Ethiopia's government is taking steps to wean itself off borrowing from the central bank, a move aimed at promoting economic stability and growth.
Fitsum Assefa (PhD), Minister of Planning and Development, said in a meeting on Monday that the government has not taken any direct advances from the National Bank of Ethiopia (NBE) this quarter. The announcement comes as the government seeks to implement reforms to reduce its reliance on central bank borrowing.
The NBE recently briefed parliamentarians on a new draft proclamation that introduces stricter rules on central government borrowing. The proposed rules aim to limit the government's ability to tap the central bank for funds, allowing borrowing only in cases of emergency that could have an adverse impact on government revenues.
Under the proposed rules, the government would be limited to borrowing 15 percent of its three-year average revenue from the central bank. The loans would need to be repaid within 12 months, according to the draft proclamation.
Mamo Mihretu, Governor of the NBE, said the previous rules did not adequately address the issue of central bank borrowing. "If we need economic growth, it has to be quality growth that supports the economy, creates jobs and curbs inflation," Mihretu said.
Despite the government's efforts to reduce its borrowing, the National Bank of Ethiopia's gross claims on the central government remain high. As of June 2023, the central bank's claims on the government stood at 564.0 billion birr, a 57.8 percent increase from the same period a year earlier.
The majority of the credit to the central government, 77 percent, was in the form of bonds, while 23 was in the form of direct advances.
