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National Bank of Ethiopia
5
I. OVERALL ECONOMIC PERFORMANCE
Economic Growth
The Ethiopian economy continued to
grow in 2011/12. Real GDP registered
a relatively robust growth of 8.8
percent compared to the 5.5 percent
estimate for Sub-Saharan Africa in the
same period. The growth was ascribed
mainly to higher growth in service
sector (10.6 percent), agriculture (4.9
percent) and industry (17.1 percent).
However, the real GDP averaged 10
percent during 2010/11-2011/12.
Moreover, the economy expanded
rapidly mirroring the performance of
the economy, the growth of nominal
GDP per capita rose to USD 510 from
USD 389 in the preceding year,
registering a 31.0 percent increase.
The resilience of the Ethiopian
economy is projected to continue with
11.3 percent growth expected in
2012/13. The Sub-Saharan Africa and
world economy growths are
anticipated to be 5.7 and 4.1 percent
respectively in the same period.
National Bank of Ethiopia
6
Table 1.1: Sectoral Contributions to GDP and GDP Growth(In Billions of Birr)
Items
years
2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12
SectorAgriculture 130.5 144.8 158.5 170.3 181.2 195.0 212.5 222.9Industry 26.6 29.3 32.1 35.4 38.8 43.0 49.8 58.3Services 94.4 106.9 123.3 143.1 163.2 184.7 207.2 229.1
Total 249.2 278.5 311.3 346.7 381.7 421.8 469.4 510.3Less FISIM 1.2 1.6 1.8 2.4 2.7 2.9 3.2 2.9
Real GDP 248.4 277.0 309.7 344.3 378.9 418.9 466.2 507.4Growth in Real GDP 12.7 11.5 11.8 11.2 10.0 10.6 11.3 8.8Real GDP per capita 3.6 4.0 4.3 4.6 4.9 5.3 5.8 6.1Mid-year population(inmillion) 68.3 70.0 72.4 74.9 76.8 78.8 80.7 82.7
Share in GDP (in %)Agriculture 47.4 47.1 46.1 44.6 43.2 46.2 45.3 43.7Industry 13.6 13.4 13.2 13.0 13.0 10.2 10.6 11.5Services 39.7 40.4 41.7 43.5 45.1 43.8 44.1 44.9
Growth in Real GDP per capita 9.7 8.8 8.1 7.5 7.3 7.8 8.7 6.2
Agriculture
AbsoluteGrowth 13.5 11.0 9.5 7.4 6.4 7.6 9.0 4.9Contributionto GDPgrowth 6.4 5.2 4.4 3.3 2.8 3.5 4.1 2.1Contributionin % 50.5 44.8 36.9 29.7 27.5 33.4 36.0 24.2
Industry
AbsoluteGrowth 9.5 10.2 9.6 10.3 9.6 10.8 15.8 17.1Contributionto GDPgrowth 1.3 1.4 1.3 1.3 1.2 1.1 1.7 2.0Contributionin % 10.2 11.8 10.7 12.0 12.4 10.5 14.9 22.2
Services
AbsoluteGrowth 12.8 13.2 15.3 16.1 14.0 13.2 12.2 10.6Contributionto GDPgrowth 5.1 5.3 6.4 7.0 6.3 5.8 5.4 4.7Contributionin % 40.1 46.5 54.2 62.5 63.0 54.6 47.6 53.7
Source: Ministry of Finance and Economic Development (MoFED)
National Bank of Ethiopia
7
GDP By Sector
In terms of sector development,
agriculture grew just by 4.9 percent in
2011/12 compared to 9 percent growth
recorded in the previous year mainly
due to lower increase in crop
production which went down from 10
to 5 percent. Crop production
constituted the largest share in GDP,
about 30 percent.
Fig. I.1: GDP Growth by Major Sectors
Source: Central Statistical Agency(CSA) owever, the growth in agricultural outputs was largely attributed to productivity improvement aided by
The growth in agricultural output was
largely attributed to productivity
improvement aided by favorable
weather condition as well as conducive
economic policies. While total
cultivated land expanded by 2.2
percent only to 12.1 million hectares in
2011/12, total agricultural output rose
marginally by 7.4 percent to 218.6
million quintals. As a result,
productivity improved slightly to 18.1
quintal in 2011/12 compared to 17.2
quintal per hectare in the preceding
year. Cereal production accounted for
86.1 percent of the total agricultural
production estimated for 2011/12.
National Bank of Ethiopia
8
Meanwhile, the industrial sector gained
17.1 percent growth mainly due to the
increase in electricity and water
supply. Manufacturing output grew by
11.8 percent while mining and
quarrying expanded by 12.7 percent
during the same period. The service
sector, which has bolstered in the
recent years, registered 10.6 percent
growth; due to the expansion in
financial sector, real estate and hotel &
tourism sectors.
Consequently, the contribution of
agriculture and allied activities to real
GDP growth stood at 24.2 percent
while industrial and service sectors
constituted about 22.2 and 53.7 percent
respectively. Although, the share of
agriculture to GDP tended to decline
continuously, it has remained the
largest source of employment, foreign
exchange earning, raw material supply
and market for domestic industrial
outputs.(FigI.1)
National Bank of Ethiopia
9
Table 1.2: Estimates of Agricultural Production and Cultivated Areas of Major
Crops for Private Peasant Holdings - Meher Season
(Area and production are in thousands of hectors and quintals, respectively)
Source: Central Statistical Agency (CSA)
1.3 GDP by Expenditure Component
Total consumption expenditure (both
private and public) as a percent of
GDP went down marginally to 85.0 in
2011/12 from 87.3 in 2010/11, largely
on account of the reduction in private
and public consumption by 1.5 and 0.8
percentage points, respectively.
In contrary, gross domestic saving to
GDP ratio improved to 15.0 percent
from 12.7 percent recorded in the
previous year. Likewise, the ratio of
gross capital formation to GDP
increased by 6.2 percentage point to
33.1 percent relative to last year.
As a result, the resource gap widened
to 18.1 percent of GDP from 15.1
percent during the same period.
AgriculturalProduction
2008/09 2009/10 2010/11 2011/12
CultivatedArea
TotalProduction
CultivatedArea
TotalProduction
CultivatedArea
TotalProduction
CultivatedArea
TotalProduction
Cereals 8,770.0 144,964.1 9,233.0 155,342.0 9,690.0 177,613.0 9,588.0 188,099.0
(Annual %Change) 0.5 5.7 5.3 7.2 4.9 14.3 8.0 9.0
Pulses 1,585.2 19,646.3 1,489.3 18,980.0 1,357.0 19,531.0 1,616.0 23,162.0(Annual %Change) 4.4 10.2 -6.0 -3.4 -8.9 2.9 19.1 18.6
Oilseeds 855.1 6,557.0 780.9 6,436.0 774.0 6,339.0 880.0 7,308.0(Annual %Change) 20.8 6.3 -8.7 -1.8 -0.88 -1.5 13.7 15.3
Total 11,210.3 171,167.4 11,503.2 180,758.0 11,821.0 203,483.0 12,084.0 218,569.0(Annual %Change) 2.3 6.2 2.6 5.6 2.8 12.6 2.2 7.4
National Bank of Ethiopia
10
Table: 1.3: Expenditure on GDP and Gross Domestic Savings (As Percentage of GDP)
YearDomestic
Absorption
Consumption ExpenditureGross
CapitalFormation
ResourceBalance
Exportsof Goods
&Services
Importsof Goods
&Services
GrossDomesticSavingsTotal Govt. Pvt.
1999/00 110.4 88.2 19.1 69.1 22.2 (12.0) 12.1 24.2 11.8
2000/01 110.5 86.9 15.7 71.2 23.6 (11.8) 12.1 23.9 13.1
2001/02 117.1 90.7 15.9 74.8 26.4 (14.1) 12.7 26.9 9.3
2002/03 116.7 92.4 14.3 78.1 24.3 (14.2) 13.5 27.7 7.6
2003/04 113.9 84.9 14.0 70.9 29.0 (16.8) 15.1 31.9 15.1
2004/05 116.6 90.6 13.3 77.3 26.0 (20.6) 15.3 35.8 9.5
2005/06 119.4 91.8 13.1 78.7 27.6 (22.9) 14.0 36.9 8.3
2006/07 111.8 87.6 11.2 76.4 24.2 (19.5) 12.8 32.4 12.4
2007/08 115.3 90.8 10.5 80.3 24.5 (19.6) 11.5 31.1 9.2
2008/09 115.1 90.2 9.5 80.7 24.9 (18.4) 10.6 29.0 9.8
2009/10 117.7 90.7 9.2 81.5 27.0 (19.6) 13.8 33.3 9.3
2010/11 115.1 87.3 8.6 78.6 27.9 (15.1) 17.0 32.1 12.7
2011/12 118.1 85.0 7.2 77.8 33.1 (18.1) 13.9 32.0 15.0
Average 115.2 89.0 12.4 76.6 26.2 (17.1) 13.4 30.6 11.0Source: Ministry of Finance and Economic Development (MoFED)
National Bank of Ethiopia
11
1.4. Micro and Small-Scale Enterprises
The five-year Growth and Transformation
Plan envisages creating a total of three
million Micro and Small-Scale Enterprises
(MSE’s) at the end of the Plan period. This
sector development is believed to be the
major source of employment and income
generation for a wider group of the society
in general and urban youth in particular.
According to the Federal Micro and Small
Enterprise Development Agency
(FeMESDA), a total of 70,455.00 new
MSEs were established in 2011/12
employing 806,322.00 people. The total
employment has grown by 23.8 percent,
compared to a year ago. The total amount
of loan received from micro finance
institutions was more than Birr 1.088 Billion
under the review period, 9.5 percent higher
than last fiscal year.
Table: 1.4 Numbers, Amount of Credit and Jobs Created through MSEs(Credit in Millions of Birr)
Source: FeMSEDA
2011/12 2012/13Percentage
Change
A B B/A
No. of MSE's na 70,455.00 -
Amount of credit (inmillion Br) 994.09 1,088.14 9.5
No of Totalemployment 651,366.00 806,322.00 23.8
National Bank of Ethiopia
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Table: 1.5. Number, Amount of Credit and Jobs Created through MSEs by Region
{{{{{[ (Credit in Billions of Birr)
Source: FeMSEDA
In terms of regional distribution of the
amount of credit, Addis Ababa took the
leading share (41.1 percent) followed by
Tigray (30.1 percent), Oromiya (12.2
percent), SNNPR (9.6 percent) and Amhara
5.9 percent.
However regarding employment creation,
Oromia employed 33.2 percent of the total
employment created during the fiscal year.
Amhara region contributed for 21.7 percent
of employment created in the report year
followed by SNNPR (15.8 percent).
AddisAbaba Oromia SNNPR Amhara Tigray Diredawa Harari
Benishangul Somale Gambela Afar Total
No.of MSEs 10,639.0 20,555.0 9,819.0 99,750.0 64,000.0 333.0 265.0 336.0 519.0 109.0 27.0 206,352.0
Amount ofcredit 447,485.4 133,084.2 104,759.6 64,600.7 327,059.2 4,029.8 6,275.1 263 580.4 - - 108,813.7
No.of totalEmploymentcreated byMSEs
99,899.00 267,474.0 127,112.0 174,971.00 82,680.0 45,248.0 3,224.0 1,010.0 3,303.0 1,401.0 - 806,322.0
Regional share
AddisAbaba Oromia SNNPR Amhara Tigray
Diredawa Harari
Benishangul Somale Gambela Afar Total
Amount ofcredit 41.1 12.2 9.6 5.9 30.1 0.4 0.6 0.0 0.1 0.0 0.0 100.0No. of totalEmploymentcreated byMSEs 12.4 33.2 15.8 21.7 10.3 5.6 0.4 0.1 0.4 0.2 0.0 100.0
National Bank of Ethiopia
13
Figure 1.2 Regional distribution of amount of credit and employment created during 2011/12
National Bank of Ethiopia
14
1.5. Access to Water Supply
During the Growth & Transformation
Plan, both urban and rural population
with 68 percent in 2009/10 would
increase to 98.5 percent by the end of the
plan period. Urban and rural population
within 0.5 km and 1.5 km access to
potable water are also expected to reach
to 100 and 98.5 percent, respectively by
the end of the plan period.
Accordingly, the national population
with access to potable water supply
reached 58.3 percent in 2011/12 from
52.1 percent in the preceding year.
