (Table 3.1

and Fig III.1).

Likewise, headline inflation soared up to

14.7 percent year-on-year from 8.8 percent

in 2016/17 on account of 6.7 percentage

points upsurge in food & non-alcoholic

beverages inflation and 4.9 percentage

points increase in non-food inflation.

Annualized food & non-alcoholic

beverages and non-food inflation scaled

up to 17.9 percent and 11.0 percent from

11.2 percent and 6.1 percent in 2015/16

respectively (Table 3.2 and Fig. III. 2).


33


Table 3.1: Annual Average Inflation Rates (in percent)

Items 2016/17 2017/18

Change

(in %age Points)

Contribution to Change

in Headline Inflation

(%age points)

A B B-A C

General 7.2 13.1 5.8 5.8

Food &Non-alcoholic

beverages 7.4 16.5 9.1 4.8

Non-Food 7.1 9.2 2.1 1.0 Source: CSA and NBE Staff Computation

Fig III 1: Developments in National Inflation

Source: CSA and NBE Staff Computation

Table 3.2: Annual Inflation Rates (in percent)

Items 2016/17 2017/18

Change

(in %age Points)

Contribution to Change

in Headline Inflation

( %age points)

A B B-A C

General 8.8 14.7 5.9 5.9

Food &Non-alcoholic

beverages 11.2 17.9 6.7 3.5

Non-Food 6.1 11.0 4.9 2.3 Source: CSA and NBE Staff Computation

0.0

5.0

10.0

15.0

20.0

25.0

Jan

uar

y

Feb

ruar

y

Mar

ch

Ap

ril

May

Jun

e

July

Au

gust

Sep

tem

ber

Oct

ob

er

No

vem

ber

Dec

emb

er

Jan

uar

y

Feb

ruar

y

Mar

ch

Ap

ril

May

Jun

e

July

Au

gust

Sep

tem

ber

Oct

ob

er

No

vem

ber

Dec

emb

er

Jan

uar

y

Feb

ruar

y

Mar

ch

Ap

ril

May

Jun

e

2016 2017 2018

Per

cen

t

General Food & Non-alcoholic bevarages Non Food


34


Fig III. 2: Developments in Inflation of Food, Non-Food & Non-alcholic beverages


3.2 Consumer Price Developments in Regional States

During the review fiscal year, the

regional simple average general inflation

accelerated to 11.7 percent from 7.1

percent in the previous year.

Beneshangule Gumz, Amhara, SNNP,

Somali and Oromia reginal states

registered higher headline inflation rates

than the regional average (Table 3.3).

The highest headline inflation (17.0

percent) was revealed in Beneshangule

Gumz while the lowest (6.5 percent) was

registered in Tigray, depicting 10.5

percentage point margin.

0.0

5.0

10.0

15.0

20.0

25.0

Jan

uar

y

Feb

ruar

y

Mar

ch

Ap

ril

May

Jun

e

July

Au

gust

Sep

tem

ber

Oct

ob

er

No

vem

ber

Dec

emb

er

Jan

uar

y

Feb

ruar

y

Mar

ch

Ap

ril

May

Jun

e

July

Au

gust

Sep

tem

ber

Oct

ob

er

No

vem

ber

Dec

emb

er

Jan

uar

y

Feb

ruar

y

Mar

ch

Ap

ril

May

Jun

e

2016 2017 2018

Per

cen

t

General Food & Non-alcoholic bevarages Non Food


35


Table 3.3: Regional Annual Average Inflation (2017/18 FY)

Regions

2016/17 2017/18 Change

General

Food &

Non-

alcoholic

beverages

Non-

food General

Food &

Non-

alcoholic

beverages

Non-

food General

Food &

Non-

alcoholic

beverages

Non-

food

A B C D E F G=D-A H=E-B I=F-C

SNNP 8.6 13.2 4.9 14.3 20.7 8.9 5.7 7.4 4.0

Harari 6.6 9.0 4.0 9.9 9.8 10.1 3.3 0.8 6.1

Oromia 3.3 1.0 6.1 12.2 14.9 9.2 8.9 13.9 3.1

Tigray 10.0 8.9 10.9 6.5 12.1 1.6 -3.5 3.2 -9.3

Gambella 5.0 7.1 1.3 11.4 12.5 9.3 6.5 5.4 8.0

Addis Ababa 3.0 1.3 4.3 8.3 8.8 7.9 5.3 7.5 3.6

Dire Dawa 7.5 9.4 6.3 8.9 12.3 6.8 1.4 2.9 0.4

Ben. Gum 5.4 5.6 5.2 17.0 19.5 13.5 11.6 13.9 8.3

Somali 10.5 11.2 15.0 14.0 14.5 13.4 3.5 3.3 -1.5

Afar 7.8 1.0 15.8 11.4 11.7 11.2 3.6 10.7 -4.6

Amhara 10.9 12.2 9.7 15.2 18.3 12.0 4.3 6.1 2.3

Regions

Average 7.1 7.3 7.6 11.7 14.1 9.4

Standard

deviation 2.8 4.5 4.7 3.2 3.9 3.4

Coefficient of

variation 0.4 0.6 0.6 0.3 0.3 0.4

Sources: CSA and NBE’s staff computation

Fig III. 3: Variation in Regional Annual Average Headline Inflation

8.6 6.6

3.3

10.0

4.9 2.9

7.5 5.3

10.5 7.8

10.9

14.3

9.9

12.2

6.5

11.4

8.3

8.9 17.0

14.0

11.4

15.2

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2017/18

2016/17


36


In 2017/18, the regional simple average

food & non-alcoholic beverages inflation

rose to 14.1 percent from 7.3 percent

recorded in 2016/17. Food & non-

alcoholic beverages inflation was higher in

SNNP, Beneshangule Gumz, Amhara,

Oromia and Somali regional states than

the regional average (Table 3.3).

Food & non-alcoholic beverages inflation

was registered highest in SNNP (20.7

percent) and the lowest in Addis Ababa

(8.8 percent) resulting 11.9 percentage

point margin between food & non-

alcoholic beverages inflation rates

recorded in the two regional states.

Fig III 4: Variation in Regional Annual Average Food & Non-alcoholic Beverages Inflation


In the meantime, the regional simple

average non-food inflation increased to

9.4 percent from 7.6 percent last year.

Beneshangule Gumz, Somali, Amhara,

Afar and Harari regional states recorded

higher non-food inflation than the

regional simple average (Table 3.3).

While Beneshangule Gumz recorded the

highest non-food inflation (13.5

percent), Tigray enjoyed with the lowest

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

13.3

9.0

1.0

8.9 7.1

1.3

9.4

5.4

11.2

1.0

12.2

20.7

9.8

14.9

12.1 12.5

8.8

12.3 19.5

14.5

11.7

18.3

2017/18

2016/17


37

non-food inflation (1.6 percent),

showing 11.9 percentage point margin.

Fig III 5: Variation in Regional Annual Average Non-food Inflation


4.9

4.0

6.3

10.9

7.6

4.2

6.7

5.2

9.9

15.8

9.7 8.9

10.1

9.2

1.6

9.3

7.9

6.8

13.5 13.4

11.2 12.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

2016/17

2017/18


38

IV. MONETARY AND FINANCIAL DEVELOPMENTS

4.1 Monetary Developments and Policy

Notwithstanding, tighter monetary policy

stance inflation has remained off-target for

the past eleven consecutive-months during

2017/18 fiscal year.

4.1.1 Developments in Monetary

Aggregates

At the end of 2017/18, domestic liquidity,

as measured by broad money supply (M2),

reached Birr 740.6 billion depicting 29.2

percent annual expansion. This is mainly

due to the surge in domestic credit by 24.3

percent. The high growth of domestic

credit is attributed to 19.4 and 25.1 percent

increase in both credit to the central

government and credit to the non-central

government, respectively (Table 4.2).

In 2017/18, all components of broad

money has witnessed a surge. Narrow

money rose by 29.7 percent due to the rise

in demand deposits and currency outside

banks, reflecting the growth in economic

activities and improvements in money

demand for transaction purposes. Similarly,

quasi-money that comprises savings and

time deposits rose by 28.8 percent and

reached Birr 459.5 billion by the close of

the fiscal year. This is attributed to the

increased capacity of banks in deposit

mobilization driven by the opening of

additional new branches (Table 4.1).


39

Table 4.1: Components of Broad Money

Particulars

Year Ended June 30 Annual Percentage Change

2014/15 2015/16 2016/17 2017/18

2015/16 2016/17 2017/18 (In Millions of Birr)

Narrow Money Supply 154,706.3 178,609.7 216,794.6 281,154.7 15.5 21.4 29.7

. Currency Outside Banks 60,460.9 66686.2 73917.7 86417.3 10.3 10.8 16.9

. Demand Deposits (net) 94,245.4 111923.5 142876.5 194737.4 18.8 27.6 36.3

Quasi-Money 216,622.6 266,656.6 356,614.4 459,418.2 23.1 33.7 28.8

. Savings Deposits 174,632.0 217,034.3 293,431.7 382,549.4 24.3 35.2 30.4

. Time Deposits 41,990.6 49,622.3 63,182.7 76,868.8 18.2 27.3 21.7

Broad Money Supply 371,328.9 445,266.3 573,408.6 740,572.9 19.9 28.8 29.2

Source: National Bank of Ethiopia (NBE)

Source: NBE

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18

(In

Mil

lio

ns

of

Bir

r)

Fig V.1: Major Components of Broad Money

(2006/07 - 2017/18)

Currency Outside Banks Net Demand Deposit Quasi- Money

Broad Money

Year


40

Table 4.2: Factors Influencing Broad Money

Particulars


2014/15 2015/16 2016/17 2017/18

2015/16 2016/17 2017/18 (In Millions of Birr)

External Assets (net) 37,570.9 21,524.2 38,034.8 39,376.2 -42.7 76.7 3.5

Domestic Credit 393,421.7 490,230.3 631156.2 784,633.1 24.6 28.7 24.3

. Claims on Central Gov't (net) 30,735.3 47,548.4 85,441.8 102,002.8 54.7 79.7 19.4

. Claims on Non-Central Gov't 362,686.5 442,682.0 545,714.4 682,630.3 22.1 23.3 25.1

Other Items (net) 59,663.8 66,488.3 100,721.6 83,436.4 11.4 51.5 -17.2

Broad Money (M2) 371,328.9 445,266.3 573,408.6 740,572.9 19.9 28.8 29.2

Source: NBE

Source: NBE

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

100.0

An

nu

al

Perc

en

tag

e G

row

th

Ethiopian Fiscal year

Fig V.2: Major Determinants of Monetary Growth

Credit to Central Gov't Credit to Non-Central Gov't

Broad Money Net Foreign Assets


41

4.1.2. Developments in Reserve Money and Monetary Ratios

In 2017/18, reserve money or base

money witnessed an annual expansion of

19.1 percent. As a result, reserve money

reached Birr 174.2 billion at the end of

the fiscal year. This growth is attributed

to 17.8 and 19.8 percent rise in deposits

of banks at NBE and currency in

circulation, respectively. In determinant

wise, the increment in reserve money

was the result of the rise in net domestic

credit by 26.6 percent and net foreign

assets 19.9 percent. Excess reserves of

commercial banks reached Birr 26.7

billion at the end of June 2017/18.

The ratio of M2 to GDP4, an indicator of

financial deepening, went up by 7.5

percent to reach 0.34 points in 2017/18,

partly indicating the prudent monetary

policy measures taken by the national

bank. Compared to last year same

period, the money multipliers defined as

narrow money to reserve money reached

1.61 from 1.48 registered last year same

period whereas ratio of broad money to

reserve money showed slight increments

and reached 4.25 from 3.92 position

4 The 2017/18 GDP is estimated by assuming

that 2016/17 GDP grew by an average GDP

growth rates of 2013/14-2016/17.

registered last year at the same period,

reflecting improvements in deposit

mobilization by commercial banks

(Table 4.3).


42


Table 4.3: Reserve Money and Monetary Ratios

(In Millions of Birr, where applicable)

Particulars


2014/15 2015/16 2016/17 2017/18 2015/16 2016/17 2017/18

Reserve Requirement (CB's) 18,250.4 21,745.4 28,280.8 36,385.8 19.2 30.1 28.7

Actual Reserve (CB's) 27,562.6 34,999.4 54,977.9 63,117.8 27.0 57.1 14.8

Excess Reserve (CB's) 9,312.2 13,253.9 26,697.1 26,732.0 42.3 101.4 0.1

Reserve Money 102,467.8 119,164.7 146,257.9 174,175.4 16.3 22.7 19.1

. Currency in Circulation 75,240.7 82,592.7 94,245.5 112,911.0 9.8 14.1 19.8

. Bank Deposits 27,227.1 36,572.0 52,012.4 61,264.5 34.3 42.2 17.8

Money Multiplier (Ratio):

. Narrow Money to Reserve Money 1.51 1.50 1.48 1.61 -0.73 -1.12 8.91

. Broad Money to Reserve Money 3.62 3.74 3.92 4.25 3.11 4.92 8.46

Other Monetary Ratios (%):

. Currency to Narrow Money 39.08 37.34 34.10 40.16 -4.46 -8.67 17.77

. Currency to Broad Money 16.28 14.98 12.89 15.25 -8.02 -13.92 18.27

. Narrow Money to Broad Money 41.66 40.11 37.81 37.96 -3.72 -5.75 0.42

. Quasi Money to Broad Money 58.34 59.89 62.19 62.04 2.66 3.85 -0.26

M2/GDP Ratio* 0.29 0.29 0.32 0.34 1.86 8.91 7.48

Source: National Bank of Ethiopia (NBE) * M2/GDP ratio for 2017/18 is calculated on the basis of estimated nominal GDP for

the same year.

Source: NBE

0

20000

40000

60000

80000

100000

120000

140000

160000

Valu

e in

Millio

ns o

f B

irr

year

Fig. V.3: Reserve Money

Reserve Requirement (CB's) Actual Reserve (CB's) Excess Reserve (CB's) Reserve Money


43


4.2. Developments in Interest Rate

Due to the policy measure taken by the

national bank of Ethiopia in October 2017,

minimum and maximum deposit interest

rates raised to 7.0 and 9.0 percent in 2017/18

fiscal year from 5.0 and 5.75 percent

registered last year same period,

respectively. Consequently, average interest

rate on savings deposit registered to be 8.0

percent at the end of the fiscal year.

