Are Ethiopian Banks growing as rapidly as the Ethiopian economy? The Financial Stability Report (FSR) released this week by the National Bank of Ethiopia sheds light on this question. The FSR states that total banking sector deposits by the end of June 2023 increased by 24.6% from the previous year and reached 2.2 trillion Birr. While loans & bonds extended by banks also increased by 24.3% for the same period. The total amount of loans and bonds was 1.9 trillion Birr ($33.3 Billion) by the end of June 2023.
There is no doubt that the Ethiopian banks are growing but the economy of Ethiopia is growing faster. IMF also acknowledged in its economic forecast report released this week that the Ethiopian economy was growing faster than most of the countries in Africa.
However, the comparison of banks’ deposits and GDP indicates that the growth of the banking sector is not at par with GDF growth. By June 2023, bank deposits were 24.8% of GDP but in the previous year, these deposits were 28.2% of GDP. Whereas, loans and bonds were 25.3% of GDP the previous year and decreased to 21.7% by June 2023.
The good news is that the Ethiopian banks have changed their loan issuing policies and now the banks are giving priority to the private sector. Banks changed their loan policies in 2021 and by the end of 2023, 61.7% of all loans were given to the private sector.
It seems that the Ethiopian banks will have to up the ante to match with if not outpace the growth of the Ethiopian economy.
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If the country economic growth is faster than other African countries, why the Ethiopian government in discussion for loan pressurised to devaluate its currency. The IMF and WB economic forcast has some mistry.
The IMF forecast depends on official currency which is false so should be devalue, how can with all these conflict u can grow number 1 in the world
It is so amazing to read the acknowlodgment of Ethiopian fast growth by IMF besides to the bank policy change concerning status of big loan to private economy as positive to impact the current and future growth.