Population with access to potable water
improved in 2011/12 compared to the
preceding year performance. Similarly
urban population with access to potable
water within 0.5 km reached to 78.7
percent, rural population having access
to potable water within 1.5 km improved
to 55.2 percent in 2011/12 from 74.6 and
48.9 percent respectively in 2010/11.
The proportion of rural population with
access to water supply in Harari reached
87.1 percent, in Gambella 71.4 percent,
in Benshangule Gumz 65.7 percent, in
Amhara 60.8 percent and in Oromia 54.9
percent. In contrary, urban population
with access to water supply declined in
Addis Ababa (80.71 percent), Afar (80.7
percent), Harari (97.2 percent) and Dire
Dawa (85.5 percent) compared to the
preceding year performance (Table 1.5)
(Figure I.3).
National Bank of Ethiopia
15
Table: 1.5 Percentages of People with Access to Potable Water by Region*
Region
2010/11 2011/12Change in
percentage pointA B C D E F
Rural Urban Average Rural Urban Average D-A E-B F-C
Addis Ababa - 82.22 82.22 - 80.71 80.71 0.0 -1.5 -1.5
Tigray 52.3 68.7 55.4 58.6 72.1 61.2 6.4 3.4 5.8
Amhara 52.0 66.0 53.4 60.8 70.7 61.8 8.8 4.7 8.4
Oromia 49.8 74.2 51.8 54.9 85.1 57.4 5.1 11.0 5.6
SNNPR 42.9 65.9 44.3 49.1 75.5 50.7 6.2 9.6 6.4
Afar 35.0 82.2 38.0 37.5 80.7 40.3 2.6 -1.5 2.3
Somali 36.1 74.7 41.6 56.1 77.4 59.2 20.0 2.7 17.6
Ben-Gumz 59.6 66.8 59.9 65.7 69.8 65.8 6.0 2.9 5.9
Harari 65.1 100.0 84.0 87.1 97.2 92.6 22.0 -2.8 8.6
Gambella 63.6 80.3 66.1 71.4 85.7 73.6 7.9 5.4 7.5
Dire Dawa 75.6 87.6 83.8 77.1 85.5 81.3 1.5 -2.1 -2.5
NationalAverage 48.9 74.6 52.1 55.2 78.7 58.3 6.4 4.1 6.1
Source: Ministry of Water Resources Development (MoWRD) and NBE Staff Computation
Note: Water supply access is calculated based on the provision of 20 liters/capita/day for urban and 15 l/c/d
for rural at a radius of 0.5 and 1.5 kilo meters, respectively.
*Based on 2010/11 assessment data
National Bank of Ethiopia Annual Bulletin
16
Source: Ministry of Water Resources Development (MoWRD) and NBE Staff C
1.6 Road Sector Development
1.6.1 Road Network
The government of Ethiopia has been
engaged in investment of infrastructure
development to sustain economic
growth, improving product
competitiveness and encourage private
investors. In particular, the government
noted that, the development of road
transport creates a network over a wide
array of infrastructural facilities so as to
improve the accessibility and mobility of
agricultural and industrial products. As a
result, the road transport in Ethiopia has
been the dominant mode of transport and
accounts for 90 to 95 percent of the total
motorized inter-urban freight and
passenger transports.
National Bank of Ethiopia Annual Bulletin
17
In 2011/12, the total stock of road
network reached 63,083 km of which
24,550 km Federal1, 31,550 km rural
road and 6,983 are woreda road. The
Federal road includes 9,875km (40
percent) asphalt and 14,675km (60
percent) gravel road, which showed
annual expansion of 19.1 percent and 3.8
percent respectively. Particularly, the
asphalt road net work in 2011/12
constituted about 15.7 percent of the
total stock of road network in the
country.
1Federal roads are administered by federal government
In 2011/12 the total road network
expanded by 16.8 percent (9.086Km)
compared to 10.67 expansions in
2010/11.
Total woreda road network, which was
previously known as community road,
also increased significantly to 6,983km
compared to 854 km in 2010/11 due to
the government’s plan to integrate every
kebele to the main roads
National Bank of Ethiopia Annual Bulletin
18
.
Table 1.7 Classification of Road Network (length in km)
Year Federal RoadRural road
Woreda roadTotal
Asphalt GravelLength Growth
rateLength Growth
rateLength Growth
rateLength Growth
rateLength** Growth
rate
2000 /01 3,924 - 12,467 - 16,480 - NA-
32,871 -
2001/02 4,053 3.29 12,564 0.78 16,680 1.21 NA-
33,297 1.30
2002/03 4,362 7.62 12,340 -1.78 17,154 2.84 NA-
33,856 1.68
2003/04 4,635 6.26 13,905 12.68 17,956 4.68 NA-
36,496 7.80
2004/05 4,972 7.27 13,640 -1.91 18,406 2.51 NA-
37,018 1.43
2005/06 5,002 0.60 14,311 4.919355 20,164 9.55 NA-
39,477 6.64
2006/07 5,452 8.99 14,628 2.215079 22,349 10.84 57,763.74 - 42,429 7.48
2007/08 6,066 11.26 14,363 -1.81159 23,930 7.07 70,038.10 - 44,359 4.55
2008/09 6,938 14.38 14,234 -0.89814 25,640 7.15 85,767.00 - 46,812 5.53
2009/10 7,476 7.75 14,373 0.976535 26,944 5.09 100,384.9 - 48,793 4.23
2010/11 8,295 10.96 14,136 -1.64893 30,712 13.98 - 854.00 53,997 10.67
2011/12 9,875 19.05 14,675 3.81296 31,550 2.73-
6,983.00 63,083 16.83Source: Ethiopian Road Authority (2011/12)
*Growth rate of community road (woreda road) is not calculated because since 2009/10 community road is
replaced by woreda road
** Total length does not include community road (woreda road) length till 2010/11 as it is non-engineered road.
National Bank of Ethiopia Annual Bulletin
19
1.6.2 Road Density
The proper level of road network is
assessed by road density, which is
measured by road length per 1000
persons or by road length per 1000 km2.
In the five year GTP period, the plan is
to increase the road density from 44.5 to
123.7 km per 1000 persons and from
0.64 to 1.54 km per 1000 km2.
At the end of 2011/12, the road density
showed improvement to 57.3km from
48.3km per 1,000 square km as
compared to a year ago. Similarly, in
2011/12 fiscal year, road density per
1,000 square km was 57.3 km with
annual growth rate of 18.6 percent
(Table 1.8).
The road density per 1000 population in
2011/12 was 0.75 km and registered 15.4
percent growth from the preceding fiscal
year (Table 1.8).
Table 1.8 Road Densities per 1000 persons
Source: Ethiopian Road Authority
Year Road Density /1000 person Road density /1000 sq. km2000/01 0.50 29.92001/02 0.50 30.32002/03 0.49 30.82003/04 0.51 33.22004/05 0.50 33.72005/06 0.53 35.92006/07 0.55 38.6
2007/08 0.56 40.32008/09 0.57 42.62009/10 0.60 44.42010/11 0.65 48.32011/12 0.75 57.3
National Bank of Ethiopia Annual Bulletin
20
1.6.3 Road Accessibility2
According Ethiopian Roads Authority,
Ethiopia requires constructing about
200,000 km of optimum national road
network, as a target to provide to its
people a reasonably good accessibility.
The level of road network in good
condition has improved continuously
over the past years and reached 64
percent of the total road network. In
particular, about 75 percent of asphalt
road is found in good condition (Figure
I.4).
1.6.4 Road Sector Financing
Construction and maintenance of roads
remained the key investment for the
government in the past years.
2 Access refers to the opportunity to use or the right to
or the ability to reach some destiny and often used to
analyze the level of population having access to all
weather roads. In fact, its benefit could be evaluated in
terms of reductions in monetary costs or time needed
by the given population to access markets or key
public social services like health and education.
Hence, large sum of finance has been
mobilized for road construction and
maintenance from external loans and
grants as well as domestic sources.
Figure 1.5 below depicts investment
capital in the road construction and
expansion sector, which has been
steadily rising over the past years
reached Birr 28.6 billion in 2011/12
showing annual growth rate of 46.8
percent (Table 1.9). Investment in
Federal road construction and expansion
was Birr 21 billion, which constituted
the lion’s share of the total road
investment capital.
National Bank of Ethiopia Annual Bulletin
21
Source: Ethiopian Road Authority
Source: Ethiopian Road Authority (2011/12)
National Bank of Ethiopia Annual Bulletin
22
Table 1.9 Investments in the Road SectorIn million Birr
Source: Ethiopian Road Authority
*Community road- before 2009/10 and woreda road after 2010/11
** All municipalities’ maintenance
Developments in Education Sector
The government of Ethiopia views
education sector development as part of
its long term vision in making the
country a middle income economy. To
this end, it has devised and put in place
various strategies for the sector. It has
also increased the budget allocated every
year to education sector to execute
development programs and planned
activities (Table 1.10). Accordingly,
primary schools in urban and rural areas,
increased to 29,482 in 2011/12 from
28,349 in the preceding year. Net
primary school enrolment and
completion, however, rose slightly to
85.4 and 52.1 percent from 85.3 and
49.4 percent respectively (Table
1.10).primary school enrolment has
reached 17 million of which 47.8
percent were girls.
On the other hand, secondary
education enrolment stood at 1.8
million, 3 percent higher than last year.
In addition, by the end of 2011/12, the
number of secondary schools (9-12
grades) reached 1,710 exhibiting a 12.7
percent annual growth.
Road Type 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12
Federal road2,848 2,886 5,037 8,124 9,813 13512 16989 21023.7
Regional road222.9 471.2 395.2 671 624.2 1091.2 1768.7 1506.9
Community /woreda road*17.8 684.4 719.3 121 439.3 307 680.7 6027.2
Urban road**
25.2 46.60 63.3 61.1 53.7 127 52.5 58.5
Total 3,114.2 4,088.1 6,215.2 8,977.5 10,930.4 15,038 19,490.9 28,616.3
National Bank of Ethiopia Annual Bulletin
23
Technical and Vocational Education and
Training (TVET) enrolment reached
330,409 registered 11 percent fall though
the number of TVET institutions
remained at 505 compared to the
preceding year.
The share of education sector in the
annual national budget was 25.3 percent
in 2011/12, about 44.6 percent higher
than a year earlier (Table 1.10).