Similarly, simple average lending interest

rate reached 13.5 percent from 12.75 percent

registered in 2016/17 fiscal year. Whereas

weighted annual average interest rates on

time and demand deposits show a slight

adjustment and reached 8.09 and 0.04

percent respectively.

However, all real interest rates were negative

as head line inflation was higher than the

interest rates. The annual headline inflation

rose to 14.7 percent at the end of 2017/18

from 8.8 percent in 2016/17. Consequently,

the average real interest rate were negative at

6.7 percent for saving deposit, 6.6 percent

for time deposit and 1.2 percent for lending

interest rate (Table 4.4).


44


Table 4.4: Interest Rate Structure of Commercial Banks (In percent per annum) Rates 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

1. Deposit Rate

1.1 Savings Deposit (Simple

Average) 5.38 5.38 5.38 5.38 5.38 5.38 8.00

Minimum 5.00 5.00 5.00 5.00 5.00 5.00 7.00

Maximum 5.75 5.75 5.75 5.75 5.75 5.75 9.00

1.2 Time deposit (Weighted

Average) 5.55 5.66 5.66 5.77 5.59 5.54 8.09

Up to 1 year 5.48 5.57 5.55 5.71 5.53 5.43 8.05

1 -2 years 5.57 5.68 5.68 5.78 5.60 5.57 8.10

Over 2 years 5.61 5.74 5.74 5.81 5.64 5.63 8.13

1.3 Demand Deposit (Weighted

Average) 0.02 0.03 0.03 0.04 0.04 0.04

0.04

2. Lending Rate (Average) 11.88 11.88 11.88 11.88 12.75 12.75 13.50

Minimum 7.50 7.50 7.50 7.50 7.50 7.50 7.00

Maximum 16.25 16.25 16.25 16.25 18.00 18.00 20.00

3. T-bills (Nominal) 1.25 1.86 1.59 1.43 1.44 1.42 1.39

4. Headline Inflation (Year-onYear) 20.8 7.4 22.4 10.4 7.5 8.8 14.7

5. Real Rate of Interest on:

5.1 SavingDeposit (1.1 - 4) -15.43 -2.03 -17.07 -5.03 -2.13 -3.43 -6.70

5.2 Time Deposit (1.2 - 4) -15.25 -1.74 -16.79 -4.64 -1.91 -3.26 -6.61

5.3 Lending (2 - 4) -8.93 4.47 -10.57 1.47 5.25 3.95 -1.20

Source: NBE


45


Source: NBE

4.3 Developments in Financial Sector

Banks, insurance companies and micro-

finance institutions were the major financial

institutions operating in Ethiopia. The number

of banks still remained 18, of which 16 are

private and 2 are state-owned.

In 2017/18, banks opened 500 new branches,

raising the total number of branches to 4757

from 4257 in the previous year. As a result,

bank branch to population ratio stood at

1:20,286.55 people in 2017/18. About 35.3

percent of the total bank branches were located

in Addis Ababa.

5 Total population is 96,503,000 as CSA estimation for

2018

Major branch expansion was undertaken by

Wegagen bank (69 branches), followed by

Dashen Bank (66 branches), Commercial Bank

of Ethiopia (65 branches), Lion International

Bank (52 braches), Cooperative Bank of

Oromiya (45 branches), Awash International

Bank (43 branches), Buna International Bank

(33 branches) and Abyssinia Bank (31

branches). The share of private banks in total

branch network rose to 68.8 percent from 66.6

percent last year signifying the steady growth

in private banks branch (Table 4.5).

-20.00

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

Valu

e in

%

Years

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

Average Saving Deposit Rate Average Time Deposit Rate Average Lending Rate


46


Total capital of the banking industry increased

by 10 percent and reached Birr 85.8 billion by

the end of June 2018 (Table 4.5).

Although, the number of insurance companies

remained at 17, their branches increased to 532

following the opening of 40 new branches in

2017/18 alone. About 53.6 percent of

insurance branches were situated in Addis

Ababa and 84 percent of the total branches

were private owned. Insurance companies

increased their total capital by 26.4 percent to

Birr 5.5 billion of which the share of private

insurance companies was 72.1 percent and that

of public insurance company was 27.9 percent

(Table 4.6).

Fig.IV.5: Branch Network and Capital of Banking System (2014/15-2017/18)

Source: Commercial Banks including DBE & Staff Computation

41.9 38.0 33.4 31.242.1

48.9

64.4 60.1

58.1 62.0 66.6 68.857.9

51.1

35.6 39.9

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Perc

enta

ge s

hare

from

tot

al

Total Private Banks Total Public Banks

Fig.IV.5: Branch Network (BN) and Capital (C) of Banking System (2014/15-2017/18)


47


1. Public Banks

Commercial Bank of Ethiopia 1028 282 1310 30.8 1051 324 1375 28.9 42,579.6 54.6 43,851.8 51.1Development Bank of Ethiopia 106 4 110 2.6 103 4 107 2.2 7,595.1 9.7 7,676.5 9.0

Total Public Banks 1134 286 1420 33.4 1154 328 1482 31.2 50174.7 64.4 51,528.3 60.1

2. Private Banks

Awash International Bank 186 153 339 8.0 213 169 382 8.0 3,807.6 4.9 4,210.0 4.9

Dashen Bank 184 131 315 7.4 238 143 381 8.0 3,420.9 4.4 3,725.6 4.3

Abyssinia Bank 140 113 253 5.9 144 140 284 6.0 2,371.0 3.0 3,265.8 3.8

Wegagen Bank 139 84 223 5.2 174 118 292 6.1 2,824.5 3.6 3,195.7 3.7

United Bank 111 93 204 4.8 116 117 233 4.9 2,221.0 2.8 2,579.9 3.0

Nib International Bank 92 111 203 4.8 101 127 228 4.8 2,570.2 3.3 2,991.4 3.5 Cooperative Bank of Oromiya 232 55 287 6.7 270 62 332 7.0 1,281.7 1.6 1,924.6 2.2

Lion International Bank 110 48 158 3.7 145 65 210 4.4 1,163.5 1.5 1,479.7 1.7

Oromia International Bank 164 73 237 5.6 171 89 260 5.5 1,378.3 1.8 1,890.0 2.2

Zemen Bank 15 7 22 0.5 12 13 25 0.5 1,050.7 1.3 1,391.8 1.6

Buna International Bank 74 69 143 3.4 96 80 176 3.7 1,152.3 1.5 1,667.7 1.9

Berhan International Bank 114 63 177 4.2 76 92 168 3.5 1,536.3 2.0 1,936.5 2.3

Abay Bank 112 40 152 3.6 109 53 162 3.4 1,139.3 1.5 1,514.7 1.8

Addis International Bank 21 32 53 1.2 24 35 59 1.2 688.4 0.9 789.6 0.9

Debub Global Bank 19 19 38 0.9 22 21 43 0.9 373.1 0.5 614.3 0.7

Enat Bank 10 23 33 0.8 15 25 40 0.8 809.3 1.0 1,045.4 1.2

Total Private Banks 1,723 1,114 2,837 66.6 1,926 1,349 3,275 68.8 27,788.1 35.6 34,222.8 39.9

3.Grand Total Banks 2857 1400 4257 100 3,080 1677 4757 100.0 77,962.7 100.0 85,751.2 100.0

Addis

AbabaTotal

Addis

AbabaTotal

%

ShareRegions

Capital

2016/17 2017/18

Table.4.5: Branch Network and Capital of the Banking System at the Close of June 30, 2018

(Branch in Number and Capital in Millions of Birr)

2016/17 2017/18Banks

Branch Network

Regions%

Share

%

Share

Total

Capital

%

Share

Total

Capital

Source: Commercial Banks


48


Fig.IV.6: Branch Network and Capital of Insurance Companies (2014/15-2017/18)

17.5 16.4 15.2 16.0 22.4 23.3 24.4 27.9

82.5 83.6 84.8 84.0 77.6 76.7 75.6 72.1

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Per

cent

age

Sha

re f

rom

tot

al

Fig .IV.6: Branch Network (BN) and Capital (C) of Insurance Companies (2014/15-2017/18)

Public Insurances Private Insurances

Source: Insurance Companies& Staff Computation

2016/17 2017/18%

Change

A.A Regions Total A.A Regions Total A B B/A

1 Ethiopian Ins. Cor. 20 55 75 25 60 85 1,056.0 1,530.0 44.9

2 Awash Ins.Com.S.C. 26 15 41 27 17 44 400.0 439.0 9.7

3 Africa Ins.Com S.C. 14 13 27 15 13 28 271.0 294.0 8.5

4 National Ins. Co. of Eth. 19 15 34 19 15 34 111.0 166.0 49.5

5 United Ins.Com. S.C 20 11 31 25 12 37 334.0 368.0 10.2

6 Global Ins. Com.S.C 8 7 15 8 8 16 128.0 148.0 15.6

7 Nile Ins.Com.S.C 19 20 39 20 20 40 320.0 436.0 36.3

8 Nyala Ins.Com.S.C 15 15 30 15 16 31 391.0 516.0 32.0

9 Nib Ins. Com.S.C 24 13 37 26 13 39 328.0 313.0 -4.6

10 Lion Ins. Com.S.C 16 15 31 16 15 31 83.0 131.0 57.8

11 Ethio-Life Ins.Com.S.c 15 4 19 15 5 20 100.0 112.0 12.0

12 Oromia Ins.Com.S.c 18 19 37 18 20 38 215.0 295.0 37.2

13 Abay Insurance 12 11 23 13 12 25 217.0 260.0 19.8

14 Berhan insurance S.C 9 2 11 9 4 13 91.0 112.0 23.1

15 Tsehay Insurance S.C 10 5 15 12 7 19 98.0 119.0 21.4

16 Lucy 7 4 11 11 4 15 116.0 129.0 11.2

17 Bunna Insurance S.C. 11 5 16 11 6 17 73.0 108.0 47.9

Total 263 229 492 285 247 532 4,332 5,476 26.4

Note: A.A=Addis Ababa

Table.4.6: Branch Network & Capital of Insurance Companies as at June 30, 2018

No.

Source: Insurance Companies

Capital

2017/18

Insurance Companies

2016/17

(Branch in Number and Capital in Millions of Birr)

Branch


49


4.3.1. Resource Mobilization

Total resources mobilized by the banking

system in the form of deposit, borrowing

and loan collection increased by 27.7

percent and reached Birr 298.2 billion at

the end of 2017/18 (Table 4.8). Aided by

remarkable branch expansion, deposit

liabilities of the banking system topped

Birr 730.3 billion, reflecting 28.4 percent

annual growth rate. Saving deposits grew

by 30.4 percent followed by demand

deposits (27.6 percent) and time deposits

(21.7 percent). Of the total deposits,

saving deposits accounted for 52.4

percent, demand deposits 37.1 percent

and time deposit (10.5 percent) (Table

4.9).

The share of private banks in deposit

mobilization increased to 37.8 percent

from 35.5 percent last year due to the

opening of 435 new branches. CBE alone

mobilized 62 percent of the total deposits

due to its extensive branch network.

Raising funds through borrowing by the

banking industry was not an important

source of resource mobilization in

Ethiopia as most of the banks were

sufficiently liquid due to increased

deposit mobilization and collection of

loans. However, total outstanding

borrowing at the end of the fiscal year

was Birr 65 billion up from Birr 39.8

billion a year earlier due to borrowing by

Development Bank of Ethiopia. Of the

total borrowing, domestic sources

accounted for 89.5 percent and foreign

sources 10.5 percent (Table 4.9).

On the other hand, banks’ loan collection

reached Birr 111.6 billion, showing a

14.9 percent annual increment, of which

58.8 percent was collected by private

banks (Table 4.8).

Table 4.7: Microfinance Institutions Performance as of June 30, 2018 (In Thousands of Birr)

Particulars 2016/17 2017/18 % Change

A B B/A

Total Capital 10,720,058.6 13,772,435.9 28.5

Saving 26,323,896.4 33,213,124.6 26.2

Credit 32,398,857.4 44,987,229.9 38.9

Total Assets 49,551,770.7 67,261,994.6 35.7

Source:MFIs


50


Public Banks Private Banks Total (A) Public Banks Private Banks Total (B) Public Banks Private Banks Total (C) C/A C/B

1. Deposits (net change) 41,941.1 28,816.2 70,757.3 76,058.3 54,607.7 130,666.0 87,120.9 74,318.1 161,439.0 128.2 23.6

Demand 12,897.7 7,670.4 20,568.0 27,103.6 13,959.0 41,062.6 39,481.4 19,106.5 58,587.9 184.8 42.7

Savings 25,960.6 16,374.8 42,335.4 44,423.5 31,979.6 76,403.1 42,937.9 46,194.7 89,132.6 110.5 16.7

T ime 3,082.8 4,771.0 7,853.8 4,531.2 8,669.1 13,200.3 4,701.6 9,016.9 13,718.5 74.7 3.9

2. Borrowing (net change) 2,551.8 - 2,551.8 5,751.5 - 5,751.5 25,167.5 - 25,167.5 886.3 337.6

Local 1,855.9 - 1,855.9 5,656.1 - 5,656.1 23,140.7 - 23,140.7 1,146.8 309.1

Foreign 695.8 - 695.8 95.4 - 95.4 2,026.9 - 2,026.9 191.3 2,024.9

3. Collection of Loans 33,722.8 43,463.9 77,186.7 42,899.1 54,270.0 97,169.1 45,965.7 65,648.9 111,614.5 44.6 14.9

4. Total Resources Mobilized (1+2+3) 78,215.6 72,280.1 150,495.8 124,708.9 108,877.7 233,586.6 158,254.1 139,967.0 298,221.1 98.2 27.7

5. Disbursement 49,626.3 38,396.8 88,023.1 48,386.6 60,624.6 109,011.2 48,230.1 67,168.0 115,398.1 31.1 5.9

6. Change in Liquidity (4-5) 28,589.4 33,883.3 62,472.6 76,322.3 48,253.1 124,575.5 110,024.0 72,799.0 182,823.0 192.6 46.8

Memorandum Item:

7. Outstanding Credit 170,719.9 93,181.7 263,901.6 188,366.8 134,640.5 323,007.4 212,449.7 182,105.8 394,555.5 49.5 22.2

(In Millions of Birr)

