Cash outside the banking system is growing, forcing commercial banks to face a liquidity shortage, while leading to a fall in interest income due to decline in loans provided to their customers.
A problem caused by the cash-withdrawal and the transaction limit that was lifted recently, the growth in cash outside banks signals the surge in cash-hoarding activities.
According to sources at the National Bank of Ethiopia, currency outside banks now stand over 140 billion Br, significantly higher than the 113 billion Br figure reported before the demonetization during September 2020.
Though the lifting of the transaction limit by the central bank recently aimed at encouraging savings, which has been at standstill in the last six months, a little has changed thus far. Some banks have reported a deposit lower than the figure registered by the end of last year during the first quarter of the existing fiscal year.