National Bank of Ethiopia
24
Table 1.10: Development in Education Sector
Indicator 2007/08 2008/09 2009/10 2010/11 2011/12
(2000) (2001) (2002) (2003) (2004)
Primary EducationNumber of primary
schools (urban, rural) 23,354 25,212 26,951 28,349 29,482
Urban 3,100 3,206 3,206 3,988 NA
Rural 20,254 21,886 23,745 24,313 NA
Primary enrolment (in millions) 15.3 15.6 15.8 16.7 17.0
Girls' primary enrolment (%) 46.5 47.3 47.4 47.3 47.8
Grades (1-4) gross enrolment ratio (%) 127.8 122.6 118.8 124 122.6
a. Girls' gross enrolment ratio (%) 122.8 118.4 114.3 119.1 118.1
b. Boys' gross enrolment ratio (%) 133 126.7 123.2 128.8 127
Grades (5-8) gross enrolment ratio (%) 60.2 63.1 65.5 66.1 65.6
a. Girls' gross enrolment ratio (%) 55.5 60.5 63.5 64.8 65.3
b. Boys' gross enrolment ratio (%) 64.8 65.6 67.4 67.4 65.9
Girls’ gross primary enrolment ratio (%) 90.5 90.7 101.6 93.2 92.9
Boys' gross primary enrolment ratio (%) 100.5 97.6 108.4 99.5 97.9
Proportion of pupils starting grade 1 whoreach grade 5(%) 49.2 39.6 75.6 69.1 NA
Gross Primary Enrolment ratio (%) (urban,rural, regional) 95.6 94.4 93.4 96.4 95.4
1. Tigray 109 107.1 103.3 102.1
NA
2. Afar 26.2 31.2 39.3 40.1
NA
3. Amhara 112.4 112.5 104.9 104.2
NA
4. Oromia 91.4 89.3 88.4 94.8
NA
5. Somali 32.7 35 65.6 61.3
NA
6. Ben.Gumuz 112.3 112.1 114.6 119.7
NA
7. SNNPR102.9 101 97.3 102.6
NA
8. Gambella 121.4 112.5 125.1 132NA
National Bank of Ethiopia Annual Bulletin
25
Indicator 2007/08 2008/09 2009/10 2010/11 2011/12
(2000) (2001) (2002) (2003) (2004)NA
9. Harari 108.4 107.9 95.3 91.5 NA
10. A.A 114.3 109.2 107.3 103.1 NA
11. Dire Dawa 86.3 92.1 91.3 89.1 NA
Primary net enrolment rate (%) 83.4 83 82.1 85.3 85.4
No. of students registered in the first cycleprimary schools(1-4) (in millions) 10.7 10.6 10.5 11.3 11.4
No. of students registered in the second cycleprimary schools(5-8) (in millions) 4.6 5 5.3 5.5 5.7
Number of students registered in the first cyclesecondary schools(9-10) (in millions) 1.3 1.4 1.5 1.5 1.4
Completion rate of primary school (%) 44.7 43.6 47.8 49.4 52.1
Girls/boys ratio in primary schools (%) 87 89.7 91 90.4 92
Grade 1-8(primary) repetition rates (%) 6.7 6.7 4.9 8.5 8.5
Primary school dropout rate (%) 14.6 18.6 13.1 16.3 NA
1st grade dropout rate (%) 18.3 22.9 28.1 19.9 25.0
Secondary Education
Number of secondary schools (urban,rural) 1,087 1,197 1,335 1,517 1,710
Urban 904 976 1,053 1,053 NA
Rural 183 209 298 339 NA
Secondary enrolment (in thousands) 1,501 1,588 1,696 1,760 1,766
Gross enrolment rate in (9-10 grades)(%) 37.1 38.1 39.1 38.4 36.9
Number of students registered in the secondcycle secondary schools(11-12)(in millions ) 0.2 0.21 0.24 0.29 0.32
Preparatory admission 100,651 118,289 142,781 NA NA
Girls/boys ratio in secondary schools (%) 63 67 0.75 79 0.84
Girls/boys ratio in(9-10) 0.65 0.72 0.78 0.81 0.86
Girls/boys ratio in (11-12) 0.48 0.4 0.56 0.83 0.75
National Bank of Ethiopia Annual Bulletin
26
Indicator 2007/08 2008/09 2009/10 2010/11 2011/12
(2000) (2001) (2002) (2003) (2004)TVET
Number of TVET centers (public, private,mission) 458 458 448 505 505
TVET enrolment 229,252 308,501 353,420 371,347 330,409
TVET Admission 95,563 NA 95,563 NA NA
Girls/boys ratio inTVET 0.92 0.86 0.8 0.86 0.91
Tertiary level EducationNumber of tertiary level institutions byuniversities (public, private), colleges(public, private) 61 72 90 86 91
Universities 22 22 22 26 32
Student intake capacity of higher educationinstitutions 56,421 NA NA 95,000 NA
Participation of women in higher educationinstitutions (%) 24 22.2 27 27 21.1
Girls/boys ratio in higher education 0.24 0.28 0.36 0.36 0.39
Percentage of female enrolled in undergraduate degree (%) 24.1 29 27 27
22.0
Percentage of female graduated in under-graduate degree (%) 20.6 29.7 23.4 27.2
25.3
Percentage of female enrolled in post-graduate degree 9.6 11.3 11.9 13.8
20.2
Percentage of female graduated in post-graduate degree 10.7 10.5 13.9 14.4
14.0
Pupil/teacher ratio
i. Grade (1-8) 57 54 51 51 50
ii. Grade (9-12) 43 41 36 31 29
iii. TEVT 25 34 NA 29 NA
iv. In higher education NA 28.2 26.8 26.7 25
Pupil/section ratio
i. Grade (1-8) 62 59 57 57 55
ii. Grade (9-12) 74 68 64 58 56.1
National Bank of Ethiopia Annual Bulletin
27
Indicator 2007/08 2008/09 2009/10 2010/11 2011/12
(2000) (2001) (2002) (2003) (2004)
Number of class rooms in primary schools 236,712 247,759 254,744 279,292 NA
7. Pupil-textbook ratio
i. Grade(1-8) 1.5 1.5 1.5 NA NA
ii. Grade(9-12) 1 1 1 NA NA
Pupil-school ratio
i. Grade(1-8) 657 619 573 590 576
ii. Grade(9-12) 1,381 1,345 1270 1160 1,033
iii. TEVT 501 673 788 735 654
Other Indicator
Annual education share to the nationalbudget 22.8 23.6 25.9 17.5 25.3
Source: - Education statistics annual abstract, Ministry of Education & NBE Staff Computation
National Bank of Ethiopia Annual Bulletin
28
II. ENERGY PRODUCTION
2.1 Electric Power Generation
Ethiopia has very large potential for
hydroelectric power and geothermal
energy generation. Nine of its major
rivers are suitable for hydroelectric
power with a total capacity of
generating 45,000 MW. The country
also has vast potential for geothermal
energy.
The Ethiopian Electric Power
Corporation (EEPCo) supplies power
to more than 1,899,685 customers, of
which 9,633 were registered in
2011/12. The country’s installed
electricity generating capacity was
2000 MW in 2010 which is targeted to
increase to 10,000 MW by the end of
2014/15, according to the five year
Growth and Transformation Plan
(GTP).
The Ethiopian Electric Power
Corporation is a public enterprise
mandated with the task of generating,
transmitting, distributing, and selling
electricity. The Corporation generates
electricity through two different power
supply systems, namely, the Inter
Connected System (ICS) and Self
Contained System (SCS).
The ICS, which is largely generated by
hydropower plants, constitutes the
major source of electric power in
Ethiopia. The SCS system merely
contributed about 0.2 percent in
2011/12 (Fig.II.1).
National Bank of Ethiopia
29
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
ICS share in% 98.3 99.1 99.1 98.6 98.2 98.2 98.8 99.2 99.0 98.8 99.5 99.8
SCS share in% 1.7 0.9 0.9 1.4 2.0 1.8 1.2 0.8 1.0 1.2 0.5 0.2
0.0
20.0
40.0
60.0
80.0
100.0
120.0
Share
Year
Fig.II.1 Trends in Share of ICS and SCS in Total Power Generation
ICS share in% SCS share in%
Source: Ethiopian Electric and Power Corporation
The total amount of electric power
generated during 2011/12 was 6.3
million KWH, 26.2 percent higher than
a year ago. About 99.3 percent of the
electric power was generated through
hydropower and the remaining 0.7
percent from thermal, wind and
geothermal sources (Table 2.1).
The coverage of electricity is expected
to scale up by 75 percent to 8000 mw
in 2015 compared to 2000mw in 2010.
In addition, the number of customers
accessing electric power is envisaged
to double to 4 million during the same
period.
Currently, the number of towns and
cities having access to electricity has
reached 5,637 of which 474 towns
were added in 2011/12.
National Bank of Ethiopia Annual Bulletin
30
Table 2.1: Electric Power Generation in ICS and SCS(In 000 KWH)
Source2009/10 Share
in %2010/11 Share
in %2011/12 Share
in %Percentage Change
[A] [B] [C] [C/A] [C/B]
ICS
Hydro Power 3,418,610 87.5 4,922,069 98.8 6,239,288.9 99.3 82.5 26.8
Thermal Power 418,170 10.7 13,716 0.3 0.0 0.0 -100 -100
Geothermal 23,522 0.6 19,267 0.4 7,979.9 0.13 -66.1 -58.6
Wind 0.0 0.0 0.0 0.0 S 0.47 - -SubTotal 3,860,302 98.8 4,955,052 99.5 6,276,525.2 99.8 62.6 26.7
SCS
Hydro Power 20,113 0.5 9,351 0.2 1,715.7 0.1 -91.5 -81.7
Thermal Power 24,960 0.6 16,094 0.3 8,180.4 0.1 -67.2 -49.2
Geothermal
SubTotal 45,073 1.2 25,445 0.5 9,896.2 0.2 -78.0 -61.1
Total
Hydro Power 3,438,723 88.1 4,931,420 99.0 6,241,004.6 99.3 81.5 26.6
Thermal Power 443,130 11.3 29,810 0.6 8,180.4 0.13 -98.2 -72.6
Geothermal 23,522 0.6 19,267 0.4 7,979.9 0.13 -66.1 -58.6
Wind 0.0 0.0 0.0 0.0 29,256.3 0.47 - -
GrandTotal 3,905,375 100.0 4,980,497 100.0 6,286,421.3 100.0 61.0 26.2
Source: Ethiopian Electric and Power Corporation
Volume and Value of Petroleum Imports
In 2011/12, about 2.14 million metric
tons of petroleum products worth Birr
36.7 million were imported into the
country. Total value of petroleum
product imports surged by 37.3 percent
was mainly due to an increase in import
bill of gas oil (59.8 percent), regular
gasoline (49.4 percent) and fuel oil (54.2
percent). The total volume of petroleum
imports increased by 12.6 percent solely
due to higher volume of gas oil (24.3
percent) and regular gasoline (4.7
percent) despite marginal reduction in
volume of fuel oil (4.3 percent) and jet
fuel (2.7 percent) (Table 2.2).
National Bank of Ethiopia Annual Bulletin
31
Table 2.2: Volume and Value of Petroleum Imports
(Volume in MT and value in ‘ooo Birr)
Products
2010/11 2011/12Percentage
ChangeVolume Value Volume Value
[A] [B] [C] [D] [C/A] [D/B]
Regular Gasoline (MGR) 143,878.8 1,743,315.0 150,619.1 2,604,584.2 4.7 49.4
Jet Fuel 559,522.5 9,738,630.0 544,519.6 9,795,246.5 -2.7 0.6
Fuel Oil 150,968.0 1,171,276.2 144,501.3 1,805,728.2 -4.3 54.2
Gas Oil (ADO) 1,047,862.0 14,096,853.0 1,302,451.2 22,531,329.0 24.3 59.8
Total 1,902,232.0 26,750,074.0 2,142,091.2 36.736,887.6 12.6 37.3
Source: Ethiopian Petroleum Enterprise
Source: Ethiopian Petroleum Enterprise
National Bank of Ethiopia Annual Bulletin
32
0
5,000
10,000
15,000
20,000
25,000
2001/022002/032003/042004/052005/062006/072007/082008/092009/102010/112011/12
Value in birr
Year
Fig. II.3 Trends in Value of Petroleum Imports (1000 birr)
MGR Jet Fuel Fuel Oil Gas Oil
Source: Ethiopian Petroleum Enterprise
As the international oil prices tended to
increase domestic retail prices were also
adjusted upwards during 2011/12.
Accordingly, the retail prices in Addis
Ababa increased on average by 25.7
percent for gas oil, 23 percent for regular
gasoil, 21.8 percent for fuel oil and 16.1
percent for kerosene (Table 2.3)
National Bank of Ethiopia Annual Bulletin
33
Table 2.3 : Annual Retail Prices of Petroleum Products in Addis Ababa ( Birr / liter)
Year Quarter MGR Fuel Oil Gas Oil Kerosene
2006/07
Qtr.1 7.60 4.20 5.20 3.90Qtr.2 8.00 5.60 5.40 4.10Qtr.3 7.70 5.20 5.40 4.10Qtr.4 7.70 5.20 5.40 4.10
Average 7.80 5.00 5.40 4.10
2007/08
Qtr.1 7.80 4.10 5.40 4.10Qtr.2 7.80 4.10 5.40 4.10Qtr.3 9.60 5.90 6.90 5.70Qtr.4 9.60 5.90 6.90 5.70
Average 8.70 5.00 6.20 4.90
2008/09
Qtr.1 9.61 5.89 6.90 5.72Qtr.2 9.61 7.40 9.40 7.50Qtr.3 8.14 5.90 7.81 6.00Qtr.4 8.20 5.80 7.30 5.70
Average 8.89 6.25 7.85 6.23
2009/10
Qtr.1 9.67 8.10 8.45 7.46Qtr.2 12.33 9.53 10.15 8.88Qtr.3 12.99 9.88 10.53 9.29Qtr.4 13.10 9.87 10.72 9.50
Average 12.02 9.34 9.96 8.78
2010/11
Qtr.1 13.14 10.08 10.98 9.75Qtr.2 15.10 11.64 12.87 11.43Qtr.3 17.14 12.98 14.75 12.92Qtr.4 20.94 14.09 17.73 14.05
Average 16.58 12.20 14.08 12.04
2011/12
Qtr.1 20.94 14.09 17.73 14.05Qtr.2 19.81 14.84 17.28 13.95Qtr.3 20.42 15.27 17.89 13.95Qtr.4 20.42 15.27 17.89 13.95
Average 20.40 14.86 17.70 13.98Annualpercentagechange 23.0 21.8 25.7 16.1
Source: Ethiopian Petroleum Enterprise
National Bank of Ethiopia Annual Bulletin
34
Fig.II.4 Trends in Addis Ababa Retail Fuel Prises(Birr/liter)
Source:Ethiopian Petroleum Enterprise
National Bank of Ethiopia Annual Bulletin
35
III. PRICE DEVELOPMENTS
3.1. Developments in National Consumer Price
Annual average headline inflation at the
end of the fiscal year 2011/12 was 34.1
percent, 16 percentage point higher than
the previous year level. This was largely
due to significant increase in food price
inflation which contributed the 14.9
percentage points to the total annual
change in headline inflation (Table 3.1).