Table 4.8: Annual Resource Mobilization & Disbursing Activities of Commercial Banks and DBE (Specialized Bank) as at June 30, 2018

Percent Change

Source: Commercial Banks & Staff Computation

Particulars

2015/16 2016/17 2017/18

2015/16 2016/17 2017/18 S/R T/S

R S T

A. Deposits

-Demand 171,019.5 212,082.1 270,670.0 24.0 27.6

-Savings 217,047.8 293,450.9 382,583.5 35.2 30.4

-Time 50,085.5 63,285.8 77,004.3 26.4 21.7

T o t a l 438,152.7 568,818.7 730,257.7 29.8 28.4

B. Borrowings

-Local 29,328.4 34,984.4 58,125.1 19.3 66.1

-Foreign 4,726.8 4,822.2 6,849.1 2.0 42.0

T o t a l 34,055.2 39,806.6 64,974.2 16.9 63.2


Table 4.9: Deposits and Borrowings of Commercial Banks and Specialized Bank as at June 30, 2018



51


Table.4.10: Loans and Advances by Lenders 1/

D* C* O/S* D* C* O/S*

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

A.Public Banks

1.Commercial Bank of Ethiopia 42817.6 38126.6 154,164.0 41281.6 41414.6 173,294.4 -3.6 8.6 12.4

2.Development Bank of Ethiopia 5569.0 4772.5 34,202.8 6948.5 4551.1 39,155.4 24.8 -4.6 14.5

Sub-Total 48,386.6 42,899.1 188,366.8 48,230.1 45,965.7 212,449.7 -0.3 7.1 12.8

B. Private Banks

3 Awash International Bank 6642.8 6975.0 22576.3 4860.5 8333.5 31209.1 -26.8 19.5 38.2

4. Dashen Bank 8694.1 7877.7 18078.9 9953.7 8392.3 23069.4 14.5 6.5 27.6

5. Bank of Abyssinia 5384.3 2881.2 14105.4 4681.4 3795.2 18023.5 -13.1 31.7 27.8

6. Wegagen Bank 3945.0 5595.1 10367.5 6194.8 6021.5 15038.5 57.0 7.6 45.1

7. United Bank 4961.6 5989.5 11996.3 4825.5 7230.3 14715.0 -2.7 20.7 22.7

8. Nib International Bank 6725.2 4555.4 10888.4 6197.2 4926.9 13692.7 -7.9 8.2 25.8

9. Cooperative Bank of Oromia 7360.3 4647.1 9995.5 8980.3 6587.9 15117.4 22.0 41.8 51.2

10. Lion Interenational Bank 2663.4 2513.9 5598.3 2998.0 3223.7 7560.3 12.6 28.2 35.0

11. Oromia International Bank 1817.2 2103.4 4160.1 2095.7 2158.8 5182.3 15.3 2.6 24.6

12. Zemen Bank 3294.9 2882.3 7175.5 5103.6 4535.3 11596.3 54.9 57.4 61.6

13.Berhan International Bank 2741.1 2675.8 5366.7 3550.1 3558.5 7144.3 29.5 33.0 33.1

14.Bunna International Bank 2264.7 1491.6 5202.8 2781.0 1811.9 6915.1 22.8 21.5 32.9

15.Abay Bank 1902.3 1722.3 4274.3 1827.9 2231.1 5854.7 -3.9 29.5 37.0

16. Addis International Bank 425.1 552.2 1581.3 543.1 541.5 2053.6 27.8 -1.9 29.9

17. Debub Global Bank 654.6 617.5 794.3 1345.7 706.5 1584.2 0.0 0.0 0.0

18. Enat Bank 1148.2 1190.0 2479.1 1229.4 1594.0 3349.6 0.0 0.0 0.0

Sub-Total 60,624.6 54,270.0 134,640.5 67,168.0 65,648.9 182,105.8 10.8 21.0 35.3

Grand Total 109,011.2 97,169.1 323,007.4 115,398.1 111,614.5 394,555.5 5.9 14.9 22.2

Source: Commercial Banks

1/ Outstanding Credit excludes central government borrowing

D*=Disbursement, C*=Collection, O/S*= Outstanding Credit


Lenders

2016/17 Percentage

Change

2017/18


52


4.3.2 New Lending Activities

Commercial Banks and Development

Bank of Ethiopia (DBE) disbursed Birr

115.4 billion in fresh loans which was 5.9

percent higher than a year ago. Of the

total new loans, about 58.2 percent was

provided by private banks and 41.8

percent by the two public banks (Table

4.10).

About 26.4 percent of the loans went to

industry followed by domestic trade (17.3

percent), international trade (16.1

percent), other sectors (11 percent),

housing and construction (10.6 percent)

and agriculture (9.9 percent) while the

remaining balance went to other

economic sectors (Table 4.12).

Fig.IV.7: Development in Deposit Mobilization, Lending and Loan Collection Activities of the Banking

System (2010/11-2017/18)

Source: Commercial Banks and DBE

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

Valu

e i

n M

illio

ns o

f B

irr

Year & Bank Ownership

Fig IV.7: Development in Deposit Mobilization, Lending and Loan Collection Activities of Banking System

(2010/11-2017/18)

Net Deposit Lending Loan collection


53


4.3.3 Outstanding Loans

Total outstanding credit of the banking

system including to the central

government increased by 22.8 percent

and reached Birr 449 billion at the end of

June 2018. Excluding central

government, credit to industry accounted

for 39.3 percent followed by international

trade (19.8 percent), domestic trade (11.4

percent), housing and construction (11

percent), others sectors (5.8 percent) and

agriculture (4.9 percent) (Table 4.12).

The share of private sector in outstanding

credit was Birr 284.5 billion (or 63.4

percent) reflecting a 23 percent year-on-

year growth (Table 4.13).

Table 4.11: Percentage Share of Loans and Advances by Lenders

D* C* O/S* D* C* O/S*


A.Public Banks

1.Commercial Bank of Ethiopia 39.278 39.2 47.7 35.8 37.1 43.9 -8.9 -5.4 -8.0

2.Development Bank of Ethiopia 5.109 4.9 10.6 6.0 4.1 9.9 17.9 -17.0 -6.3

Sub-Total 44.4 44.1 58.3 41.8 41.2 53.8 -5.8 -6.7 -7.7

B.Private Banks

3 Awash International Bank 6.1 7.2 7.0 4.2 7.5 7.9 -30.9 4.0 13.2

4. Dashen Bank 8.0 8.1 5.6 8.6 7.5 5.8 8.2 -7.3 4.5

5. Bank of Abyssinia 4.9 3.0 4.4 4.1 3.4 4.6 -17.9 14.7 4.6

6. Wegagen Bank 3.6 5.8 3.2 5.4 5.4 3.8 48.3 -6.3 18.8

7. United Bank 4.6 6.2 3.7 4.2 6.5 3.7 -8.1 5.1 0.4

8. Nib International Bank 6.2 4.7 3.4 5.4 4.4 3.5 -13.0 -5.8 3.0

9. Cooperative Bank of Oromia 6.8 4.8 3.1 7.8 5.9 3.8 15.3 23.4 23.8

10. Lion Interenational Bank 2.4 2.6 1.7 2.6 2.9 1.9 6.3 11.6 10.6

11. Oromia International Bank 1.7 2.2 1.3 1.8 1.9 1.3 8.9 -10.6 2.0

12. Zemen Bank 3.0 3.0 2.2 4.4 4.1 2.9 46.3 37.0 32.3

13.Berhan International Bank 2.5 2.8 1.7 3.1 3.2 1.8 22.3 15.8 9.0

14.Bunna International Bank 2.1 1.5 1.6 2.4 1.6 1.8 16.0 5.7 8.8

15. Abay Bank 1.7 1.8 1.3 1.6 2.0 1.5 -9.2 12.8 12.1

16. Addis International Bank 0.4 0.6 0.5 0.5 0.5 0.5 20.7 -14.6 6.3

17. Debub Global Bank 0.6 0.6 0.2 1.2 0.6 0.4 0.0 0.0 0.0

18. Enat Bank 1.1 1.2 0.8 1.1 1.4 0.8 0.0 0.0 0.0

Sub-Total 55.6 55.9 41.7 58.2 58.8 46.2 4.7 5.3 10.7

Grand Total 100.0 100.0 100.0 100.0 100.0 100.0 0.0 0.0 0.0

Source: Commercial BanksD*=Disbursement, C*=Collection, O/S*= Outstanding Credit

Lenders

2016/17

Percentage change

2017/18


54


Table 4.12: Loans & Advances by Economic Sectors

D* C* O/S* D* C* O/S* D* C* O/S*


Government Deficit Financing 0 0 42,593.8 0 0 54,398.5 - - 27.7

Agriculture 13,133.7 13,962.6 20,041.8 11,401.9 14,073.7 19,511.8 (13.2) 0.8 (2.6)

Industry 25,035.6 20,942.8 129,977.7 30,503.0 24,413.5 154,904.4 21.8 16.6 19.2

Domestic Trade 23,608.9 18,399.2 41,830.1 19,935.9 21,336.8 44,945.3 (15.6) 16.0 7.4

International Trade 13,494.8 20,993.9 52,207.7 18,606.2 23,135.2 77,976.5 37.9 10.2 49.4

Export 6,062.2 10,478.0 30,017.5 11,603.2 13,375.1 47,774.1 91.4 27.6 59.2

Import 7,432.7 10,515.9 22,190.2 7,003.0 9,760.1 30,202.5 (5.8) (7.2) 36.1

Hotels and Tourism 2,213.4 2,390.9 5,852.8 2,197.9 2,629.0 9,856.6 (0.7) 10.0 68.4

Transport and Communication 6,924.9 4,901.9 14,275.4 4,525.6 5,644.1 13,826.9 (34.6) 15.1 (3.1)

Housing and Construction 13,583.6 10,521.0 37,970.6 12,281.4 12,434.2 43,572.6 (9.6) 18.2 14.8

Mines, Power and Water resource 363.4 179.8 225.1 319.5 142.1 221.9 (12.1) (21.0) (1.5)

Others 8,452.9 3,938.9 16,373.4 12,674.1 6,353.8 23,044.3 49.9 61.3 40.7

Personal 2,199.8 938.1 4,252.8 2,952.6 1,452.1 6,695.2 34.2 54.8 57.4

Total 109,011.2 97,169.2 365,601.2 115,398.1 111,614.5 448,954.1 5.9 14.9 22.8



2016/17 2017/18 Percentage Change

Economic Sectors



55


-

50,000.0

100,000.0

150,000.0

200,000.0

250,000.0

300,000.0

350,000.0

400,000.0

2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

In M

illio

ns

of

Bir

r

Fiscal Years

Fig.IV.8: Sectoral Breakdown of Bank Credit (2006/07-2017/18)

Agriculture Others Housing & Construction

International Trade Domestic Trade & Services Industry

Table 4.13: Loans and Advances by Borrowers

2014/15 2015/16 2016/17

O/S* O/S* O/S* D* C* O/S*

A B C E F G G/B G/C

Central Government 15,514.4 16,471.6 42,593.8 - 0.0 54,398.5 230.3 27.7

Public Enterprises 69,841.6 84,675.6 91,771.6 18,093.4 13,631.0 110,092.5 30.0 20.0

Cooperatives 13,850.7 13,704.4 13,477.1 12,261.4 13,756.7 16,724.6 22.0 24.1

Private & Individuals 133,618.1 165,467.4 217,758.7 85,043.2 84,226.8 267,738.5 61.8 23.0

Total 232,824.8 280,319.0 365,601.2 115,398.0 111,614.5 448,954.0 60.2 22.8


2017/18

Borrowing Sector

Percentage change




56


4.4. Financial Activities of NBE

As of June 2018, gross claims of NBE on

the central government reached Birr

160.1 billion which was 18.1 percent

higher than a year earlier. Of the total

credit to the central government, direct

advance accounted for 95.1 percent and

that of bond 4.9 percent.

Similarly, NBE’s outstanding claim on

DBE was birr 47.3 billion showing 77.7

percent increase over the preceding year.

On the liability side, total deposits at

NBE increased by 7.4 percent and

amounted birr 81.6 billion as a result of

8.3 percent growth in deposits in

financial institutions and 4.7 percent rise

in government deposit (Table 4.14).

2015/16 2016/17 2017/18

A B C B/A C/B

Loans and Advances (1+2) 134,687.4 162,247.8 207,421.6 20.5 27.8

1.Claims on Central Gov’t 109,080.4 135,640.8 160,128.8 24.3 18.1

1.1 Direct Advance 100,764.9 127,764.9 152,264.9 26.8 19.2

1.2 Bonds 8,315.5 7,875.9 7,863.9 -5.3 -0.2

2. Claims on DBE 25,607.0 26,607.0 47,292.7 3.9 77.7

3. Deposit Liabilities 51,697.0 75,987.7 81,596.5 47.0 7.4

3.1 Government 14,042.3 19,031.5 19,922.0 35.5 4.7

3.2 Financial Institutions 37,654.7 56,956.2 61,674.5 51.3 8.3

Particulars% Change

Source: NBE and Staff Computation

( In Millions of Birr)

Table 4.14: Financial Activities of National Bank of Ethiopia at the Close of June 30, 2018


57


4.5 Developments in Financial Markets

Although there is no secondary market in

Ethiopia, government bonds are

occasionally issued to finance government

expenditures and/or to absorb

excess liquidity in the banking

system.

4.5.1. Treasury Bills Market

The amount offered and demanded in the

Treasury-bill market showed a similar

development. The amount of Treasury-bills

offered registered 36.2 percent rise and

reached Birr 286.5 billion in 2017/18.

Similarly, the amount of T-bills demanded

in the weekly auction market exhibited 43.8

percent growth and stood at Birr 324.0

billion.

The amount of T-bills sold during the year

stood at Birr 324.0 billion indicating the

market was oversubscribed by Birr 37.5

billion (6.14 percent).

At the end of 2017/18, the total outstanding

T-bills went up by 51.8 percent and stood at

Birr 111.2 billion.

The dominance of non-bank

institutions in the T-bill market

continued in the review year.

Accordingly, the Non-bank

institution constituted the entire

amount of the total outstanding T-

bills (Table 4.15).

The average weighted yield of the

four types of bills declined slightly

to 1.416 from 1.424 percent, a

mere 0.567 percent down from last

year (Table 4.15).