Meanwhile, annualized food inflation,
scaled up significantly to 42.9 percent
and depicted a 27.2 percentage point
increment over the preceding year as a
result of a price hike in most of the food
items except oil and fats, spices and non –
alcoholic beverage and coffee.
Similarly, annual average core inflation
slightly increased to 22.4 percent from
21.8 percent a year ago as a result of
higher prices of all non-food components
(Table 3.1 and Fig.III.1).
On contrary, year-on-year, headline
inflation slowed down to 20.8 percent
from 38.0 percent a year ago as both food
and non-food price inflation registered
19.9 and 12 percentage points decline,
respectively. Annual food inflation,
which was 45.3 percent in June 2011,
declined to 25.4 percent in June 2012
while annual core inflation dropped to
15.8 percent from 27.8 over the same
period (Fig III.2).
Table 3.1: Annual Average Inflation Rates (in percent)ConsumptionItems
2010/11 2011/12 Change (inPercentage Points)
Contribution to Change inHeadline Inflation (in PercentagePoints)
A B B-A CGeneral 18.1 34.1 16.0 16.0
Food 15.7 42.9 27.2 14.9
Non-Food 21.8 22.4 0.6 1.1Source: CSA and NBE Staff Computation
National Bank of Ethiopia Annual Bulletin
36
Source:CSA and NBE Staff computation
Source:CSA and NBE Staff computation
National Bank of Ethiopia Annual Bulletin
37
3.2 Consumer Price Developments in Regional States
At the end of 2011/12, the regional
average general inflation picked up to
32.7 percent from 16.4 percent a year
earlier. Amhara, Oromia, SNNP,
Gambella and Beni-shangul Gumz
regional states registered higher headline
inflation than the regional simple
average. Beni-shangul Gumz saw the
highest surge in headline inflation (32.9
percentage point) while the lowest (5.4
percentage point) rise was recorded in
Addis Ababa (Table 3.2).
Table 3.2: Regional Average Annual Inflation
Regions
2010/11 2011/12 Change
General FoodNonFood
General FoodNonFood
General FoodNonFood
A B C D E F G=D-A H=E-B I=F-C
Tigray 9.7 5.3 16.9 31.1 33.6 28.4 21.4 28.2 11.5
Afar 19.6 13.8 27.2 29.2 37.0 23.9 9.6 23.2 -3.3
Amhara 15.9 11.8 24.0 33.8 42.0 20.7 17.9 30.2 -3.4
Oromia 19.8 18.4 22.0 36.4 44.4 25.1 16.6 26.0 3.1
Somali 20.8 21.3 19.6 29.2 30.5 26.9 8.4 9.3 7.3
SNNP 19.7 18.8 21.1 38.2 49.1 24.0 18.5 30.3 3.0
Harari 19.2 20.5 17.5 28.0 36.8 21.1 8.8 16.3 3.6
Gambela 11.3 8.3 15.9 40.9 55.3 20.2 29.6 47.0 4.3
Dire Dawa 14.7 13.2 16.7 24.5 32.2 14.4 9.8 19.0 -2.3
B. Gumuz 10.7 4.0 17.9 43.6 67.5 21.7 32.9 63.5 3.8
A.A 19.4 14.8 23.5 24.8 30.6 21.1 5.4 15.9 -2.4
Mean 16.4 13.7 20.2 32.7 41.7 22.5
Standard dev. 4.2 5.9 3.6 6.4 11.7 3.8
Coeff. of Var. 0.3 0.4 0.2 0.2 0.3 0.2
Source: CSA and NBE Staff Computation
National Bank of Ethiopia Annual Bulletin
38
Source: CSA and NBE Staff Computation
The regional average food inflation
significantly increased to 41.7 percent by
the end of June 2012 compared to last
year. Food inflation higher than the
regional simple average was registered in
Oromia, Amhara, SNNP, Gambella and
Beni-shangul Gumz (Table 3.2).
The highest increase in food inflation was
registered in Beni-shangul (63.5
percentage points); and the lowest in
Somali (9.3 percentage points). Over the
two-year period (2010/11 to 2011/12),
food price instability was high in most of
the regions.
Source: CSA and NBE Staff Computation
National Bank of Ethiopia Annual Bulletin
39
Likewise, the average regional non-food
inflation stood at 22.5 percent at June
2012. Non-food inflation stood above the
average level in SNNP, Oromia, Tigray,
Somali and Afar (Table 3.2).
The highest rise in non-food inflation was
recorded in Tigray (11.5 percentage
points), while the higher decline
registered in Amhara (-3.4 percentage
points).
Source: CSA and NBE Staff Computation
Regarding inflation rate disparity across
regions which is measured by the change in
coefficient of variation3 between 2010/11
and 2011/12 indicated that no significant
change were observed apparently due to the
growing regional market integration as
transportation and communication facilities
have been improved.
3Coefficient of variation is the ratio of standard deviation to mean.
National Bank of Ethiopia Annual Bulletin
40
IV. MONETARY AND FINANCIAL DEVELOPMENTS
4.1. Monetary Developments and Policy
During the year under review, Ethiopia’s
monetary policy continued to focus on
containing inflationary pressure.
Accordingly as a result of prudent fiscal
and tight monetary policies as well as other
administrational measures coupled with
slow down in global food and fuel prices ,
the year-on-year headline inflation dropped
to 20.5 percent by end 2011/12 compared
to 38 percent last year.
Developments in Monetary Aggregates
As at end of the 2011/12 domestic
liquidity, as measured by broad money
supply (M2), reached Birr 189.4 billion
reflecting a 30.3 percent growth, over the
same period last year. This was largely
attributed to the 39.5 percent surge in
domestic credit offsetting the 28.4 percent
decline in net foreign assets. Of the
components of domestic credit, credit to
non-central government sector grew
remarkably by 56.7 percent while credit to
central government slow down by 24.8
percent. This was consistent with the
government’s policy of promoting private
sector development as well as prudent
fiscal policy nit to borrow from the Central
Bank in a bid to fight inflationary pressure.
Fiscal year 2011/12 also witnessed a 30
percent growth in broad money. Narrow
money rose by 24.5 percent due to higher
demand deposits and currency outside
banks reflecting the growth in economic
activities and improvement in transactions
demand for money. Similarly, quasi-money
that comprises savings and time deposits
went up by 36.6 percent and reached Birr
94.5 billion owing to improved financial
intermediation by banks partly through
opening up of 319 new branches.
National Bank of Ethiopia Annual Bulletin
41
Table 4.1: Components of Broad Money(In Million of Birr)
ParticularsYear Ended June 30 Annual Percentage Change2008/09 2009/10 2010/11 2011/12 2008/09 2009/10 2010/11 2011/12
Narrow Money Supply 42,112.7 52,434.6 76,171.0 94,849.9 19.1 24.5 45.3 24.5
. Currency Outside Banks 19,715.0 24,206.8 32,574.9 38,537.1 11.7 22.8 34.6 18.3
. Demand Deposits (net) 22,397.6 28,227.8 43,596.1 56,312.7 26.6 26.0 54.4 29.2
Quasi-Money 40,397.1 51,997.8 69,206.0 94,548.9 23.0 28.7 33.1 36.6. Savings Deposits 37,148.7 48,041.6 64,539.6 82,487.8 26.0 29.3 34.3 27.8. Time Deposits 3,248.4 3,956.2 4,666.4 12,061.1 -3.2 21.8 18.0 158.5
Broad Money Supply 82,509.8 104,432.4 145,377.0 189,398.8 21.0 26.6 39.2 30.3Source: NBE
02,0004,0006,0008,000
10,00012,00014,00016,00018,00020,00022,00024,000
02/03 04/05 06/07 08/09 10/11
(In M
illio
ns o
f Birr
)
Fig IV.1: Major Components of Broad Money(2002/03 - 2011/12)
Currency Outside Banks Net Demand Deposit Quasi- Money
Broad Money
Year
Source: NBE
National Bank of Ethiopia Annual Bulletin
42
Table 4.2: Factors Influencing Broad Money(In Millions of Birr)
Particulars
Year Ended June 30 Annual Percentage Change
2008/09 2009/10 2010/11 2011/12 2008/09 2009/10 2010/11 2011/12External Assets (net) 17,976.8 27,189.8 55,534.7 39,787.7 54.1 51.2 104.2 -28.4
Domestic Credit 89,203.0 104,413.5 135,553.9 189,080.8 11.5 17.1 29.8 39.5. Claims on Central Gov't (net) 32,786.5 33,013.1 28,651.7 21,557.4 -0.9 0.7 -13.2 -24.8
. Claims on Non-Central Gov't 56,416.5 71,400.4 106,902.2 167,523.4 20.3 26.6 49.7 56.7Other Items (net) 24,670.1 27,170.9 45,711.6 39,469.7 5.2 10.1 68.2 -13.7
Broad Money (M2) 82,509.8 104,432.4 145,377.0 189,398.8 21.0 26.6 39.2 30.3Source: NBE
Source: NBE
National Bank of Ethiopia Annual Bulletin
7
4.1.2. Developments in Reserve Money and Monetary Ratios
During the year under review, reserve
money or base money went down by 4.4
percent over last year due to 32.6 percent
decline in deposits of banks at the NBE
offsetting a 17.1 percent rise in currency
in circulation. The drop in reserve
money was also attributed to a 35.3
percent decline in NBE’s net foreign
asset outweighing12.2 percent rise in
domestic credit. Excess reserves of
commercial banks decreased to Birr 3.7
billion from Birr 7.3 billion last year
reflecting the slow down in deposits of
commercial banks at the NBE as a result
of their active participation in the
weekly T-bills market.
The ratio of M2/GDP, an indicator of
financial deepening, went up by 13.7
percent to 0.32 percent in 2011/12,
partly indicating the tight monetary
policy measures taken in order to
mitigate the inflationary pressure.
Compared to last year same period, the
money multiplier defined as narrow
money to reserve money and broad
money to reserve money also slightly
increased reflecting increased deposit
mobilization by commercial banks.
National Bank of Ethiopia Annual Bulletin
44
Table 4.3: Reserve Money and Monetary Ratios(In Millions of Birr)
Particulars
Year Ended June 30 Annual Percentage Change
2008/09 2009/10 2010/11 2011/12 2008/09 2009/10 2010/11 2011/12
Reserve Requirement (CB's) 11,183.3 14,368.0 20,495.2 18,080.6 22.7 28.5 42.6 -11.8
Actual Reserve (CB's) 19,569.4 20,620.9 27,757.3 21,791.8 28.5 5.4 34.6 -21.5
Excess Reserve (CB's) 8,386.0 6,252.9 7,262.1 3,711.3 37.0 -25.4 16.1 -48.9
Reserve Money 45,107.0 49,424.5 69,043.1 65,972.6 26.9 9.6 39.7 -4.4
. Currency in Circulation 23,836.4 28,802.9 39,100.6 45,785.2 17.9 20.8 35.8 17.1. Bank Deposits 21,270.7 20,621.5 29,942.5 20,187.4 38.7 -3.1 45.2 -32.6
Money Multiplier (Ratio):. Narrow Money to Reserve
Money 0.9 1.1 1.1 1.4 -6.1 13.6 4.0 30.3. Broad Money to Reserve
Money 1.8 2.1 2.1 2.9 -4.6 15.5 -0.3 36.3Other Monetary Ratios (%):
. Currency to Narrow Money 46.8 46.2 42.8 40.6 -6.3 -1.4 -7.4 -5.0
. Currency to Broad Money 23.9 23.2 22.4 20.3 -7.7 -3.0 -3.3 -9.2. Narrow Money to Broad
Money 51.0 50.2 52.4 50.1 -1.6 -1.6 4.4 -4.4. Quasi Money to Broad Money 49.0 49.8 47.6 49.9 1.7 1.7 -4.4 4.9
M2/GDP Ratio* 0.25 0.27 0.28 0.32 -10.4 10.9 4.3 13.7
Source: NBE
* M2/GDP ratio was calculated on the basis of new GDP series.
Source: NBE
National Bank of Ethiopia Annual Bulletin
45
4.2. Developments in Interest Rate
In 2011/12 the minimum interest rate on
saving deposit was 5 percent and the
maximum 5.75 percent. Consequently,
average interest rate on savings deposit
remained at 5.4 percent.
On the other hand, the weighted annual
average interest rate on time deposit
increased to 5.73 percent from 5.49
percent last year. Average lending rate,
however, remained at 11.88 percent.
All rates including yield on T-Bills were
negative against the year-on-year
headline inflation of 20.9 percent during
the review fiscal year.
National Bank of Ethiopia
46
Table 4.4: Interest Rate Structure of Commercial Banks
(In % per annum)
Rates 2002/03 2003/04 2005/06 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12
Deposit Rate
Savings Deposit
Minimum 3.00 3.00 3.00 3.00 3.00 4.00 4.00 4.00 5.04 5.00
Maximum 3.15 3.15 3.15 3.15 3.15 4.15 5.00 5.00 5.75 5.75
Average* 3.08 3.08 3.08 3.08 3.08 4.08 4.50 4.50 5.40 5.40
Time deposit
Up to 1 year 3.35 3.40 3.60 3.60 3.64 4.67 4.12 4.56 5.37 5.65
1 -2 years 3.62 3.64 4.01 4.01 4.11 5.23 4.48 4.80 5.51 5.74
Over 2 years 3.82 3.84 4.30 4.30 4.49 5.59 4.73 5.01 5.60 5.78
Average* 3.60 3.62 3.97 3.97 4.08 5.16 4.44 4.79 5.49 5.73
Demand Deposit(Average*) 0.04 0.05 0.06 0.06 0.06 0.04 0.06 0.06 0.06 0.03
Lending Rate
Minimum 7.00 7.00 7.00 7.00 7.00 8.00 8.00 8.00 7.50 7.50
Maximum 14.00 14.00 14.00 14.00 14.00 15.00 16.50 16.50 16.25 16.25
Average* 10.50 10.50 10.50 10.50 10.50 11.50 12.25 12.25 11.88 11.88
Real Rate of Interest
Deposit 1/ -14.70 0.70 -7.73 -7.73 -12.03 -51.13 1.80 1.70 -12.70 -28.3
Deposit 2/ 1.98 0.48 -7.93 -7.93 -7.83 -19.13 -10.50 -13.70 -16.40 -17.20
Lending/1 -7.27 8.12 -0.30 -0.30 -4.60 -43.70 9.55 13.70 -6.23 -21.80
T-bills (Nominal) 1.31 1.05 0.04 0.04 0.50 0.67 0.80 0.89 1.31 1.92
Source: NBE
1/ Real saving deposit interest rates and real lending rates computed based on average headline inflation.
2/ Real saving deposit interest rates computed based on average core inflation
It is simple average for saving deposit and lending rates, while weighted mean for time and demand deposits .As a result,the movements in the average interest rate on time and demand deposits reflect the change in the proportion of commercial bankdeposits that would pay higher interest rate on time and demand deposits, rather than the change in interest rate.
National Bank of Ethiopia
47
0.002.004.006.008.00
10.0012.0014.00
Val
ue in
%
Years
Fig. IV.4: Interest Rate Structure of Commercial Banks
Average Saving Deposit Rate Average Time Deposit Rate Average Lending Rate
Source: NBE
4.3: Developments in Financial Sector
The major financial institutions operating in
Ethiopia are banks, insurance companies and
micro-finance institutions. The number of
banks operating in the country during the
fiscal year reached 17, of which 14 were
private, and the remaining 3 state-owned.
During the fiscal year, 319 new branches
were opened raising the total branch network
in the country to 1,289 from 970 last year.
As a result, bank branch to population ratio
declined from 65,415.834 people to 62,063.6
in 2011/12.
The significant branch expansion was
undertaken by Commercial Bank of Ethiopia
(CBE) (142 branches), followed by
Construction & Business Bank (50
branches), United Bank (19 branches),
4 Taking total population 84 million
National Bank of Ethiopia
48
Abay Bank (17 branches), Awash
International Bank (16 branches) and Buna
International Bank (14 branches). Hence, the
share of private banks branch network was
47.6 percent at the end of 2011/12 slightly
down from 50.2 percent last year due to
aggressive branch expansion by CBE.
The number of bank branches in Addis
Ababa, reached 430 showing 23.2 percent
growth last year, indicating the booming
economic activities in the central city.
Following significant capital injection by
private banks, mainly Nib International Bank
(Birr 259 million), Dashen Bank (Birr 229
million), Wegagen Bank (Birr 176 million),
Bank of Abyssinia (Birr 159 million) and
Awash International Bank (Birr 153
million), the total capital of the banking
industry increased by 12.9 percent to Birr 18
billion by the end of June 2012. As a result,
the share of private banks in total capital
rose to 49.3 percent from 45.3 percent same
period last year. On the other hand, the share
of public banks in total capital was 50.7
percent with CBE taking up to 34.6 percent.
In the meantime, the number of insurance
companies increased to 15 from 14 last year.
The number of branches also rose to 243
following the opening of 22 additional
branches. Major expansion of branches was
undertaken by Berhan Insurance S.C. (6
branches) followed by Ethiopian Insurance
Corporation (5 branches), Oromia Insurance
S.C. and Tsehay Insurance S.C. each with
three branches.
About 53.1 percent of insurance branches
were located in Addis Ababa. Ownership
wise, private insurance companies accounted
for 81.1 percent of the total branches.
National Bank of Ethiopia
49
At the same time, the total capital of
insurance companies increased by 25.6
percent to Birr 1.2 billion in 2011/12. Private
insurance companies accounted for 73.3
percent of the total capital while one public
insurance company alone accounted for 26.7
percent.
Source: Commercial Banks
National Bank of Ethiopia
50
Table 4.5: Capital and Branch Network of the Banking System at the Close of June 30, 2012
(Branch in Number and Capital in Million Birr)
Banks
Branch Network Capital
2010/11 2011/12 2010/11 2011/12
Regions AddisAbaba Total %
Share Regions AddisAbaba Total %
ShareTotalCapital
%Share
TotalCapital
%Share
1. Public BanksCommercial Bank ofEthiopia 323 94 417 43.0 448 111 559 43.4 6,262.0 39.3 6,231.0 34.6Construction & BusinessBank 17 17 34 3.5 53 31 84 6.5 277.0 1.7 363.0 2.0Development Bank ofEthiopia 31 1 32 3.3 31 1 32 2.5 2,179.0 13.7 2,540.0 14.1
Total Public Banks 371 112 483 49.8 532 143 675 52.4 8,718.0 54.7 9,134.0 50.7
2. Private BanksAwash International Bank 36 34 70 7.2 39 47 86 6.7 1,104.0 6.9 1,257.0 7.0
Dashen Bank 31 34 65 6.7 38 37 75 5.8 1,152.0 7.2 1,381.0 7.7
Bank of Abyssinia 25 32 57 5.9 29 32 61 4.7 532.0 3.3 691.0 3.8
Wegagen Bank 29 24 53 5.5 33 27 60 4.7 1,093.0 6.9 1,269.0 7.0
United Bank 18 32 50 5.2 29 40 69 5.4 748.0 4.7 785.0 4.4
Nib International Bank 19 32 51 5.3 20 38 58 4.5 983.0 6.2 1,242.0 6.9Cooperative Bank ofOromiya 38 5 43 4.4 45 6 51 4.0 207.0 1.3 338.0 1.9
Lion International Bank 17 13 30 3.1 19 17 36 2.8 318.0 2.0 357.0 2.0
Oromia International Bank 25 11 36 3.7 29 12 41 3.2 265.0 1.7 393.0 2.2
Zemen Bank 0 3 3 0.3 3 4 7 0.5 193.0 1.2 290.0 1.6
Buna International Bank 2 9 11 1.1 14 11 25 1.9 220.0 1.4 257.0 1.4
Berhan International Bank 3 7 10 1.0 7 8 15 1.2 138.0 0.9 211.0 1.2
Abay Bank 7 1 8 0.8 21 4 25 1.9 161.0 1.0 250.0 1.4
Addis International Bank n/a n/a 0 0.0 1 4 5 0.4 117.0 0.7 155.0 0.9
Total Private Banks 250 237 487 50.2 327 287 614 47.6 7,231.0 45.3 8,876.0 49.3
3.Grand Total Banks 621 349 970 100 859 430 1,289 100.0 15,949.0 100 18,010.0 100
Source: Commercial Banks
National Bank of Ethiopia
51
Table.4.6: Branch Network & Capital of Insurance Companies at a close of June 2012.(Branch in Number and Capital in Million Birr)
No. Insurance Companies
Branch Capital
2010/11 2011/12 2010/11 2011/12 %Change
A.A Regions Total A.A Region
s Total A B B/A
1 Ethiopian Insurance Corporation. 11.0 30.0 41 11 35 46 291.0 321.0 10.3
2 Awash Insurance S.C. 18.0 11.0 29 20 11 31 89.0 113.9 27.9
3 Africa Insurance S.C. 6.0 7.0 13 6 7 13 81.0 96.7 19.5
4 National Ins. Co. of Eth. 8.0 8.0 16 9 8 17 27.9 52.5 87.8
5 United Insurance S.C 15.0 8.0 23 15 8 23 88.0 121.9 38.4
6 Global Insurance S.C 6.0 4.0 10 6 4 10 27.8 29.8 7.1
7 Nile Insurance S.C 11.0 10.0 21 11 10 21 100.3 122.9 22.6
8 Nyala Insurance S.C 8.0 8.0 16 10 8 18 96.3 126.0 30.8
9 Nib Insurance S.C 14.0 8.0 22 14 8 22 87.4 102.7 17.5
10 Lion Insurance S.C 6 5 11 6 5 11 17.3 35.2 103.3
11 Ethio-Life Insurance S.C. 0.0 0.0 - 0 0 - 4.9 5.3 7.4
12 Oromia Insurance S.C. 8 8 16 11 8 19 23.9 39.6 65.4
13 Abay Insurance S.C. 1 2 3 1 2 3 11.4 10.4 -8.6
14 Berhan Insurance S.C - - - 6 0 6 9.4 11.4 20.8
15 Tsehay Insurance S.C - - - 3 0 3 0.0 10.9 -
16 Total 112.0 109.0 221.0 129 114 243 955.7 1,200.1 25.6Source: Insurance Companies
Note: A.A represents Addis Ababa
National Bank of Ethiopia
52
Source: Insurance Companies
By the end of 2011/12, the number of
Micro-finance Institutions (MFIs) operating
in the country was 33. Their total capital and
total asset remarkably increased by 27.5 and
31 percent and reached Birr 3.8 billion and
Birr 13.3 billion, respectively.
Similarly their deposit mobilization and
credit extension have witnessed a significant
growth. Compared to last year, their
deposits went up by 44.2 percent to Birr 5.4
billion while their credit provision rose by
32.9 percent to Birr 9.3 billion.
The four largest MFI namely Amhara,
Dedebit, Oromia and Omo Crediit and
Savings institution accounted for 75.4
percent of the total capital, 88.0 percent of
the savings, 82.7 percent of the credit and
82.7 percent of the total assets of MFIs at
the end of 2011/12, reflecting the existence
of low competition in the industry.
National Bank of Ethiopia
53
Table 4.7: Microfinance Institutions Performance as of June 2012(In Thousands of Birr)
Micro-Financing Institutions 2010/11 2011/12 Percentage Change
A B B/A
Total Capital 2,945,970.0 3,755,479.9 27.5
Saving 3,779,089.0 5,450,593.5 44.2
Credit 6,991,986.0 9,289,642.6 32.9
Total Assets 10,156,387.0 13,308,200.1 31.0
Source: Microfinance Institutions
4.3.1 Resource Mobilization by Banks
The total resource mobilized by the
banking system in the form of deposit,
loan collection and borrowing increased
by 16.6 percent and reached Birr 89.2
billion at the end of 2011/12.
Spurred by remarkable branch
expansion, deposit liabilities of the
banking system reached Birr 187.3
billion reflecting annual growth rate of
33.3 percent over last year. Component
wise, time deposits registered a
significant increase (143 percent)
followed by demand deposits (30.2
percent), and saving deposits (27.8
percent). Demand deposits accounted for
49.3 percent of the total deposits
followed by saving deposits (44 percent)
and time deposit (6.7 percent).