The highest yield was recorded for

the 364-day T-bill while the lowest

yield was for 182-day T-bill with a

corresponding rate of 3.000 and

0.622 percent, respectively.


58


Table 4.15: Results of Treasury Bills Auction

C/A C/B

Number of Bidders -11.5 -4.0

Amount Demanded (Mn.Birr) 100.5 43.8

28-day bill 0.0 0.0

91-day bill 106.8 39.3

182-day bill -69.1 -12.5

364-day bill 128.6 128.6

Amount Supplied (Mn.Birr) 94.1 36.2

28-day bill 1.9 0.0

91-day bill 114.3 39.6

182-day bill -67.6 -16.4

364-day bill 0.8 0.0

Amount Sold (Mn.Birr) 100.6 43.8

Banks 0.0 -

Non-Banks 100.6 43.8

28-day bill -0.004 -0.001

91-day bill -0.001 0.000

182-day bill 0.075 0.025

364-day bill 0.000 0.000

28-day bill 7.181 2.147

91-day bill 0.422 -0.008

182-day bill -19.584 -7.413

364-day bill -0.001 -0.001

Banks 0.00 0.00 0.00 0.00 0.00 0.000 0.000

Non-Banks 57,252.56 100.00 73,271.56 100.00 111,213.56 100.00 94.251 51.783

Public Servants Social Security Agency 30,566.56 53.39 41,015.56 55.98 54,915.56 49.38 79.659 33.890

Development Bank of Ethiopia 13,216.00 23.08 13,216.00 18.04 30,216.00 27.17 128.632 128.632

Private Organizations’ Employees Social Security Agency 11,182.00 19.53 16,604.00 22.66 23,346.00 20.99 108.782 40.605

Other Public Non-Bank Institutions 2,288.00 4.00 2,436.00 3.32 2,736.00 2.46 19.580 12.315

Share

% 94.251 51.783Outstanding bills at the end of period(Mn.Br.) 57,252.560

Share

% 73,271.560

Share

% 111,213.560

0.773 0.672 0.622

3.000 3.000 3.000

0.783 0.821 0.839

1.198 1.203 1.203

Average Weighted Yeild for Successful bids(%) 1.438 1.424 1.416-2.996 -0.567

99.616 99.666 99.691

97.095 97.095 97.095

99.940 99.937 99.936

99.702 99.701 99.701

Average Weighted Price for Successful

bids(Birr)99.088 99.100 99.106 0.018 0.006

0.0 0.0 0.0

161,475.2 225,321.2 323,991.2

13,116.0 13,216.0 13,216.0

161,475.240 225,321.240 323,991.240

125,921.4 193,204.2 269,791.2

7,502.0 2,902.0 2,427.0

147,579.435 210,382.240 286,494.240

1,040.0 1,060.0 1,060.0

6,802.000 2,402.000 2,102.000

13,216.000 13,216.000 30,216.000

1,040.000 1,040.000 1,040.000

140,517.240 208,663.240 290,633.240

217 200 192.00

161,575.240 225,321.240 323,991.240

Particulars

2015/16 2016/17 2017/18

Percentage

Change

A B C

Source: NBE


59


Fig IV.9: Treasury Bills Auction Result

Source: NBE

4.5.2 NBE Bill Market

On April 4, 2011, NBE has introduced

NBE-Bill market so as to mobilize

resource from private banks for financing

of priority sectors which are identified as

the driving forces of the economy.

Following the introduction of the NBE

Bill market, the total NBE bill purchased

by the banking sector reached Birr 21.01

billion at the end of 2017/18.

4.5.3. Bonds Market

During 2017/18 FY, corporate bond purchase

of CBE showed 19.8 percent annual increase

and reached to Birr 57.4 billion.

In the same year, corporate bond redeemed by

City Government of Addis Ababa, Railway

Corporation, EEPCO and regional

government reached Birr 2.94 billion, 781.4

million, Birr 50.0 million, and Birr

36.5 million showing 36.7 percent

annual decline, 894.5 percent

increase, 100 percent rise and 51.2

percent decline respectively (Table

4.16). As a result, total outstanding

bond holdings, registered 22.6

percent annual growth and amounted

0.00

0.50

1.00

1.50

2.00

2.50

3.00

-

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00

300,000.00

350,000.00

An

nu

al w

eig

hte

d y

ield

Val

ue

in M

illio

ns

of

Bir

r

Year

Demand Supply Average Weighted Yield


60


to Birr 291.4 billion. Of the outstanding

corporate bond, EEPCO accounted for 74.2

percent, City government of Addis Ababa

15.5 percent, Railway Corporation 10 percent

and Regional governments 0.2 percent.

Table 4.16: Disbursement, Redemption and Outstanding of Coupon and Corporate Bond of CBE


Particulars

Annual Annual Percentage Change

2015/16 2016/17 2017/18

B/A Actual A B 1. Corporate Bond Purchases by holders 43,023.9 47,951.1 57,448.9 19.8

EEPCO 28,000.0 32,100.0 37,100.00 15.6

Regional governments - -

-

Development Bank of Ethiopia - - - -

City Government of Addis Ababa 12,575.0 12,300.0 9,300.00 (24.39)

Railway Corporation 2,448.9 3,551.1 11,048.91 311.14

Private Sector - 0.0 - -

2. Redemption of Bonds by Clients 6,963.4 4,801.1 3,808.6 -20.7

EEPCO - 0.0 50.00 -

Regional governments 380.6 74.7 36.49 -51.2

Development Bank of Ethiopia 43.4 0.0

-

City Government of Addis Ababa 6,539.4 4,647.80 2,940.70 -36.73

Railway Corporation - 78.6 781.36 894.47

Private Sector - - - -

3. Outstanding Bonds by Clients 188,749.7 237,784.6 291,425.0 22.6

EEPCO 143,100.0 179,300.0 216,350.0 20.7

Regional governments 700.8 625.4 589.0 -5.8

Development Bank of Ethiopia - - - -

City Government of Addis Ababa 29,500.0 38,937.8 45,297.1 16.3

Railway Corporation 15,448.9 18,921.4 29,189.0 54.3

Private Sector

- - - -

Source: Commercial Bank of Ethiopia


61


4.5.4. Inter-bank Money Market

The interbank money market remained

inactive in Ethiopia due to the existence

of excess reserves in the banking system.

Accordingly, there was no transaction in

the inter-bank money market after April

2008. Since its introduction in September

1998, merely twenty three transactions

worth Birr 259.2 million were transacted

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).

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

Borrower Lender

Amount

Borrowed (In

Thousand Birr)

Interest Rate

%

Date of

Transaction

Maturity

Period

Nib International Bank Awash International Bank 7,000.0 11 16/11/00 Overnight

Wegagen Bank Commercial Bank of Ethiopia 10,000.0 8 3/1/2001 5 years

Nib International Bank ,, 10,000.0 8 3/31/2001 3 months

Wegagen Bank ,, 10,000.0 8 3/22/2001 1 year



Nib International Bank ,, 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


62


V. DEVELOPMENTS IN EXTERNAL SECTOR

5.1 Overall Balance of Payments

During 2017/18, the overall balance of

payments recorded USD 201.6 million

deficit against the USD 658.6 million

surplus in the previous year. This was

mainly due to 14.1 and 7.2 percent decline

in net official transfers and net capital

account, respectively.

However, merchandise trade deficit

narrowed by 3.7 percent. Net services

registered USD 140.2 million deficit,

showing strong improvement compared to

the USD 557.6 million deficit recorded

last year. At the same time, net private

transfer increased by 10.7 percent. As a

result, current account deficit (including

official transfers) narrowed to USD 5.3

billion from USD 6.5 billion and its share

in the 2017/18 GDP projection stood at 5.7

percent.



63

Table 5.1: Balance of Payments1 (In Millions of USD)

S/N Particulars

2015/16 2016/17* 2017/18 Percentage Change

A B C B/A C/B

1 Exports, f.o.b. 2,867.7 2,907.5 2,839.8 1.4 -2.3

Coffee 722.7 883.2 839.0 22.2 -5.0

Other 2,145.0 2,024.3 2,000.8 -5.6 -1.2

2 Imports 16,725.2 15,802.6 15,253.4 -5.5 -3.5

Fuel 1,339.0 1,823.6 2,317.3 36.2 27.1

Cereals 1,032.7 554.1 771.7 -46.3 39.3

Aircraft 162.9 150.3 282.3 -7.7 87.8

Imports excl. fuel, cereals, aircraft 14,190.6 13,274.5 11,882.1 -6.5 -10.5

3 Trade Balance (1-2) -13,857.5 -12,895.1 -12,413.5 -6.9 -3.7

4 Services, net -621.5 -557.6 -140.2 -10.3 -74.9

Non-factor services, net -245.3 -61.3 237.1 -75.0 -486.5

Exports of non-factor services 3,196.4 3,331.1 4,219.5 4.2 26.7

Imports of non-factor services 3,441.8 3,392.5 3,982.5 -1.4 17.4

Income, net -376.1 -496.3 -377.3 31.9 -24.0

O/w Gross official int. payment 377.2 465.9 417.5 23.5 -10.4

Dividend, net -12.1 -48.9 -0.1 303.7 -99.9

5 Private transfers, net 6,428.6 5,485.3 6,074.8 -14.7 10.7

o/w: Private Individuals 4,420.3 4,427.5 5,121.4 0.2 15.7

6 Current account balance excluding off. Transfers (3+4+5) -8,050.41 -7,967.5 -6,479.0 -1.0 -18.7

7 Official transfers, net 1,391.1 1,428.3 1,226.3 2.7 -14.1

8 Current account balance including official transfers(6+7) -6,659.3 -6,539.1 -5,252.6 -1.8 -19.7

9 Capital account 6,577.7 6,895.1 6,397.4 4.8 -7.2

Off. Long-term Cap., net 1,631.4 1,418.0 1,631.6 -13.1 15.1

Disbursements 1,733.8 1,534.5 1,794.7 -11.5 17.0

Amortization 102.4 116.6 163.1 13.8 39.9

Other pub. long-term cap. 1,116.8 673.5 937.0 -39.7 39.1

Private sector, long term 450.8 502.8 250.7 11.5 -50.1

Foreign Direct Investment(net) 3,268.69 4,170.80 3,723.44 27.60 -10.7

Sort term Capital 110.0 130.0 -145.2 18.2 -211.7

10 Errors and omissions -749.3 302.7 -1,346.4

11 Overall balance (8+9+10) -830.9 658.6 -201.6

12 Financing 830.9 -658.6 201.6

13 Reserves [ Increase(-), Decrease (+)] 830.9 -658.6 201.6

14 Central Bank (NFA) 975.6 -555.7 -17.3

Asset -152.6 204.7 349.8

Liabilities 1,128.2 -760.4 -367.1

15 Commercial banks (NFA) -144.7 -103.0 218.9

16 Debt Relief

Principal

Interest

Source: NBE Staff Compilation 1 2017/18 data are Preliminary

*Some items are revised



64

Table 5.2: Components of Current Account as Percentage of GDP

Particulars

2015/16 2016/17 2017/18*

Percentage

Change

A B C B/A C/B

Exports 3.9 3.6 3.1 -8.1 -14.0

Imports 22.9 19.6 16.7 -14.4 -15.0

Trade Balance -19.0 -16.0 -13.6 -15.7 -15.3

Net Services -0.9 -0.7 -0.2 -18.7 -77.9

Net Private Transfers 8.8 6.8 6.6 -22.7 -2.5

Current Account Deficit (excluding official transfers) -11.0 -9.9 -7.1 -10.3 -28.4

Current Account Deficit (including official transfers) -9.1 -8.1 -5.7 -11.0 -29.3

Source: NBE Staff Compilation

*GDP is a forecast

Source: NBE Staff Computations

-15000

-10000

-5000

0

5000

10000

In M

illi

on o

f U

SD

Fig. V.1 Trends in Components of Current Account

Net Services Trade Balance

Private Transfers, net Official Transfers, net



65

5.2. Developments in Merchandise Trade

5.2.1 Balance of Trade

Merchandise trade deficit in 2017/18

amounted USD 12.4 billion, depicting

3.7 percent improvement over the

preceding fiscal year. This was mainly

attributed to the reduction of import

bills. As a result, merchandise trade

deficit to GDP ratio declined by 2.4

percentage point and stood at 13.6

percent.

5.2.2 Merchandise Export

Total merchandise export earnings

declined by 2.3 percent over last year

due to lower earnings from export of

coffee (5.0 percent), pulses (3.7 percent),

gold (52.0 percent), live-animals (9.6

percent), chat (3.6 percent) and other

export items (2.9 percent). Hence, the

ratio of merchandise export to GDP

declined to 3.1 percent from 3.6 percent

a year ago.

Specifically, earnings from export of

coffee dropped by 5.0 percent wholly

due to 10.1 percent decline in its

international price despite 5.7 percent

increase in its export volume. As a

result, the share of coffee in total

merchandise export slightly contracted

to 29.5 percent from 30.4 percent

recorded last year.

Earnings from pulses export also

decreased by 3.7 percent to USD 269.5

million solely due to 13.7 percent fall in

international price despite 11.5 percent

growth in export volume. Hence, the

share of pulses in total merchandise

export earnings stood at 9.5 percent

compared to 9.6 percent share a year

earlier.

Similarly, the revenue from export of

gold showed 52 percent reduction and

amounted USD 100.2 million, driven

wholly by 52.8 percent contraction in

volume of export despite a 1.6 percent

rise in international price. Thus, the

share of gold in total merchandise export

shrunk to 3.5 percent from 7.2 percent.

Chat export earnings declined by 3.6

percent and amounted USD 263.2

million. This was wholly due to 3.7



66

percent drop in volume of export. Yet,

its share in total merchandise export

stood 9.3 percent compared to 9.4

percent share recorded last year.

The proceeds from export of live-

animals showed 9.6 percent reduction

resulting from 11.4 percent contraction

in export volume against 2.1 percent rise

in world price. Hence, the revenue from

live-animals accounted for 2.2 percent of

the total merchandise export compared

to 2.3 percent share a year ago.

On the other hand, export revenue from

oilseeds increased by 20.6 percent and

reached USD 423.5 million aided by

15.4 and 4.5 percent rise in international

price and export volume, respectively.

Hence, the share of oilseeds in total

merchandise export improved to 14.9

percent from 12.1 percent recorded last

year.

Similarly, earning from export of leather

& leather products registered 16.1

percent increment owing to 8.7 percent

expansion in export volume and 6.9

percent rise in international price.

Consequently, the share of leather &

leather products in total merchandise

export revenue marginally improved to

4.7 percent from 3.9 percent.

Likewise, earning from export of flower

showed 4.6 percent increment over last

year. This was attributed to

improvements in both export volume

(1.5 percent) and international price (3.1

percent). As a result, the share of flower

in total export earnings marginally rose

to 8.0 percent from 7.5 percent last year.

Receipts from meat & meat products

grew by 3.1 percent on account of 1.0

percent increase in global price and 2.0

percent growth in volume of exports. As

a result, export of meat & meat products

constituted 3.6 percent of the total

merchandise export earnings.

Export earnings from fruits and

vegetables increased by 9.5 percent vis-

à-vis last year driven by 5.8 percent

expansion in export volume and 3.5

percent improvement in international

price. Thus, the share of fruits and

vegetables in total merchandise export

earnings rose to 2.2 percent from 1.9

percent last year.



67

Finally, earnings from electricity export

increased by 14.9 percent vis-à-vis last

year owing to 16.1 percent growth in

export volume despite a 1.1 percent fall

in international price. As a result, export

of electricity accounted for 3 percent of

the total merchandise export earnings

compared to 2.5 percent share last year.

Table 5.3 Values of Major Export Items

(In millions of USD)

Particulars 2015/16 2016/17 2017/18

Percentage

Change

A %share B %share C %share B/A C/B

Coffee 722.7 25.2 883.2 30.4 839.0 29.5 22.2 -5.0

Oilseeds 477.2 16.6 351.0 12.1 423.5 14.9 -26.4 20.6

Leather and Leather products 115.3 4.0 114.0 3.9 132.4 4.7 -1.1 16.1

Pulses 232.4 8.1 279.9 9.6 269.5 9.5 20.5 -3.7

Meat & Meat Products 96.4 3.4 98.7 3.4 101.7 3.6 2.3 3.1

Fruits & Vegetables 53.7 1.9 56.1 1.9 61.4 2.2 4.5 9.5

Live Animals 147.8 5.2 67.6 2.3 61.1 2.2 -54.2 -9.6

Chat 262.5 9.2 273.0 9.4 263.2 9.3 4.0 -3.6

Gold 290.7 10.1 208.8 7.2 100.2 3.5 -28.2 -52.0

Flower 225.3 7.9 218.5 7.5 228.6 8.0 -3.0 4.6

Electricity 31.5 1.1 73.4 2.5 84.3 3.0 133.0 14.9

Others 212.3 7.4 283.2 9.7 275.0 9.7 33.4 -2.9

Total Export 2867.7 100.0 2907.5 100.0 2839.8 100.0 1.4 -2.3

Total Export Excluding

Electricity 2836.3

2834.1

2755.6

-0.1 -2.8

Source: Ethiopian Revenue and Customs Authority and Ethiopian Electric Power



68

0

200

400

600

800

1000In

Mill. o

f U

SD

Fig.V.2. Foreign Exchange Earnings from Selected Export

Items

Coffee Oil Seeds Leather and Leather Products Pulses Flower Chat Gold

Source: NBE Staff Computation


Coffee

29.5%

Oil Seeds

14.9%

Leather and Leather

products

4.7%

Pulses

9.5%

Flower

8%

Chat

9.3%

Gold

3.5% others

9.7%

Fig.V.3 Export Share of Selected Commodities



69

Table 5.4: Volume of Major Exports

(In millions of kg unless stated otherwise)

Particulars


A B C B/A*100-

100

C/B*100-

100

Coffee 198.7 225.7 238.6 13.6 5.7

Oilseeds 436.6 333.5 348.5 -23.6 4.5

Leather and Leather

products 6.0 5.9 6.4 -1.6 8.7

Pulses 375.4 392.7 438.1 4.6 11.5

Meat & Meat Products 19.0 19.6 20.0 3.2 2.0

Fruits & Vegetables 167.1 178.6 189.0 6.9 5.8

Live Animals 77.8 36.1 31.9 -53.6 -11.4

Chat 47.0 48.8 47.0 3.9 -3.7

Gold(in mill of grams) 8.6 6.0 2.8 -30.4 -52.8

Flower 50.6 49.4 50.1 -2.5 1.5

Electricity(in mill of

kwh) 511.3 1305.5 1516.2 155.3 16.1

Source: Ethiopian Revenue and Customs Authority and Ethiopian Electric Power

0

50

100

150

200

250

300

350

400

450

500

In M

n o

f K

g

Fig.V. 4. Export Volume of Selected Commodities

Coffee Oil Seeds Leather and Leather Products Pulses Flower Chat Gold




70

Table 5.5: Unit Value of Major Export Items

(In USD/kg unless stated otherwise)

Particulars 2015/16 2016/17 2017/18 Percentage Change

A B C B/A*100-100 C/B*100-100

Coffee 3.6 3.9 3.5 7.5 -10.1

Oilseeds 1.1 1.1 1.2 -3.7 15.4

Leather and Leather products 19.3 19.4 20.7 0.5 6.9

Pulses 0.6 0.7 0.6 15.1 -13.7

Meat & Meat Products 5.1 5.0 5.1 -0.8 1.0

Fruits & Vegetables 0.3 0.3 0.3 -2.2 3.5

Live Animals 1.9 1.9 1.9 -1.3 2.1

Chat 5.6 5.6 5.6 0.1 0.1

Gold 33.9 35.0 35.5 3.2 1.6

Flower 4.5 4.4 4.6 -0.5 3.1

Electricity 0.1 0.1 0.1 -8.8 -1.1

Source: Ethiopian Revenue and Customs Authority

0

10

20

30

40

50

60

US

D/k

g, fo

r G

old

in

US

D/g

m

Fig.V. 5. Unit Value of Selected Export Commodities

Coffee Oil Seeds Leather and Leather Products Pulses Chat Gold


5.2.3. Import of Goods

Total merchandise import bills amounted

to USD 15.3 billion depicting 3.5 percent

annual decline. This was mainly on

account of lower import of capital,

consumer and semi-finished goods. As a

result, total import to GDP ratio shrunk to

16.7 percent from 19.6 percent last year.

Import bills of capital goods dropped by

12.7 percent driven by lower import of

transport goods (20.9 percent),



71

agricultural goods (32.1 percent) and

industrial goods (9.7 percent). Thus, the

share of capital goods in total

merchandise import bills fell to 34.5

percent from 38.2 percent a year ago.

Import bills of consumer goods amounted

to USD 4.7 billion showing 3.9 percent

deceleration over last year owing to lower

import of durable consumer goods (20.9

percent) against the increase in non-

durable consumer goods (5.2 percent). As

a result, the share of consumer goods in

total merchandise import bills remained

nearly at 31 percent.

Similarly, semi-finished goods import

slowed down by 3.5 percent to USD 2.5

billion and its share in the total

merchandize import remained unchanged

at 16.6 percent. However, import of

fertilizer, increased by 30.0 percent over

last year.

On the other hand, import of raw

materials increased by 9.8 percent

relative to the preceding year and

accounted for 0.9 percent of the total

merchandise import.

Fuel import bills also surged by 27.1

percent and amounted to USD 2.3 billion.

This was attributed to the increase in both

international price (16.1 percent) and

import volume (9.5 percent). As a result,

fuel import accounted for 15.2 percent of

the total merchandise import compared to

11.5 percent last year same period.



72

Table 5.6: Value of Imports by End Use

(In Millions of USD)

Source: Ethiopian Revenue and Customs

Authority and Ethiopian petroleum Enterprise

5.2.4 Direction of Trade

5.2.4.1 Export of Goods

The major export destinations for

Ethiopian goods were Asia, Europe and

Africa. Asia accounted for 39.8 percent

of the total exports. China, mainland was

the largest market for Ethiopia’s export

with a 21.3 percent share in total export

earnings from Asia, followed by Saudi

Arabia (16.8 percent), United Arab

Emirates (9.8 percent), Israel (8.6

percent), Japan (8.0 percent), India (5.5

percent), South Korea (4.1 percent),

Yemen (4.1 percent), Indonesia (3.4

percent) and Hong Kong (1.5 percent).

All these countries accounted for 83.1

percent of Ethiopia’s total export to

Asia.

Categories

2015/16 2016/17 2017/18 Percentage change

A % share B % share C % share B/A C/B

Raw Materials 149.3 0.9 125.6 0.8 138.0 0.9 -15.8 9.8

Semi-finished Goods 2,895.5 17.3 2,620.6 16.6 2,527.8 16.6 -9.5 -3.5

Fertilizers 430.0 2.6 367.9 2.3 478.5 3.1 -14.4 30.0

Fuel 1,339.0 8.0 1,823.7 11.5 2,317.3 15.2 36.2 27.1

Petroleum Products 1,280.1 7.7 1,743.7 11.0 2,225.3 14.6 36.2 27.6

Others 58.9 0.4 79.9 0.5 92.0 0.6 35.7 15.1

Capital Goods 6,829.4 40.8 6,032.1 38.2 5,269.1 34.5 -11.7 -12.7

Transport 1,535.6 9.2 1,429.7 9.0 1,130.9 7.4 -6.9 -20.9

Agricultural 83.4 0.5 75.8 0.5 51.5 0.3 -9.1 -32.1

Industrial 5,210.4 31.2 4,526.7 28.6 4,086.7 26.8 -13.1 -9.7

Consumer Goods 5,264.3 31.5 4,898.3 31.0 4,707.0 30.9 -7.0 -3.9

Durables 1,567.3 9.4 1,707.8 10.8 1,351.7 8.9 9.0 -20.9

Non-durables 3,697.0 22.1 3,190.5 20.2 3,355.3 22.0 -13.7 5.2

Miscellaneous 247.8 1.5 302.3 1.9 294.2 1.9 22.0 -2.7

Total Imports 16,725.2 100.0 15,802.7 100.0 15,253.4 100.0 -5.5 -3.5



73

Europe accounted for 28.7 percent of

Ethiopia’s total export revenue,

Netherlands taking a 23.5 percent share,

followed by Germany (22.2 percent),

Switzerland (12.4 percent), Belgium (8.9

percent), Italy (7.0 percent), Turkey (5.9

percent), United Kingdom (5.5 percent),

France (3.9 percent) and Russia (2.2

percent). These countries together had a

91.6 percent share of Ethiopia’s total

exports to Europe.

On the other hand, about 20.9 percent of

Ethiopia’s export earnings originated

from markets in Africa, mainly Somalia

(38.5 percent), Djibouti (21.1 percent),

Sudan (17.4 percent), Kenya (7.0

percent), Nigeria (2.4 percent), Egypt

(1.7 percent) and South Africa (1.4

percent) which altogether accounted for

89.6 percent of the total exports to

Africa.

America accounted for 9.9 percent of

Ethiopia’s total export earning, of which

90.1 percent was from exports to the

United States and 6.2 percent to Canada.

20.9%

28.7%

9.9%

39.8%

0.8%

Fig.V.6 Export by Destination

Africa

Europe

America

Asia

Oceania



74


5.2.4.2 Import of Goods

During 2017/18, Asia accounted for 64.2

percent of the total imports of Ethiopia. The

major imports from Asia originated from

China (39.3 percent), Kuwait (12.6 percent),

India (10.1 percent), U.A.E (5.4 percent),

Japan (5.3 percent), Saudi-Arabia (3.6

percent), Malaysia (3.3 percent), South Korea

(2.4 percent), Indonesia (2.3 percent) and

Thailand (1.8 percent) whose combined share

was 86.3 percent.

Imports from Europe accounted for 19.3

percent of Ethiopia’s total imports with the

major countries, namely Turkey (20.1

percent), Italy (17.5 percent), Germany (9.4

percent), United Kingdom (7.9 percent),

Netherlands (7.8 percent), France (6.2

percent), Ukraine (4.3 percent), Belgium (3.9

percent), Russia (3.1 percent) and Rumania

(3.0 percent), these countries jointly

accounted for 83.3 percent of Ethiopia’s total

imports from Europe.

Imports from America accounted for 9.4

percent of the total import bill, of which the

share of United States was 83.7 percent

followed by Brazil and Canada by 9.8 percent

and 5.1 percent, respectively.

Africa accounted for about 7.0 percent of

Ethiopia’s total merchandise import. The

major countries of origin were Egypt (27.6

percent), Morocco (27.1 percent), South

Africa (27.0 percent), Sudan (8.8 percent)

Nigeria (3.6 percent) and Kenya (3.2 percent),

which altogether constituted 97.2 percent of

the total imports from the continent.



75


5.3 Services and Transfers

5.3.1 Services

In 2017/18, net services account recorded

USD 140.2 million deficit, which was

narrower than the USD 557.6 million

deficit recorded a year ago.

This was largely due to the surplus in net

travel against the deficit recorded last

year, higher surplus in transport services

(35.2 percent), coupled with

improvements in the deficits of other

services and investment income.

7.0 %

64.2%

19.3%

9.4%

0.09%

Fig: V.7. Import by Origin

Africa

Asia

Europe

America

Oceania



76

Table 5.7 Services Accounts (In Millions of USD)

Particulars

2015/16 2016/17 2017/18

A B C D=B/A E=C/B

1 Investment Income (2+5) -376.1 -496.3 -377.3 31.9 -24.0

2 Interest, net (3-4) -364.0 -447.4 -377.2 22.9 -15.7

3 Credit 13.1 18.5 40.3 41.1 117.4

4 Debit 377.2 465.9 417.5 23.5 -10.4

5 Dividend, net -12.1 -48.9 -0.1 303.7 -99.9

6 NON-FACTOR SERVICES, net (7-8) -245.3 -61.3 237.1 -75.0 -486.5

7 Exports of non-factor services

3,196.4

3,331.1

4,219.5 4.2 26.7

Travel 376.8 340.4 749.0 -9.7 120.0

Transport 1

2,228.6

2,304.0 2919.6 3.4 26.7

Gov't 2 418.2 460.3 295.3 10.1 -35.9

Other 3 172.8 226.4 255.6 31.0 12.9

8 Imports of non-factor services

3,441.8

3,392.5

3,982.5 -1.4 17.4

Travel 442.5 382.9 475.3 -13.5 24.1

Transport 1 1697.5 1921.7 2402.8 13.2 25.0

Gov't 2 58.1 75.5 79.2 29.9 4.9

Other 3 1243.6 1012.4 1025.3 -18.6 1.3

9 Net Services (10+11+12+13+14) -621.5 -557.6 -140.2 -10.3 -74.9

10 Travel -65.7 -42.5 273.7 -35.4 -744.7

11 Transport 531.1 382.3 516.9 -28.0 35.2

12 Gov't 360.1 384.8 216.1 6.9 -43.8

13 Other -1070.8 -786.0 -769.6 -26.6 -2.1

14 Investment Income -376.1 -496.3 -377.3 31.9 -24.0

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

1/ Includes Ethiopian Airlines receipts and payments

2/ Includes transactions with Embassies and international organizations such as UN-ECA, AU, EU, IMF and WB

3/ Includes communication, construction, insurance, financial, information, other business

5.3.2 Unrequited Transfers

During 2017/18, net transfers showed

5.6 percent annual increment wholly

driven by 10.7 percent increase in net

private transfers. However, net official

transfers dropped by 14.1 percent during

the same year.