The surge in demand deposit over saving
deposit indicates the relative increase in
transaction demand for money. At the
same time the rise in saving deposits
reflects the ever growing financial
intermediation of banks
Despite the opening of 127 new branches
by private commercial banks, the share
of private banks in deposit mobilization
slightly went down to 31.9 percent from
33.3 percent last year. CBE alone
mobilized 65.9 percent of the total
deposit due to its wider branch network.
Raising funds through borrowing by the
banking industry was not an important
source of resource mobilization as most
of the banks were sufficiently liquid due
to the surge in deposit mobilization and
National Bank of Ethiopia
54
collection of loans. As a result, total
outstanding borrowing at the end of the
fiscal year reached Birr 16.9 billion
in2011/12 up from Birr 9.7 billion a year
earlier. Of the total borrowing, domestic
sources accounted for 93.9 percent, while
foreign sources took the remaining
balance.
Loan collection by the banking system
stood at Birr 35.2 billion 15.2 percent
higher than last year. More than half of
52.5 percent of the loan was collected by
public banks
National Bank of Ethiopia
55
Table 4.8: Annual Resource Mobilization & Disbursement Activities of Commercial Banksand DBE (Specialized Bank) During 2011.
(In Million Birr)
Particulars
2009/10 2010/11 2011/12PercentChange
PublicBanks
PrivateBanks
Total(A)
PublicBanks
PrivateBanks
Total(B)
PublicBanks
PrivateBanks Total (C) C/A C/B
1. Deposits (net change) 11,863.0 8,618.4 20,481.4 30,423.2 11,475.2 41,898.4 37,004.6 9,754.3 46,758.9 128.3 11.6
Demand 6,813.9 2,067.9 8,881.8 19,721.7 4,971.7 24,693.4 19,199.2 2,213.2 21,412.4 141.1 (13.3)
Savings 4,574.5 6,322.0 10,896.6 10,114.6 6,364.2 16,478.8 12,049.3 5,916.5 17,965.9 64.9 9.0
Time 474.5 228.5 703.0 586.9 139.3 726.2 5,756.0 1,624.6 7,380.6 949.8 916.3
2. Borrowing (net change) 2,597.5 - 2,597.5 4,041.7 - 4,041.7 7,247.1 - 7,247.1 179.0 79.3
Local 2,266.1 - 2,266.1 4,001.0 - 4,001.0 7,232.4 - 7,232.4 219.2 80.8
Foreign 331.4 - 331.4 40.8 - 40.8 14.7 - 14.7 (95.6) (63.9)
3. Collection of Loans 10,168.0 14,898.8 25,066.8 11,987.8 18,560.4 30,548.2 18,479.9 16,707.6 35,187.4 40.4 15.2
4. Total ResourcesMobilized (1+2+3) 24,628.4 23,517.2 48,145.6 46,452.7 30,035.6 76,488.4 62,731.5 26,461.9 89,193.4 85.3 16.6
5. Disbursement 13,939.3 14,965.8 28,905.1 21,955.8 20,252.0 42,207.9 36,949.2 19,152.9 56,102.1 94.1 32.9
6. Change in Liquidity (4-5) 10,689.2 8,551.4 19,240.5 24,496.9 9,783.6 34,280.5 25,782.4 7,308.9 33,091.3 72.0 (3.5)
Memorandum Item:
7. Outstanding Credit* 33,912.8 17,720.8 51,633.5 50,743.5 26,947.0 77,690.5 79,605.7 36,740.4 116,346.1 125.3 49.8
Source: Commercial Banks &Staff Computation
* Includes government borrowing in the form of bonds and treasury bills from commercial banks and other sectors other than NBE
4.9: Deposits and Borrowings of Commercial Banks and DBE At June 30, 2012(In Million Birr)
Particulars
2009/10 2010/11 2011/12B/A C/B
A B CA. Deposits
-Demand 46149.0 70842.4 92254.8 53.5 30.2-Savings 48049.9 64528.7 82494.6 34.3 27.8-Time 4434.4 5160.6 12541.3 16.4 143.0
T o t a l 98633.3 140531.8 187290.7 42.5 33.3B. Borrowings
-Local 4665.6 8666.5 15898.9 85.8 83.5-Foreign 978.7 1019.4 1034.1 4.2 1.4
T o t a l 5644.2 9686.0 16933.1 71.6 74.8Source: Commercial Banks &Staff Computation
National Bank of Ethiopia
56
4.3.2 New Lending Activities.
Despite the tight monetary policy
measures followed by the National Bank
of Ethiopia, the fiscal year witnessed a
32.9 percent increase in fresh loan
disbursements by banks, (including DBE)
which reached Birr 56.1 billion in
2011/12. This was attributed to enhanced
deposit mobilization and loan collection
of the banks. Of the total new loans
disbursed by the banking system, 34.1
percent was by private banks and
remainder by public banks. The ratio of
new loan disbursement of private banks
to their total deposit was 32.1 percent
while that of public banks was 29
percent.
Regarding loan allocation by sector, 29.4
percent went to industry followed by
agriculture (25.3 percent) and domestic
trade (17.3 percent), with other sectors
taking up the remaining balance. The
share of the new loan disbursement to
real sector (agriculture, industry and
housing & construction) rose from 51.2
percent last year to 63.8 percent in
2011/12 reflecting the shift in loan from
trade and other short term loans towards
the production sector.
Source: Commercial Banks and DBE
National Bank of Ethiopia
57
Table.4.10: Loans and Advances by Lenders 1/ At June 30, 2012(In Million Birr)
Lenders
2010/11 2011/12
Percentage ChangeD* C* O/S* D* C* O/S*
A B C D E F D/A E/B F/CA. Public Banks
1.Commercial Bank of Ethiopia 17796.8 10156.7 34,217.7 31940.3 15718.4 58,327.0 79.5 54.8 70.5
3. Construction & Business Bank 367.2 593.8 1,726.6 460.8 605.4 1,803.1 25.5 2.0 4.4
2.Development Bank of Ethiopia 3791.8 1237.3 11,980.5 4548.1 2156.1 15,120.0 19.9 74.3 26.2
Sub-Total 21,955.8 11,987.8 47,924.8 36,949.2 18,479.9 75,250.1 68.3 54.2 57.0B. Private Banks
4 Awash International Bank 4654.0 4257.3 3994.8 2467.2 2204.7 5511.6 -47.0 -48.2 38.05. Dashen Bank 2912.0 2748.1 6141.7 3632.4 3380.4 8042.0 24.7 23.0 30.96. Bank of Abyssinia 2497.9 2338.4 3315.9 2101.7 1998.0 3897.7 -15.9 -14.6 17.57. Wegagen Bank 2612.0 2640.7 2910.0 2556.5 2370.4 3565.7 -2.1 -10.2 22.58. United Bank 2557.1 2287.4 3277.0 2358.1 2228.6 4085.4 -7.8 -2.6 24.79. Nib International Bank 1645.0 1724.9 2766.5 2093.4 1755.5 3708.2 27.3 1.8 34.010. Cooperative Bank of Oromia 660.2 703.6 799.5 669.0 407.4 1383.5 1.3 -42.1 73.111. Lion International Bank 472.9 514.8 677.0 568.8 454.6 970.8 20.3 -11.7 43.412. Oromia International Bank 649.4 465.4 645.2 786.7 745.8 1012.7 21.2 60.2 57.013. Zemen Bank 817.4 490.0 661.7 579.5 467.6 1019.6 -29.1 -4.6 54.1
14.Berhan International Bank 312.4 192.0 330.0 254.2 165.1 499.6 -18.6 -14.0 51.4
15.Bunna International Bank 309.5 187.0 366.3 472.8 296.5 649.1 52.8 58.6 77.2
16.Abay Bank 152.3 10.8 161.0 453.0 213.4 450.4 197.5 1876.1 179.8
17. Addis International Bank 0.0 0.0 0.0 159.6 19.5 154.2 - - -
Sub-Total 20,252.0 18,560.4 26,046.6 19,152.9 16,707.6 34,950.5 -5.4 -10.0 34.2
Grand Total 42,207.9 30,548.2 73,971.4 56,102.1 35,187.4 110,200.6 32.9 15.2 49.0
Source: Commercial Banks & DBE1. O/S Credit excludes lending to central governmentD*=Disbursement, C*=Collection, O/S*= Outstanding Credit
National Bank of Ethiopia
58
Table 4.11: Percentage Share of Loans and Advances by Lenders at June 30, 2012(In Million Birr)
Lenders
2010/11 2011/12
Percentage changeD* C* O/S* D* C* O/S*
A B C D E F D/A E/B F/C
Public Banks
1.Commercial Bank of Ethiopia 42.2 33.2 46.3 56.9 44.7 52.9 35.0 34.4 14.4
2.Development Bank of Ethiopia 9.0 4.1 16.2 0.8 1.7 1.6 -90.9 -57.5 -89.9
3. Construction & Business Bank 0.9 1.9 2.3 8.1 6.1 13.7 831.8 215.2 487.8
Sub-Total 52.0 39.2 64.8 65.9 52.5 68.3 26.6 33.8 5.4
B. Private Banks4 Awash International Bank 11.0 13.9 5.4 4.4 6.3 5.0 -60.1 -55.0 -7.4
5. Dashen Bank 6.9 9.0 8.3 6.5 9.6 7.3 -6.2 6.8 -12.1
6. Bank of Abyssinia 5.9 7.7 4.5 3.7 5.7 3.5 -36.7 -25.8 -21.1
7. Wegagen Bank 6.2 8.6 3.9 4.6 6.7 3.2 -26.4 -22.1 -17.8
8. United Bank 6.1 7.5 4.4 4.2 6.3 3.7 -30.6 -15.4 -16.3
9. Nib International Bank 3.9 5.6 3.7 3.7 5.0 3.4 -4.3 -11.6 -10.0
10. Cooperative Bank of Oromia 1.6 2.3 1.1 1.2 1.2 1.3 -23.8 -49.7 16.2
11. Lion International Bank 1.1 1.7 0.9 1.0 1.3 0.9 -9.5 -23.3 -3.7
12. Oromia International Bank 1.5 1.5 0.9 1.4 2.1 0.9 -8.9 39.1 5.4
13. Zemen Bank 1.9 1.6 0.9 1.0 1.3 0.9 -46.7 -17.1 3.4
14.Berhan International Bank 0.7 0.6 0.4 0.5 0.5 0.5 -38.8 -25.4 1.6
15.Bunna International Bank 0.7 0.6 0.5 0.8 0.8 0.6 14.9 37.7 18.9
16. Abay Bank 0.4 0.0 0.2 0.8 0.6 0.4 123.8 1615.5 87.8
17. Addis International Bank 0.0 0.0 0.0 0.3 0.1 0.1 0.0 0.0 0.0
Sub-Total 48.0 60.8 35.2 34.1 47.5 31.7 -28.8 -21.9 -9.9
Grand Total 100.0 100.0 100.0 100.0 100.0 100.0 0.0 0.0 0.0
Source: Commercial Banks & DBED*=Disbursement, C*=Collection, O/S*= Outstanding Credit
4.3.3 Outstanding Loans
Total outstanding credit of the banking
system including the central government
increased by 49.8 percent and reached
Birr 116.3 billion at end June 2012. Gross
outstanding claims on the central
government and public enterprises surged
by 65.2 and 102.3 percent, while claims
on the private sector including
cooperatives rose by 32 and 64.1 percent,
respectively.
The sectoral distribution of outstanding
loans indicated that credit to Industry
accounted for 28.8 percent followed by
international trade (21.5 percent) and
agriculture (14.8 percent).
National Bank of Ethiopia
59
Table 4.12: Loans & Advances by Economic Sectors 1
Economic Sectors2010/11 2011/12 Percentage Change
D* C* O/S* D* C* O/S* D* C* O/S*
A B C D E F D/A E/B F/C
Government Deficit Financing 0 0 3,719.1 0 0 6,145.6 - - 65.2
Agriculture 8,248.0 5,114.4 10,575.3 14,175.4 8,686.4 17,165.6 71.9 69.8 62.3
Industry 10,465.2 3,556.5 20,650.5 16,511.9 5,706.6 33,557.3 57.8 60.5 62.5
Domestic Trade 6,733.5 6,148.3 7,261.1 9,700.7 6,548.9 12,074.7 44.1 6.5 66.3
International Trade 10,569.9 9,943.5 18,025.7 7,061.3 7,489.3 25,015.6 (33.2) (24.7) 38.8
Export 5,921.4 6,078.5 7,222.8 2,659.5 2,733.6 10,720.6 (55.1) (55.0) 48.4
Import 4,648.5 3,895.6 10,802.8 4,401.8 4,755.7 14,294.8 (5.3) 22.1 32.3
Hotels and Tourism 395.4 333.1 1,435.5 456.3 433.7 1,650.5 15.4 30.2 15.0
Transport and Communication 1,850.6 1,455.4 3,558.6 1,917.3 1,724.6 4,428.9 3.6 18.5 24.5
Housing and Construction 2,900.9 2,739.5 9,023.1 5,083.4 3,440.1 12,397.4 75.2 25.6 37.4
Mines, Power and Water resource 7.3 14.9 37.2 16.2 16.3 31.9 123.5 9.5 (14.1)
Others 711.9 729.0 3,076.6 907.0 931.4 3,172.3 27.4 27.8 3.1
Personal 311.7 359.4 315.0 183.8 174.6 430.1 (41.0) (51.4) 36.5
Interbank Lending 13.66 123.6 12.9 88.8 35.5 276.4 549.9 (71.3) 2,038.3
Total 42,207.9 30,548.2 77,690.5 56,102.1 35,187.4 116,346.1 32.9 15.2 49.8Source: Commercial Banks including DBE & Staff Computation
D*=Disbursement, C*=Collection, O/S*= Outstanding Credit1/ includes lending to central government
National Bank of Ethiopia
60
Source: Commercial Banks including DBE & Staff Computation
Table 4.13: Loans and Advances by Borrowers1atst June 30, 2012(In Million Birr)
Borrowing Sector
2008/09 2009/10 2010/11 2011/12
Percentage changeO/S* O/S* O/S* D* C* O/S*
A B C E F G G/B G/C
Central Government 5,628.8 7,600.1 3,719.1 - 0.0 6,145.6 -19.1 65.2
Public Enterprises 8,170.8 8,442.7 13,687.9 13,534.5 3,753.4 27,694.9 228.0 102.3
Cooperatives 3,364.5 5,077.8 8,377.5 12,116.3 8,197.2 13,750.2 170.8 64.1
Private & Individuals 34,041.9 40,910.7 51,893.1 30,362.6 23,201.4 68,479.1 67.4 32.0
Inter-bank Lending 427.5 260.9 12.9 88.8 35.5 276.4 6.0 2038.3
Total 51,633.5 62,292.2 77,690.5 56,102.1 35,187.4 116,346.1 86.8 49.8
Total less Inter-bank Lending 51,206.0 62,031.3 77,677.5 56,013.3 35,151.9 116,069.7 87.1 49.4Source: Commercial Banks including DBE & Staff Computation
D*=Disbursement, C*=Collection, O/S*= Outstanding Credit1/ Includes lending to central government
National Bank of Ethiopia
61
4.4 Financial Activities of NBE
By the end of 2011/12, outstanding
claims of NBE on the central government
reached Birr 55.56 billion of which direct
advances stood at Birr 46.3 billion or
83.3 percent of the total claim, while
bond holdings accounted for the
remaining 16.7 percent. By the end of
2011/12, the outstanding claim of NBE
on DBE rose from Birr 9.3 billion to Birr
12.5 billion.
Regarding liabilities of NBE, total
deposits at the NBE dropped by 24.4
percent to Birr 30.8 billion due to lower
deposits of financial institutions and
central government.
Table 4.14: Financial Activities of National Bank of Ethiopia at the Close of June 30, 2012(In Million Birr)
Particulars
2009/10 2010/11 2011/12 % Change
A B C B/A C/B
Loans and Advances (1+2) 45,522.8 61,864.6 68,064.5 35.9 10.01.Claims on Central Government 45,522.8 55,614.6 55,562.5 22.2 -0.1
1.1 Direct Advance 36,044.1 46,265.0 46,264.9 28.4 0.0
1.2 Bonds 9,478.7 9,349.6 9,297.5 -1.4 -0.6
2. Claims on DBE - 6,250.0 12,502.0 - 100.0
3. Deposit Liabilities 27,107.8 40,705.9 30,756.9 50.2 -24.43.1 Government 6,182.5 10,290.9 10,218.4 66.5 -0.7
3.2 Financial Institutions 20,925.3 30,415.0 20,538.5 45.4 -32.5
Source: NBE and Staff Computation
4.5. Developments in Financial Markets
Treasury bill market is the only regular
primary market where securities are
transacted on a weekly basis. There is no
secondary market for the security.
Government bonds are also occasionally
issued to finance government
expenditures and/or to absorb excess
liquidity in the banking system.
National Bank of Ethiopia
62
4.5.1 NBE Treasury Bill Market
The amount of Treasury-bills offered to
the weekly auction market during the
fiscal year reached Birr 96.5 billion,
depicting 15.7 percent annual growth
while total demand increased by 38.4
percent.
The amount of T-bills sold during the
year was Birr 74.7 billion (96.8 percent
of total demand), depicting a 42.8 percent
rise.
Albeit improved participation of banks in
the T-bill market, non-bank institutions
continued to dominate in the market by
holding 88.1 percent of the total
outstanding T-bills. At the end of
2011/12, the total outstanding T-bills
went up by 85.4 percent to Birr 20
billion.
The average weighted yield for all types
of bills increased to 1.87 from 1.13
percent last year. The yields for 28-days,
91-days and 182 days T-bills grew by
73.5, 17.9 and 83.2 percent, respectively
over last year.
National Bank of Ethiopia
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Table 4.15: Results of Treasury Bills Auction at June 30, 2012
Source: NBE
Particulars2009/10 2010/11 2011/12 Percentage Change
A B C C/A C/B
Number of Bidders 280 220 406 45.0 84.5Amount Demanded (Mn.Birr) 51,258.015 55,760.025 77,194.810 50.600 38.4
28-day bill 19,760.000 30,635.000 33,689.070 70.491 9.96991-day bill 27,553.755 22,159.875 28,691.740 4.130 29.476182-day bill 3,944.260 2,965.150 9,748.000 147.144 228.752364-day bill 5,066.000 - -
Amount Supplied (Mn.Birr) 55,203.315 83,390.670 96,511.875 74.8 15.728-day bill 15,110.000 41,575.900 40,023.990 164.884 -3.73391-day bill 28,150.495 35,152.630 35,435.585 25.879 0.805182-day bill 11,942.820 6,662.140 16,652.300 39.434 149.954364-day bill 4,400.000 - -
Amount Sold (Mn.Birr) 41,736.415 52,316.025 74,694.810 79.0 42.8Banks 13,902.000 20,271.275 24,212.670 74.167 19.443Non-Banks 27,834.415 32,044.750 50,482.140 81.366 57.536
Average Weighted Price forSuccessful bids(Birr) 97.017 99.745 98.556 1.586 -1.192
28-day bill 99.943 99.886 99.806 -0.137 -0.08091-day bill 99.757 99.703 99.653 -0.105 -0.051182-day bill 91.352 99.645 97.254 6.461 -2.400364-day bill 97.513 - -
Average Weighted Yeild forSuccessful bids(%) 0.786 1.126 1.866 137.299 65.671
28-day bill 0.750 1.460 2.533 237.809 73.49791-day bill 0.976 1.186 1.399 43.336 17.944182-day bill 0.633 0.732 1.342 112.004 83.201
364-day bill 2.189 - -Outstanding bills at the end ofperiod(Mn.Br.) 11,566.200 10,796.620 20,011.860 73.020 85.353
Banks 4,400.000 900.000 2,383.500 -45.830 164.833Non-Banks 7,166.200 9,896.620 17,628.360 145.993 78.125
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64
4.5.2 NBE Bill Market
On April 4, 2011, NBE introduced NBE
Bill to mobilize resource from banks to
help long term financing of some priority
sectors identified as the driving forces for
over all economic growth. Since its
introduction total NBE bill purchased by
the banking sector reached Birr 12.84
billion at the end of the fiscal year.
Source: NBE
0.00
0.50
1.00
1.50
2.00
2.50
3.00
0.00
20000.00
40000.00
60000.00
80000.00
100000.00
120000.00
Valu
e in
Mill
ions
of B
irr
Year
Fig IV.9:Treasury Bills Auction Result
Demand Supply Average Weighted Yield
National Bank of Ethiopia
65
4.5.3. Bonds Market
In recent years, following the strong
growth in economic activities and real
income, there was strong demand for
corporate bonds. As a result, corporate
bond holdings of CBE increased by 53.5
percent to Birr 61.8 billion in 2011/12
from Birr 40.3 billion a year ago.
Corporate bonds of EEPCO accounted
for 79.2 percent, regional states and DBE
17.8 percent and 3 percent, of total bond
holdings by CBE.
Public institutions and regional
governments are the sole issues of
corporate bonds.
Table 4.16: Disbursement, Redemption and Outstanding of Coupon and Corporate BondPurchases by the Banking System at the end of June 30, 2012
(In Millions of Birr)
Particulars
AnnualPercentage
Change2010/11 2011/12
B/AA B
1. Corporate Bond Purchases by holders 18,157.0 23,501.0 29.4EEPCO 13,000.0 19,300.0 48.5Regional governments 3,007.0 4,101.0 36.4Development Bank of Ethiopia 2,150.0 100.0 -95.3Private Sector2. Redemption of Bonds by Clients 5,611.7 1,740.3 -69.0EEPCO 0.0 0.0 0.0Regional governments 1,167.1 1,740.3 49.1Development Bank of Ethiopia 4,444.6 0.0 -100.0Private Sector3. Outstanding Bonds by Clients 40,258.3 61,786.7 53.5EEPCO 29,600.0 48,900.0 65.2Regional governments 8,858.3 11,015.8 24.4Development Bank of Ethiopia 1,800.0 1,870.9 3.9Private SectorSource: Commercial Bank of Ethiopia
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4.5.4. Inter-bank Money Market
The interbank money market was not active
in Ethiopia due to the existence of excess
reserves in the banking system.
Accordingly, no inter-bank money market
transaction has been conducted since April
2008. Since the introduction of the
interbank money market in September
1998, merely twenty three transactions to
the tune of Birr 259.2 million were
conducted with interest rates ranging
between 7 to 11 percent per year. The
maturity period of these loans widely
spanned from overnight to 5 years.
Table 4.17: Interbank Money Market Transactions up to June 30, 2012
Borrower Lender
AmountBorrowed (In
Thousand Birr)Interest Rate
%Date of
TransactionMaturity
PeriodNib International Bank Awash International Bank 7,000.0 11 16/11/00 Overnight
Wegagen Bank Commercial Bank of Ethiopia 10,000.0 8 3/1/2001 5 years
Nib International Bank ,, 10,000.0 8 3/31/2001 3 months
Wegagen Bank ,, 10,000.0 8 3/22/2001 1 year
Nib International Bank ,, 3,600.0 8 5/31/2001 6 months
Nib International Bank ,, 3,700.0 8 06/31/01 6 months
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 Bank of Abyssinia 19,046.9 7 31/01/03 3.5 months
Nib International Bank Bank of Abyssinia 20,310.0 7 28/02/03 3.5 months
Nib International Bank Bank of Abyssinia 28,987.0 7 31/03/03 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
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V. DEVELOPMENTS IN EXTERNAL SECTOR
5.1 Overall Balance of Payments
The overall balance of payments in
2011/12 recorded a deficit of USD 972.8
million in contrast to USD 1.4 billion
surplus registered in the preceding year.
The trade deficit also widened by 43.6
percent during the review period owing to
a 34 percent growth in merchandise
imports compared to moderate increase
(14.8 percent) in merchandise exports.
Meanwhile, although net private transfers
improved in the same period, the current
account deficit worsened to USD 2.8
billion from USD 210.6 million in the
previous year. As a result, net transfers to
GDP ratio declined to 11.8 percent from
14.7 percent a year ago.