77

Table 5.8 Unrequited Transfers (In Millions of USD)

S/N Particulars

2015/16 2016/17 2017/18 Percentage

Change

A % share B % share C %

share B/A C/B

1 Private Transfers

6,428.6

82.2

5,485.3

79.3

6,074.8

83.2 -14.7 10.7

1.1 Receipts

6,459.6

82.0

5,544.8

79.1

6,150.9

83.1 -14.2 10.9

NGO's

2,039.2

25.9

1,117.2

15.9

1,029.5

13.9 -45.2 -7.9

Cash

1,207.7

15.3

922.4

13.2

775.5

10.5 -23.6 -15.9

Food

831.5

10.6

194.8

2.8

254.0

3.4 -76.6 30.4

Other

Private individuals

4,420.3

56.1

4,427.5

63.1

5,121.4

69.2 0.2 15.7

1.2 Payments

31.0

56.5

59.5

60.9

76.2

76.2 91.6 28.1

2 Official Transfers

1,391.1

17.8

1,428.3

20.7

1,226.3

16.8 2.7 -14.1

2.1 Receipts

1,415.0

18.0

1,466.5

20.9

1,250.1

16.9 3.6 -14.8

Cash

1,159.4

14.7

920.0

13.1

1,160.0

15.7 -20.6 26.1

Food

Other

255.6

546.5

90.1 113.8 -83.5

2.2 Payments

23.9

43.5

38.1

39.1

23.8

23.8 59.4 -37.6

Total Receipts

7,874.6

100.0

7,011.2

100.0

7,401.1

100.0 -11.0 5.6

Total Payments 55.0 100.0 97.6 100.0 100.0 100.0 77.6 2.4

3 Net Transfers

7,819.6

100.0

6,913.6

100.0

7,301.1

100.0 -11.6 5.6

Source: National Disaster Risk Management Commission, MoFEC and NBE

5.4. Current Account

The deficit in current account balance

including official transfers narrowed to

USD 5.3 billion from USD 6.5 billion last

year, due to the improvement in trade

balance, in net services deficit and strong

increment in net private transfers.



78

5.5 Capital Account

The capital account registered USD 6.4

billion surplus which is 7.2 percent lower

than that of last year, owing to the

reduction in private sector long term capital

(50.1 percent) and foreign direct investment

(10.7 percent) together with short term

capital from surplus to deficit. However,

official long term net capital and other

public long term capital surged by 15.1 and

39.1 percent, respectively.

5.6 Changes in Reserve Position

Net foreign assets of the banking system

recorded a reserve decline of USD 201.6

million, due to USD 218.9 million draw

down in net foreign assets of the

commercial banks. This was more than the

USD 17.3 million increase in net foreign

asset of National Bank of Ethiopia. Thus,

the gross international reserves sufficiently

covered 2.1 months of imports of goods

and non-factor services.

5.7 External Debt

Ethiopia’s external debt stock reached

USD 26.4 billion in 2017/18, depicting

11.3 percent annual growth largely due to

higher debt owed to multilateral and

commercial creditors. As a result, the

country’s external debt stock to GDP ratio

stood at 28.9 percent. Its ratio to total

receipts from export of goods and non-

factor services slightly decline to 3.7 from

3.8 a year ago. Commercial debt stock

reached USD 7.3 billion, showing a 13.7

percent annual increase and constituted

27.7 percent of the total debt stock. Of the

total debt stock, 39.7 percent was owed to

multilateral and 32.6 percent to bilateral

creditors. The country’s external debt

burden as measured by debt services to

export of goods and non-factor services

ratio marginally declined to 18.4 percent

from 20.6 percent a year earlier.


79


Table 5.9: External Public Debt* (In Millions of USD)

Particulars

2015/16 2016/17 2017/18 Percentage

Change

A B C D=B/A E=C/B

Annual Debt

3,523.7

2,946.4

3,483.4 -16.4 18.2

Debt Stock

21,665.2

23,740.9

26,428.0

9.6

11.3

Multilateral

7,719.2

9,104.9

10,490.1

18.0

15.2

Bilateral

7,473.1

8,207.5

8,626.6

9.8

5.1

Commercial

6,472.9

6,428.5

7,311.3 -0.7 13.7

Debt Service

1,134.0

1,288.1

1,301.4

13.6

1.0

Principal repayments

775.5

854.6

914.8

10.2

7.0

Interest Payments

358.5

433.5

386.5

20.9 -10.8

Debt Stock to GDP Ratio (in %)1

29.7 29.5 28.9 -0.7 -2.0 Debt stock to export of goods and non-

factor services

3.6 3.8 3.7 6.5 -1.6

Receipt from Goods & Non-factor Services

6,064.2

6,238.6

7,059.4

2.9

13.2

Debt service ratio (In percent )2 18.7 20.6 18.4 10.4 -10.7

Arears

Principal

Interest

Relief

Principal

Interest Source: MoFEC and NBE

1/ GDP is a forecast

2/ Ratio of debt service to receipts from export of goods and non-factor services

*2015/16 and 2016/17 data are revised according to MoFEC statistics 2017/18 data are Preliminary


80


5.8. Developments in Foreign Exchange Markets

5.8.1. Developments in Nominal Exchange Rate

During 2017/18, the weighted average

exchange rate of Birr in the inter-bank

foreign exchange market depreciated by

16.5 percent on annual bases and reached

Birr 26.1082/USD (Table 5.10).

Table 5.10 Inter-Bank Exchange Rates of Birr per USD

Period

Average

Weighted

Rate

Amount Traded in millions of

USD

Number of Trades

Total

o/w Among

CBs Total

o/w Among

CBs

2015/16 21.1059 12.65 0.0 253.0 0.0

Qtr. I 20.6965 3.15 0.00 63.00 0.00

Qtr. II 20.9497 3.25 0.00 65.00 0.00

Qtr. III 21.2059 3.10 0.00 62.00 0.00

Qtr. IV 21.5713 3.15 0.00 63.00 0.00

2016/17 22.4137 12.55 0.0 251.0 0.0

Qtr. I 21.9262 3.10 0.0 62.0 0.0

Qtr. II 22.2228 3.25 0.0 65.0 0.0

Qtr. III 22.5832 3.15 0.0 63.0 0.0

Qtr. IV 22.9225 3.05 0.0 61.0 0.0

2017/18 26.1082 12.50 0.00 250.0 0.0

Qtr. I 23.2488 3.10 0.00 62.00 0.00

Qtr. II 26.7099 3.20 0.00 64.00 0.00

Qtr. III 27.2250 3.15 0.00 63.00 0.00

Qtr. IV 27.2493 3.05 0.00 61.00 0.00 Source: NBE, Foreign Exchange Monitoring & Reserve Management Directorate and staff compilation

In the retail foreign exchange market, the

average buying and selling rates of the

Birr at forex bureaus both depreciated by

16.7 percent and 16.6 percent,

respectively, with spread margin of 1.91

percent.


81


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

Currency


A B C B/A C/B

Pound Sterling 1.3433 1.2965 1.4065 -3.48 8.48

Swedish Kroner 0.1175 0.1173 0.1196 -0.17 1.97

Djibouti Franc 0.0056 0.0056 0.0056 0.00 0.19

Swiss Franc 1.0198 1.0429 1.0457 2.27 0.27

Saudi Riyal 0.2666 0.2666 0.2667 0.00 0.02

UAE Dirhams 0.2723 0.2722 0.2722 -0.04 0.01

Canadian Dollar 0.7696 0.8106 0.7744 5.33 -4.47

Japanese Yen 0.0097 0.0089 0.0094 -8.25 5.52

Euro 1.1083 1.1405 1.2313 2.91 7.96

SDR 1.3954 1.3876 1.4576 -0.56 5.04

Source: Staff Compilation

In 2017/18, the end period mid-market

exchange rate of the US dollar

depreciated against Pound Sterling (8.5

percent), Euro (8.0 percent), Japanese

Yen (5.5 percent), SDR (5.0 percent),

Swedish Kroner (2.0 percent), Swiss

Franc (0.3 percent), Djibouti Franc (0.2

percent), Saudi Riyal (0.02 percent) and

UAE Dirham’s (0.01 percent), whereas it

appreciated against Canadian Dollar (4.5

percent). (Table 5.11)


82


Table 5.12: End Period Mid-Market Rates (Birr per Unit of Foreign Currency)

Currency


A B C B/A C/B

USD 21.9094 23.2237 27.3761 6.00 17.88

Pound 29.4309 30.1095 38.5045 2.31 27.88

Swedish Kroner 2.5751 2.7248 3.2746 5.81 20.18

Djibouti Franc 0.1229 0.1303 0.1536 6.02 17.88

Swiss Franc 22.3429 24.2191 28.6271 8.40 18.20

Saudi Riyal 5.8416 6.1923 7.2999 6.00 17.89

UAE Dirhams 5.9650 6.3222 7.4525 5.99 17.88

Canadian Dollar 16.8612 18.8260 21.1988 11.65 12.60

Japanese Yen 0.2135 0.2061 0.2571 -3.47 24.75

Euro 24.2822 26.4866 33.7082 9.08 27.27

SDR 21.9094 32.2251 39.9034 47.08 23.83


The Birr also depreciated vis-à-vis most

international currencies, particularly,

Pound Sterling (27.9 percent), Euro (27.3

percent), Japanese Yen (24.8 percent),

SDR (23.8 percent), Swedish Kroner

(20.2 percent), Swiss Franc (18.2 percent)

and Canadian Dollar (12.6 percent). In

addition, the Birr depreciated by 17.9

percent against USD, Djibouti Franc,

Saudi Riyal and UAE Dirham. (Table 5.

12)

5.8.2. Movements in Real Effective Exchange Rate

The real effective exchange rate (REER)

of the Birr has been appreciating since

2010/11 as a result of higher domestic

inflation relative to that of the country’s

major trading partners. During 2017/18,

the REER however, depreciated by 5.9

percent due to the devaluation measure

taken in October 2017. (Table 5.13)

Similarly, the nominal effective exchange

rate (NEER) of the Birr has been

depreciated by 10.9 percent on annual

basis.


83


Table 5.13: Trends in Real and Nominal Effective Exchange Rates

Fiscal Year REERI NEERI

Percentage Change

REERI NEERI

2010/11 122.8 42.9 1.33 -23.5

2011/12 139.4 43.2 13.49 0.7

2012/13 140.2 42 0.59 -2.7

2013/14 140.8 40.7 0.44 -3.3

2014/15 157.6 42.3 11.93 4

2015/16 159.3 41.2 1.1 -2.7

2016/17 171.9 41.8 7.9 1.6

2017/18 161.8 37.2 -5.9 -10.9

Source:NBE Staff Compilation

An increase in REERI and NEERI indicates appreciation and vice versa.

Where: REERI = Real Effective Exchange Rate Index

NEERI = Nominal Effective Exchange Rate Index

5.8.3. Foreign Exchange Transactions

During 2017/18, USD 12.5 million was

traded in the inter-bank foreign exchange

market which was 0.4 percent lower than

last year. All the foreign exchange traded

in the inter-bank market was supplied by

National Bank of Ethiopia (Table 5.10).

Meanwhile, forex bureaus of commercial

banks purchased foreign exchange to the

tune of USD 320.0 million showing a 0.6

percent marginal increase over the

preceding year. Their foreign exchange

sales rose by 40.2 percent to USD 270.2

million (Table 5.14).


84


Table 5.14: Foreign Exchange Transactions by Forex Bureaus of Commercial Banks

(In Millions of USD)

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 262.02 93.50 242.05 84.48 239.76 151.52 -0.95 79.36

Bank of Abyssinia 5.06 9.64 6.32 11.32 2.89 14.69 -54.24 29.75

Dashen Bank 16.87 30.34 12.97 20.59 14.12 20.77 8.88 0.89

Awash International Bank 6.28 10.71 4.85 16.70 5.44 16.31 12.16 -2.34

Construction & Business Bank 3.09 1.72 0.00 0.00 0.00 0.00

Wegagen Bank 3.77 5.99 4.16 5.61 11.44 8.30 175.11 47.98

United Bank 9.96 14.50 6.03 13.10 10.00 16.15 65.76 23.27

Development Bank 0.03 0.37 0.00 0.28 0.00 0.33 17.34

Nib International Bank 1.40 5.27 1.35 7.60 2.29 4.83 69.43 -36.46

Lion International Bank 19.04 4.77 25.59 5.61 8.32 3.73 -67.50 -33.58

Oromia International Bank 9.01 5.09 3.46 5.02 6.50 7.40 87.92 47.47

Zemen Bank 0.65 6.19 0.72 11.74 0.37 8.41 -48.85 -28.34

Cooperative Bank of Oromia 0.67 1.67 0.75 2.17 0.95 5.19 26.57 139.16

Buna International Bank 0.54 1.17 4.25 2.39 8.99 3.09 111.58 29.29

Birhan International Bank 0.14 0.47 0.68 2.38 0.98 4.34 43.44 82.25

Abay Bank 0.07 1.00 1.38 1.34 1.82 1.30 32.18 -2.99

Addis International Bank 0.78 1.55 3.20 1.55 4.37 1.90 36.63 22.62

Debub Global Bank 0.16 0.36 0.07 0.29 0.17 0.24 141.39 -18.60

Enat Bank 0.32 0.25 0.25 0.52 1.62 1.70 547.96 226.77

Total 339.86 194.57 318.09 192.67 320.0 270.2 0.6 40.2

Average Exchange Rate 21.091 21.5044 22.41 22.85 26.1 26.6 16.7 16.6



85


VI.GENERAL GOVERNMENT FINANCE

6.1. General

During 2017/18 F.Y, the overall fiscal

operation of the general government

resulted in a deficit of Birr 66.6 billion.

It was greater than Birr 60.1 billion

(including grants) recorded in last year

(Table 6.4).

Total revenue (including grants) was

Birr 287.5 billion and depicted a 6.9

percent annual growth. Its performance

was 85 percent of the annual plan (Table

6.2). However, revenue to GDP ratio

decreased to 12.2 percent when

compared with 14.2 percent of last year

(Table 6.1).

Meanwhile, General government

expenditure reached Birr 354.2 billion

and went up by 7.6 percent compared to

a year ago due to rose in current

expenditure (Table 6.3). Hence, the ratio

of expenditure to GDP reached 16.1

percent compared with 18.2 percent a

year earlier (Table 6.1).

Table 6.1 Measuring Fiscal Sustainability(In Percent) Fiscal

Year PD/GDP IP/RR Debt/GDP R(Debt) R(GDP) Exp/GDP Rev/GDP R(OR)

2004/05 -4.5 6.5 38.2 29.4 22.9 23.5 14.7 11.1

2005/06 -4.7 5.4 37.8 22.3 23.6 22.5 15.0 26.3

2006/07 -3.7 5.5 36.3 25.5 30.6 20.9 12.8 11.6

2007/08 -2.9 3.8 32.5 29.3 44.4 19.1 12.1 36.7

2008/09 -0.9 3.2 26.9 11.5 35.1 17.4 12.1 34.8

2009/10 -1.3 2.9 27.5 17.1 14.2 18.8 14.2 34.1

2010/11 -1.6 2.8 26.8 29.8 33.4 18.6 13.7 28.3

2011/12 -1.2 2.2 25.6 39.5 46.1 16.8 13.9 48.8

2012/13 -2.0 2.4 27.4 23.4 15.5 18.1 14.6 20.6

2013/14 -2.6 2.6 28.6 28.4 21.1 17.5 13.8 17.8

2014/15 -2.5 2.9 31.8 31.1 16.6 18.6 15.1 27.7

2015/16 -1.9 3.1 32.1 24.6 23.6 17.9 15.1 23.6

2016/17 -3.3 3.2 34.9 28.7 18.2 18.2 14.2 11.3

2017/18 3.0 4.3 35.6 24.3 21.9 16.1 12.2 5.1

Source: Staff Computation

PD = Primary Deficit

IP/RR = Share of interest payments in Recurrent revenue

Debt/GDP = Ratio of Domestic Debt to GDP

R(Debt) = Growth rate of Domestic Debt

R(GDP) = Growth rate of GDP at current market price

Exp/GDP = Ratio of General Government Expenditure to GDP

Rev/GDP = Ratio of General Government Revenue to GDP

R(OR) = Growth rate of ordinary Revenue


86


6.2. Revenue and Grants

In the review year, Birr 287.5 billion

total revenue and grants collected. It was

85 percent of annual budget. Its GDP

ratio was 13.1 percent relative to 14.9

percent in 2016/17.

About 87.2 percent of the total revenue

was generated through taxes which

surged by 11.9 percent and was Birr

235.2 billion. The rose was due to

improved income from direct and

indirect taxes by 19.9 and 6.9 percent

respectively. Direct taxes contributed

41.5 percent of total tax revenue while

indirect tax was 58.5 percent.

Non-tax revenue during the review

period was Birr 34.4 billion and showed

a down ward movement by a 26 percent

over last year same period due to decline

in reimbursement & property sales,

government investment and others

(Table 6.2).

Grants were Birr 17.9 billion and 43.6

percent higher than a year earlier.


87


0

50000

100000

150000

200000

250000

300000

In m

illi

on

Bir

r

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


88


Table 6. 2: Summary of General Government Revenue by Component (In Millions of Birr)

Particulars

2016/17 2017/18 Percentage

Change Performance Rate [A] [B] [C]

[C/A] Pre. Act Revised

Revenue Plan Pre. Act [C/B]

Total Revenue and Grants 269,105.9 338,280.0 287,562.1 6.9 85.0

Total Revenue 1/ 256,629.0 321,103.3 269,648.2 5.1 84.0

Tax Revenue 210,135.9 266,609.4 235,229.5 11.9 88.2

1. Direct Tax Revenue 81,410.4 101,768.6 97,646.0 19.9 95.9

1.1 Income and Profit Taxes 78,321.7 98,632.1 94,837.3 21.1 96.2

Personal 26,577.5 30,896.0 34,810.6 31.0 112.7

Business 42,260.2 52,146.7 44,732.7 5.9 85.8

Others 2/ 9,484.0 15,589.3 15,294.1 61.3 98.1

1.2 Rural Land Use Fee 410.9 486.1 376.3 (8.4) 77.4

1.3 Urban Land Use Fee 2,677.8 2,650.4 2,432.4 (9.2) 91.8

2. Indirect Taxes 128,725.4 164,840.7 137,583.5 6.9 83.5

2.1 Domestic Taxes 62,523.1 78,503.1 67,172.4 7.4 85.6

2.2 Foreign Trade Taxes 66,202.4 86,337.7 70,411.0 6.4 81.6

Import 66,202.4 86,337.7 70,411.0 6.4 81.6

3. Non-Tax Revenue 46,493.2 54,493.9 34,418.7 (26.0) 63.2

3.1 Charges and Fees 3,567.8 2,697.3 4,182.5 17.2 155.1

3.2 Govt. Invt. Income 3/ 14,746.0 17,210.9 12,222.8 (17.1) 71.0

3.3 Reimb. And Property Sales 145.9 9,986.6 121.2 (16.9) 1.2

3.4 Sales of Goods & Services 4,956.9 5,679.5 5,282.4 6.6 93.0

3.5 Others 4/ 23,076.6 18,919.7 12,609.8 (45.4) 66.6

4. Grants 12,476.9 17,176.7 17,913.9 43.6 104.3

Source: Ministry of Finance and Economy 1/ It does not include privatization proceeds 2/ others include rental income tax, withholding income tax on imports, interest income tax, capital gains tax,

agricultural income and other income 3/ Government investment income includes: residual surplus, capital charge, interest payments and state

dividend. 4/other extraordinary, miscellaneous and pension contribution


89


6.3. Expenditure

Total general government expenditure

reached Birr 354.2 billion and was 7.6

percent higher than a year ago as a result

of rose in current expenditure by 19.1

percent (Table 6.3).

Current expenditure stood at Birr 210.5

billion and Its share in total expenditure

became 59.4 percent.

Capital expenditure was Birr 143.7

billion and depicted 5.8 percent annual

decrease and its share in total

expenditure was 40.6 percent.

In summary, the performance of general

government expenditure was 85.1

percent of the annual budget.

.


90


Table 6.3: Summary of General Government Expenditure (In Millions of Birr)

Particulars

2016/17 2017/18

Percentage

Change Performance

Rate [A] [B] [C]

[C/A] Pre. Act

Revised

Expenditure Plan Pre. Act [C/B]

Total Expenditure 329,286.8 416,120.8 354,205.3 7.6 85.1

1. Current Expenditure 176,703.0 227,108.0 210,470.2 19.1 92.7

General Services 53,697.4 54,203.3 62,715.7 16.8 115.7

Economic Services 23,536.3 30,787.4 26,503.3 12.6 86.1

Social Services 86,659.4 92,624.3 9,7845.8 12.9 105.6

Interest and Charges 8,248.1 12,051.4 11,570.7 40.3 96.0

Others (miscellaneous) 4,561.9 37,441.5 11,834.9 159.4 31.6

2. Capital Expenditure 152,583.8 189,012.8 143,735.1 (5.8) 76.0

Economic Development 98,781.3 119,557.6 89,717.1 (9.2) 75.0

Social Development 39,869.0 45,711.1 37,477.1 (6.0) 82.0

General Development 13,933.6 23,744.1 16,540.9 18.7 69.7

3. Special programs

Source: Ministry of Finance and Economy

Note: 1/ Includes mapping, science and technology, public buildings, etc


91


0

50000

100000

150000

200000

250000

300000

350000

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Fig. VI.2: Trends in General Government Expenditure by Component

Total Expenditure Current Expenditure Capital Expenditure


92


0.0

5.0

10.0

15.0

20.0

25.0

30.0

1996/9

7

1997/9

8

1998/9

9

1999/0

0

2000/0

1

2001/0

2

2002/0

3

2003/0

4

2004/0

5

2005/0

6

2006/0

7

2007/0

8

2008/0

9

2009/1

0

2010/1

1

2011/1

2

2012/1

3

2013/1

4

2014/1

5

2015/1

6

2016/1

7

2017/1

8

In P

ercen

t o

f G

DP

Fiscal Year

Fig.VI.3 Trends in General Government Expenditure and Revenue (% of GDP)

Expenditure/GDP

Revenue/GDP


93


6.4 Deficit Financing

General government budgetary operation

including grants resulted in a fiscal

deficit of Birr 66.6 billion during

2017/18.

It was 10.7 percent higher than a year

earlier.

Primary deficit as percentage of GDP

was 3.0 percent and was financed by net

external borrowing, net domestic

borrowing, privatization receipts and

others & residuals while there was

repayment to the banking System.


94


Table 6.4 Summary of General Government Finance (In Millions of Birr)

Particulars

2016/17 2017/18

Percentage

Change Performance Rate [A] [B] [C]

[C/A] Pre. Act Revised Budget Pre. Act [C/B]

Revenue and Grants 269,105.9 338,280.0 287,562.1 6.9 85.0

Revenue 256,629.0 321,103.3 269648.2 5.1 84.0

Grants 12,476.9 17,176.7 17913.9 43.6 104.3

Total Expenditure 329,286.8 416,120.8 354,205.3 7.6 85.1

Current Expenditure 176,703.0 227,108.0 210470.2 19.1 92.7

Capital Expenditure 152,583.8 189,012.8 143735.1 (5.8) 76.0

Overall Surplus/ Deficit

(Including Grants) (60,180.9) (77,840.8) (66,643.2) 10.7 85.6

(Excluding Grants) (72,657.8) (95,017.5) (84,557.1) 16.4 89.0

Total Financing 60,180.9 77,841.0 66,643.2 10.7 85.6

Net External Borrowings 28,952.5 24,557.2 28134.7 (2.8) 114.6

Gross Borrowing 31,621.5 28,878.5 32449.7 2.6 112.4

o/w Special Programs

Amortization Paid 2,668.9 4,321.4 4315.1 61.7 99.9

HIPC Relief

Net Domestic Borrowings 34,629.5 53,283.8 14871.2 (57.1) 27.9

Banking System 18,651.6 (23423.8) (225.6)

Non-Banking Systems 15,977.9 38295.0 139.7

Privatization Receipts 10,883.3 9349.1 (14.1)

Others and Residuals 14,284.4) 14288.3 (200.0)

Source: Ministry of Finance and Economy


95


VII. Investment

During 2017/18 fiscal year, 1,550 projects

become operational under Ethiopian

Investment Commission and regional

investment offices; which were 231.2

percent higher than a year earlier. All of

which were private and at operational stage.

These projects command investment capital

Birr 25.9 billion; showing 190.8 percent

annual growth.

Of the total investment projects, 1,496 (96.5

percent) were domestic with a capital of Birr

20.7 billion (80 percent); and 54 projects

were foreign having Birr 5.2 billion capital.

The average capital per project for domestic

investors was Birr 13.8 million and that of

foreign investors Birr 95.9 million,

signifying that foreign investment projects

were more of capital intensive than domestic

ones.

It is estimated that these investment projects

have created job opportunities for about

332,003 permanent and 36,214 casual

workers; showing 1,502.9 and 270.5 percent

expansion respectively compared with the

previous year (Table 7.1).


96


Table 7.1: Number of Projects, Capital and Jobs Created by Operational Investment (Capital in millions of Birr)

2015/16 2016/17 2017/18 Percentage change

A B C Share C/A C/B

1. Total

Investment Number 852 468 1,550 100.0 81.9 231.2

Capital 6,708.6 8,896.9 25,876.3 100.0 285.7 190.8

Permanent

Workers 12,724 20,712 332,003 100.0 2,509.3 1,502.9

Temporary

Workers 12,710 9,775 36,214 100.0 184.9 270.5

1.1. Total

Private Number 852 467 1,550 100.0 81.9 231.9

Capital 6,708.6 3,896.9 25,876.3 100.0 285.7 564.0

Permanent

Workers 12,724 20,692 332,003 100.0 2,509.3 1,504.5

Temporary

Workers 12,710 9,775 36,214 100.0 184.9 270.5

1.1.1.

Domestic Number 772 424 1,496 96.5 93.8 252.8

Capital 5,463.7 3,295.0 20,698.2 80.0 278.8 528.2

Permanent

Workers 5,869 17,810 233,115 70.2 3,872.0 1,208.9

Temporary

Workers 8,993 9,051 14,044 38.8 56.2 55.2

1.1.2.

Foreign Number 80 43 54 3.5 (32.5) 25.6

Capital 1,244.9 602.0 5,178.1 20.0 316.0 760.2

Permanent

Workers 6,855 2,882 98,888 29.8 1,342.6 3,331.2

Temporary

Workers 3,717 724 22,170 61.2 496.4 2,962.2

1.2.Public Number

1

Capital

5,000.0

Permanent

Workers

20

Temporary

Workers

Source: Ethiopian Investment Commission


97


Fig.VII.1: Number of Operational Investment Projects by Type

Source: Ethiopian Investment Commission.

Fig.VII.2: Capital of Operational Investment Projects by Type

Source: Ethiopian Investment Commission

0

200

400

600

800

1000

1200

1400

1600

2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Nu

mb

er o

f p

roje

cts

Year

Domestic

Foreign

Public

0

5000

10000

15000

20000

25000

2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Mil

lio

ns

of

Bir

r

Year

Domestic

Foreign

Public


98


7.1 Investment by Sector

Of the total investment projects, about 37.3

percent were in manufacturing, followed by

real estate, renting & business activities (32

percent), and construction (22.2 percent) and

agriculture, hunting & forestry (2.7 percent).

The rest of the sectors attracted about 5.8

percent of total investment projects.

As for investment capital, manufacturing

constituted 56 percent followed by real

estate, renting & business activities (27.8

percent), construction (11.6 percent),

agriculture, hunting & forestry (1.2 percent)

and the remaining sectors 3.3 percent (Table

7.2).

Fig.VII.3: Distribution of Operational Investment capital by Sector in 2017/18


Others*: hotel & restaurant, education, health & social work, tour operation, transport & communication, mining &

quarrying, others and other community, social and personal service activities.

Manufacturing

56%

Agriculture,

hunting and

forestry

1%

Real estate,

renting and

Business activities

28%

Construction

12% Others

3%


99


Table: 7.2: Numbers and Capital of Operational Investment Projects by Sector (Capital in millions of Birr)

Sectors

2015/16 2016/17 2017/18 Percentage share

No. of

Projects

Investment

Capital

No. of

Projects

Investment

Capital

No. of

Projects

Investment

Capital

No. of

Projects

Investment

Capital

Manufacturing 85 2,539.5 149 1,888.0 578 14,494.8 37.3 56.0

Agriculture, hunting

and forestry 35 66.0 14 119.6 42 322.8 2.7 1.2

Real estate, renting

and Business

activities 637 3,550.7 81 5,737.4 496 7,204.8 32.0 27.8

Hotel and

restaurants 3 10.8 2 9.5 5 57.8 0.3 0.2

Education 3 7.1 4 6.1 7 67.8 0.5 0.3

Health and social

work

3 13.7 15 276.4 1.0 1.1

Construction 75 506.7 199 1,081.9 344 3,002.1 22.2 11.6

Tour operation,

transport and

communication 5 10.7 3 14.7 5 11.4 0.3 0.0

Whole sale, retail

trade and repair

service

1 2.0 0.1 0.0

Mining and

quarrying 6 12.1 8 18.7 7 81.0 0.5 0.3

Electricity, gas,

steam and water

supply

1 100.0 0.1 0.4

Other community,

social and personal

service activities 2 0.9 4 5.2 46 245.8 3.0 0.9

Others 1 4.0 1 1.9 3 9.5 0.2 0.0

Grand Total 852 6,708.6 468 8,896.9 1550 25,876.2 100.0 100.0



100


7.2 Distribution by Region

Of the total 1,550 investment projects that

went in to operation in 2017/18, about 1,362

projects (87.9 percent) with Birr 19.9 billion

capital (76.7 percent) were located in Addis

Ababa, followed by 66 projects (4.3 percent)

with Birr 395.5 million capital were in

Tigray region. Similarly there were 46

projects (3 percent) with investment capital

of Birr 380 million in Afar; 15 projects (1

percent) with Birr 39.7 million capitals in

Amhara, 1 project (0.1 percent) with Birr 2

million capitals in Benishangul-Gumuz and

1 project with investment capital of Birr 2.5

million in SNNPR. There was no

operational investment project in Oromia,

Somali, Gambella, Harari and Diredawa

during 2017/18 fiscal year (Table 7.3).

While, there is 59 projects or 3.8 percent of

total projects, with Birr 5.2 billion capital

went to operation in multiregional projects

in 2017/18 fiscal year.

Table 7.3: Number and Capital of Operational Projects by Region (Capital in millions of Birr)

Regions

2015/16

2016/17 2017/18 Percentage share

No. of

projects

Investment

Capital

No. of

projects

Investment

Capital

No. of

projects

Investment

Capital

No. of

projects

Investment

Capital

Tigray 49 207.3 21 65.9 66 395.3 4.3 1.5

Afar 15 97.5

46 380.0 3.0 1.5

Amhara 4 10.0 42 104.5 15 39.7 1.0 0.2

Oromia 304 1,398.4 19 335.6

0.0 0.0

Somali 0 0

0.0 0.0

Benishangu

l-Gumuz 0 0

1 2.0 0.1 0.0

SNNPR 1 13.8 10 83.5 1 2.5 0.1 0.0

Gambella 0 0

0.0 0.0

Harari 3 27

0.0 0.0

Addis

Ababa 31 2,381.5 376 8,307.5 1,362 19,839.3 87.9 76.7

Dire Dawa 0 0

0.0 0.0

Multiregion

al Projects 0 0

59 5,217.5 3.8 20.2

Grand

Total 407 4,135.0 468 8,896.9 1,550 25,876.2 100.0 100.0



101


VIII. International Developments

8.1. International Economic Developments

8.1.1. Overview of the World Economy

Global growth strengthened and marked

improvements in 2017 to 3.7 percent, due to

recovery in investment in advanced

economies and continued strong growth in

emerging Asia and signs of recovery in

several commodity exporters. Economic

activity in both advanced economies and

emerging & developing economies is

forecast to accelerate in 2018, to 2.4 percent

and 4.9 percent, respectively, with global

growth projected to be 3.9 percent.

In the United States, growth is expected to

rise from 2.3 percent in 2017 to 2.9 percent

in 2018, before moderating slightly to 2.7

percent in 2019.

In Japan, economic growth is projected to

moderate to 1.0 percent in 2018 (from a

strong above trend outturn of 1.7 percent in

2017 before slowing further to 0.9 percent in

2019.

Growth in the United Kingdom is projected

to slow from 1.7 percent in 2017 to 1.4

percent in 2018 and 1.5 percent in 2019,

with business investment expected to remain

weak in light of heightened uncertainty

about post-Brexit arrangements. The

medium-term growth forecast is also

broadly unchanged at 1.6 percent, due to the

likely effect of higher barriers to trade and

lower foreign direct investment following

Brexit.

In the euro area growth is projected to

slightly moderate to 2.2 percent in 2018

from 2.4 percent in 2017, before slowing

further to 1.9 percent in 2019. Medium-term

growth in the euro area is projected at 1.4

percent, held back by low productivity amid

weak reform efforts and unfavorable

demographics.

Growth in emerging market and developing

economies is expected to increase further—

from 4.7 percent in 2017 to 4.9 percent in

2018 and 5.1 percent in 2019. Although the

high growth rate reflects primarily continued

strong economic performance in emerging

Asia, the projected pickup in growth reflects

improved prospects for commodity

exporters after three years of very weak

economic activity. Beyond 2019, growth in


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emerging market and developing economies

is projected to stabilize at about 5 percent

over the medium term. China’s growth is

projected to soften slightly from 6.9 percent

in 2017 to 6.6 percent in 2018 and 6.4

percent in 2019. Over the medium term, the

economy is projected to continue

rebalancing away from investment toward

private consumption and from industry to

services.

Growth in the Middle East, North Africa,

Afghanistan, and Pakistan region is also

expected to pick up 3.5 percent in 2018 and

3.9 percent in 2019. Stronger oil prices are

expected to help recovery in domestic

demand in oil exporters, including Saudi

Arabia.

Growth in Sub-Saharan Africa is also

projected to rise gradually during 2018–19

to 3.4 percent and 3.8 percent, respectively,

as the challenging outlook in commodity

exporters gradually improve. Growth in

South Africa is expected to strengthen from

1.3 percent in 2017 to 1.5 percent in 2018

and 1.7 percent in 2019. Though the likely

effects of improvement in business

confidence due to the change in the political

leadership are expected to have positive

effects, growth prospects however, remain

weighed down by structural bottlenecks. In

Nigeria, the economy is projected to grow

2.1 percent in 2018 and 2.3 percent in 2019

(up from 0.8 percent in 2017), reflecting

improved oil prices, revenue, and production

and recently introduced foreign exchange

measures that contribute to better foreign

exchange availability.


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Table 8.1: Overview of World Economic Outlook and Projection

(Annual Percentage Change)

Particulars

2016

2017

Projection

2018 2019

World Output 3.2 3.7 3.9 3.9

Advanced Economies 1.7 2.4 2.4 2.2

United States 1.5 2.3 2.9 2.7

Euro Area 1.8 2.4 2.2 1.9

Japan 1.0 1.7 1.0 0.9

United Kingdom 1.8 1.7 1.4 1.5

Emerging Market & Developing Economies 4.4 4.7 4.9 5.1

Middle East, North Africa, Afghanistan and Pakistan 5.0 2.2 3.5 3.9

Sub-Saharan Africa 1.5 2.8 3.4 3.8

Nigeria -1.6 0.8 2.1 2.3

South Africa 0.6 1.3 1.5 1.7

World Trade Volume (goods & services) * 2.3 4.9 5.1 4.7

Imports


Emerging Market and Developing Economies 1.8 6.4 6.0 5.6

Exports


Emerging Market and Developing Economies 2.6 6.4 5.1 5.3

Commodity Prices (U.S. dollars)

Oil -15.7 23.3 33.0 -1.8

Non- oil -1.5 6.8 6.0 0.5

Consumer Prices*


United States 1.3 2.1 2.5 2.4

Euro Area 0.2 1.5 1.5 1.6

United Kingdom 0.7 2.7 2.7 2.2

Japan -0.1 0.5 1.1 1.1

Emerging Market & Developing Economies 4.3 4.0 4.6 4.3

China 2.0 1.6 2.5 2.6

Mexico 2.8 6.0 4.4 3.1

Turkey 7.8 11.1 11.4 10.5

Brazil 8.7 3.4 3.5 4.2

Russia 7.1 3.7 2.8 3.7

Sub-Saharan Africa 11.3 11.0 9.5 8.9

Angola 32.4 31.7 27.9 17.0

Nigeria 15.7 16.5 14.0 14.8

Ghana 17.5 12.4 8.7 8.0

Source: IMF, World Economic Outlook, July, 2018

*IMF, World Economic Outlook, April, 2018


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8.1. 2 World Trade

Global volume of world trade growth of

goods and services in 2017 is estimated to

have grown by 4.9 percent in volume terms.

It is estimated to expand by 5.1 percent in

2018 and is projected to increase by 4.7

percent in 2019. Imports of goods and

services by advanced economies rise by 5.1

percent in 2018 and by 4.5 percent in 2019.

Similarly, imports by emerging market and

developing economies forecasted to grow by

6.0 percent and 5.6 percent in 2018 and

2019, respectively. Likewise, export of

goods and services from advanced

economies and emerging and developing

economies is forecasted to expand by 4.5

percent and 5.1 percent in 2018,

respectively.

8.1.3 Inflation and Commodity Prices

Global headline inflation is picking up as a

result of a strengthening global outlook,

narrowing output gaps, supply effects

together with stronger demand. As wage

dynamics start reflecting tighter labor

markets, core inflation is also expected to

rise. In advanced economies, head line

inflation rate is forecasted to be 2.0 percent

in 2018 and 1.9 percent in 2019, up from 1.7

percent in 2017. Headline inflation in

emerging market and developing economies

is projected to rise to 4.6 percent in 2018

from 4.0 percent in 2017. In 2019, inflation

is expected to moderate to about 4.3 percent.

In the United States, headline consumer

price inflation is expected to increase from

2.1 percent in 2017 to 2.5 percent in 2018

before declining to 2.4 percent in 2019.

In Euro area headline inflation is expected to

remain at about 1.5 percent in 2018 and it is

expected to increase to 1.6 percent in 2019.

In the United Kingdom, headline inflation in

2018 is projected at 2.7 percent, same as in

2017, before declining to 2.2 percent in

2019.

Headline inflation in Japan forecasted to be

1.1 percent in 2018 and 2019 from 0.5

percent in 2017. Higher energy and food

prices and strong domestic demand are the


105


main causes for the rise in inflation rate in

Japan.

In emerging market economies, inflation

development is diverse. In China inflation is

expected to pick up to 2.5 percent in 2018

from 1.6 percent in 2017. Headline inflation

rates in Brazil and Russia are expected to

continue to remain subdued in a range of 3

percent to 4 percent in 2018 as output gaps

gradually close, with growth continuing to

recover from the recession between 2015

and 2017. In Mexico, the inflation rate is

projected to decline to 4.4 percent in 2018

from 6.0 percent in 2017 as the effects of

fuel price liberalization fade.

Inflation is expected to moderate in 2018

and 2019 in Sub-Saharan Africa, but is

expected to remain double digits in key

large economies reflecting the pass-through

effects of currency depreciation and their

impact on inflation expectations in Angola,

supply factors, and assumed monetary

policy accommodation to support fiscal

policy (Nigeria).

Oil prices have continued to increase, due to

supply outages, the extension of the

production agreement of OPEC members,

and stronger global economic growth.

Metal prices increased by 8.3 percent

between August 2017 and February 2018.

The increase in price is attributed to the

solid growth in global economy and a wider

demand-supply gap for all base metals

specially aluminum.

The IMF agriculture price index, which

consists of food, beverages, and agricultural

raw materials prices, has increased by 4.1

percent from August 2017 to February 2018.

The sub-indices of food and agricultural raw

materials rose by 4.1 and 6.0 percent,

respectively. The beverages index declined

by 3.6 percent as results of a substantial

decline in the price of coffee (by 12.7

percent) while the gain in the index of raw

agricultural materials was due to the

increase in the price of cotton.

8.1.4. Exchange Rate

Between August 2017 and March 2018, the

U.S. dollar weakened modestly in real

effective terms by about 1.5 percent. The

euro has appreciated by 1 percent and

becomes 4 percent stronger than its 2017

average. The Japanese yen has remained

broadly stable, while the British pond

appreciated by 5.5 percent. Among


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emerging market currencies, the Chinese

renminbi appreciated by 3.5 percent in real

effective terms. The South African rand

rebounded by 10 percent on reduced

political uncertainty and the Malaysian

ringgit by over 8 percent in line with

improved growth outlook and stronger

commodity prices. The Turkish lira

depreciated by more than 10 percent on

account of the higher inflation.

8.2 Implications of International Economic Developments on the Ethiopia Economy

Global growth strengthened and marked

improvements in 2017 due to recovery in

investment in advanced economies and

continued strong growth in emerging Asia

and signs of recovery in several commodity

exporters. Economic activity in both

advanced economies and emerging &

developing economies is forecast to

accelerate in 2018.

Oil prices have continued to increase, due to

supply outages, the extension of the

production agreement of OPEC members,

and stronger global economic growth. The

increase in oil price during 2017/18 has

increased the country’s import bills during

the period.

On the other hand, the beverages index

declined as results of a substantial decline in

the price of coffee. The decrease in the

price of coffee in the international market

reduced Ethiopia’s export earnings from

coffee which is the major export item of the

country.

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