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68
Table 5.1: Balance of Payments(In Millions of USD)
S/NParticulars 2009/10 2010/11 2011/12 Percentage Change
A B C B/A C/B1 Exports,f.o.b. 2,003.1 2,747.1 3,152.7 37.1 14.8
Coffee 528.3 841.8 833.0 59.3 -1.0Other 1,474.8 1,905.3 2,319.7 29.2 21.7
2 Imports 8,268.9 8,253.3 11,061.2 -0.2 34.0Fuel 1,310.7 1,659.3 2,124.7 26.6 28.0Cereals 513.1 196.0 652.5 -61.8 232.9Aircraft 0.8 24.7 42.1 2,987.5 70.6
Imports excl. fuel, cereals, aircraft 6,444.3 6,373.3 8,241.8 -1.1 29.3
3 Trade Balance (1-2) -6,265.8 -5,506.2 -7,908.5 -12.1 43.6
4 Services,net 457.4 688.1 74.9 50.4 -89.1
Non-factor services, net 513 757.6 171.1 47.7 -77.4
Exports of non-factor services 2,044.0 2,585.5 2,810.5 26.5 8.7Imports of non-factor services 1531 1,827.9 2,639.4 19.4 44.4
Income, net -55.3 -69.5 -96.2 25.7 38.4O/w Gross official int. payment 31.9 51.9 89.1 62.7 71.7
Dividend -26.6 -28.1 -15.5 5.6 -44.8
5 Private transfers 2,709.6 2,746.7 3,245.8 1.4 18.2o/w: Private Individuals 1,847.3 1,886.3 1,945.9 2.1 3.2
6 Current account balance (3+4+5) -3,098.8 -2,071.4 -4,587.8 -33.16 121.48445Current account balance (excludingofficial transfers) %age of GDP -10.4 -6.6 -10.7
7 Official transfers 1,905.6 1,860.7 1,787.9 -2.4 -3.9
8 Current account balance (6+7) -1,193.2 -210.6 -2,799.8 -82.3 1,229.3Current account balance as %ageof GDP -4.0 -0.7 -6.6
9 Capital account 1,996.2 2,535.5 2,119.8 27.0 -16.4Off. Long-term Cap., net 857.16 1,019.3 937.8 18.9 -8.0
Disbursements 893.96 1,054.5 1,007.0 18.0 -4.5
Amortization 36.8 35.2 69.2 -4.3 96.7
Other pub. long-term cap. 186.4 430.3 230.8 130.8 -46.4
Foreign Direct Investment(net) 956.4 1,242.5 1,072.1 29.9 -13.7
Sht-trm Capital -3.8 -156.6 -120.9
10 Errors and omissions -486.3 -940.7 -292.7
11 Overall balance (8+9+10) 316.6 1,384.2 -972.812 Financing -316.6 -1,384.2 972.813 Reserves (-; Increase) -304.6 -1,375.8 980.8
14 Central Bank (NFA) 57.8 -932.2 846.5Asset -397.7 -1,065.0 810.0Liabilities 455.5 132.8 36.6
15 Commercial banks (net) -362.4 -443.6 134.3
16 Debt Relief -12.0 -8.4 -8.0Principal 9.8 7.8 6.7Interest 2.2 0.6 1.3
Source: NBE Staff Compilation
National Bank of Ethiopia
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Table 5.2: Components of External Trade as Percentage of GDP
Particulars
2009/10 2010/11 2011/12 Percentage Change
A B C B/A C/B
Exports 6.7 8.7 9.5 29.9 9.2
Imports 27.8 26.0 33.2 -6.5 27.7
Trade Balance -21.1 -17.4 -23.7 -17.5 36.2
Net Services 1.5 2.2 0.2 40.9 -89.6
Net Private Transfers 15.5 14.5 15.1 -6.5 3.9
Current Account Deficit (excluding official transfers) -10.4 -6.5 -13.8 -37.4 110.6
Current Account Deficit (including official transfers) -4.0 -0.7 -8.4Source: NBE Staff Compilation
Source: NBE Staff Computations
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5.2 Developments in Merchandise Trade
The deficit in merchandise trade during
2011/12 was widened by 42.8 percent to
USD 7.9 billion, relative to the preceding
fiscal year mainly due to higher growth in
total imports than total exports.
Compared to same period last year,
export to GDP ratio and import to GDP
ratios was declined by 1.3 and 0.4
percentage points respectively from 8.7
percent and 26.3 percent last year.
5.2.1 ExportsTotal export proceeds during 2011/12
amounted to USD 3.15 billion, about 14.8
percent higher than the previous fiscal
year. The growth was largely attributed to
increased earnings from oilseeds (44.6
percent), gold (30.5 percent), live animals
(40 percent), pulses (15.8 percent), flower
(12.4 percent), meat & meat products
(24.5 percent), fruits and vegetables (42.7
percent), leather & leather products (5.9
percent), and chat (0.8 percent).
Earnings from export of oilseeds grew by
44.6 percent and reached USD
472.3 million, as a result of significant
increment in volume of export (44.6
percent) and marginal improvement in
international price (0.03 percent).
Revenue from gold rose by 30.5 percent
annually to USD 602.4 million driven by
9 percent growth in volume and 19.7
percent increase in international price.
Revenue from gold accounted for 19.1
percent of total export earnings.
Export of live animals earned USD 207.1
million, depicting a 40 percent growth
over the preceding year owing to a rise in
the volume of exports (28.4 percent) and
higher international price (9 percent).
Earnings from live animals contributed
6.6 percent of the total merchandise
export proceeds.
Driven by marginal improvement in the
volume of export (0.7 percent) and
moderate rise in international price (15
percent); export proceeds from pulses
increased by 15.8 percent to USD 159.7
million accounting for 5.1 percent of the
total merchandise exports.
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71
Earning from flower was USD 197
million, 12.4 percent higher than a year
ago owing to 12.6 percent growth in
volume despite 0.2 percent decline in
world price. The share of flower export
in total export revenue was 6.3 percent,
down from 8.5 and 6.4 percent in the last
consecutive two years, respectively.
Similarly, earnings from export of meat
& meat products rose by 24.5 percent to
USD 78.8 million as a result of 4.7
percent growth in volume and 19 percent
increase in international price. As a
result, revenue from this export item
accounted for 2.5 percent of the total
export, earnings.
Earnings from export of fruits and
vegetables at USD 44.9 million showed a
42.7 percent annual growth driven by
higher volume of exports (34.9 percent)
and international price (5.8 percent).
Fruits and vegetables export accounted
for 1.4 percent of the total export
revenue.
Table 5.3: Values of Major Export Items(In Millions of USD)
Particulars
2009/10 2010/11 2011/12Percentage
ChangeValue Share(%) Value Share
(%) Value Share(%)
A B C C/B C/A
Coffee 528.3 26.4 841.8 30.6 833.1 26.4 -1.0 57.7Oilseeds 358.5 17.9 326.6 11.9 472.3 15.0 44.6 31.7Leather & Leather products 56.4 2.8 103.8 3.8 109.9 3.5 5.9 95.0Pulses 130.1 6.5 137.9 5.0 159.7 5.1 15.8 22.7Meat & Meat Products 34.0 1.7 63.3 2.3 78.8 2.5 24.5 131.8Fruits & Vegetables 31.5 1.6 31.5 1.1 44.9 1.4 42.7 42.8Live Animals 90.7 4.5 147.9 5.4 207.1 6.6 40.0 128.2Chat 209.5 10.5 238.3 8.7 240.3 7.6 0.8 14.7Gold 281.4 14.0 461.7 16.8 602.4 19.1 30.5 114.1Flower 170.2 8.5 175.3 6.4 197.0 6.2 12.4 15.7Others 112.5 5.6 219.1 8.0 207.1 6.6 -5.4 84.1
Total 2003.1 100.0 2747.1 100.0 3152.7 100.0 14.8 57.4Source: Ethiopian Revenue and Customs Authority
Leather & leather products earned USD
109.9 million, about 5.9 percent higher
than the previous year. This increment
ascribed to a 23.4 percent rise in
international price despite 14.2 percent
decline in volume. However, their share
in the total export declined to 3.5 percent
from 3.8 percent in the previous period.
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72
Export of chat rose slightly by 0.8 percent
and reached USD 240.3 million owing to
marginal increase in volume and
improved price. The share of Chat in total
export was 7.6 percent.
Revenue, from export of coffee declined
by 1 percent in 2011/12 and amounted to
USD 833.0 million. This slight fall in
export proceeds from coffee was solely
attributed to the 13.6 percent decline in
volume of export despite higher price. As
a result, the share of coffee in total
exports went down to 26.4 percent from
30.6 percent last year.
Source: Ethiopian Revenue and Customs Authority
National Bank of Ethiopia
73
Source: NBE Staff Compilation
Table 5.4: Volume of Major Exports(In Millions of K.G.)
Particulars
2009/10 2010/11 2011/12 Percentage Change
A B C C/B C/A
Coffee 172.2 196.1 169.4 -13.6 -1.6
Oilseeds 299.0 254.2 367.4 44.6 22.9
Leather and Leather products 2.9 5.2 4.4 -14.2 52.6
Pulses 225.7 224.5 226.2 0.7 0.2
Meat & Meat Products 10.2 16.9 17.7 4.7 73.5
Fruits & Vegetables 66.3 91.6 123.5 34.9 86.2
Live Animals 67.9 112.8 144.9 28.4 113.3
Chat 36.1 41.0 41.1 0.2 13.8
Gold 0.0089 0.0112 0.0122 9.00 36.76
Flower 36.0 41.6 46.8 12.6 30.1Source: Ethiopian Revenue and Customs Authority
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74
Source: Ethiopian Revenue and Customs Authority
Table 5.5: Unit Value of Major Exports(In USD per K.G.)
2009/10 2010/11 2011/12 Percentage ChangeA B C C/B C/A
Coffee 3.1 4.3 4.9 14.6 60.3
Oilseeds 1.199 1.285 1.285 0.03 7.2
Leather and Leather products a 19.4 20.1 24.8 23.4 27.7
Pulses 0.58 0.61 0.71 15.0 22.5
Meat & Meat Products 3.3 3.8 4.5 19.0 33.6
Fruits & Vegetables 0.47 0.34 0.36 5.8 -23.3
Live Animals 1.34 1.31 1.43 9.0 7.0
Chat 5.81 5.82 5.85 0.6 0.8
Gold 31.6 41.3 49.4 19.7 56.5
Flower 4.73 4.22 4.21 -0.2 -11.1Source: Calculated from Tables 5.3 and 5.4
National Bank of Ethiopia
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Source: NBE Staff Compilation
5.2.2. Imports
Compared to last year, total merchandise
import in 2011/12 surged by 33.8 percent
to USD 11.06 billion owing to growth in
imports of consumer goods (53.9
percent), fuel (28.1 percent), and semi-
finished goods (59.4 percent), capital
goods (7.4 percent) and raw materials
(8.4 percent).
Imports of consumer goods rose
considerably by 53.9 percent mainly due
to 70.1 percent increment in imports of
non-durable goods. The boost in imports
of cereals (232.9 percent) was the main
factor for higher import of non-durably.
Consequently, the share of consumer
goods in total imports increased to 31.9
percent from 27.8 percent in the
preceding year.
Similarly, fuel import bill rose by 28.1
percent in 2011/12 and amounted to USD
2.12 billion. This was due to higher
volume of export (20.4 percent) and
improvement in international fuel price
(16.6 percent)5. As a result, the share of
fuel in total import bill went down to 19.2
percent from 20.1 percent recorded last
year same period.
5 Information on international fuel price wasobtained from U.S. Energy InformationAdministration
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76
Meanwhile, import of capital goods
increased by 7.4 percent over the
previous year and amounted to USD 2.96
billion. The increase was due to a rise in
import of transport goods (17.7 percent),
agricultural goods (87.9 percent) and
industrial goods (1.4 percent). Capital
goods import accounted for 26.8 percent
of the total import during the period.
Import bill of semi-finished goods was
USD 1.96 billion, which was 59.4 percent
higher than last year. Import of fertilizer
surged by 76.6 percent and reached USD
604.6 million, driven by the rising global
prices and increased volume of imports.
During that time, raw material imports
rose by 8.7 percent relative to the
preceding year and constituted 1.8
percent of the total imports.
Table 5.6: Value of Imports by End Use(In Millions of USD)
Categories
2009/10 2010/11 2011/12Percentage
ChangeValueShare(%) Value
Share(%) Value
Share(%)
A B C C/B C/ARaw Materials 212.4 2.6 183.7 2.2 199.7 1.8 8.7 -6.0Semi-finished Goods 1,226.5 14.8 1,228.0 14.9 1,957.2 17.7 59.4 59.6
Fertilizers 249.4 3.0 342.4 4.1 604.6 5.5 76.6 142.4Fuel 1,310.7 15.9 1,659.3 20.1 2,124.8 19.2 28.1 62.1
Petroleum Products 1,303.0 15.8 1,648.8 20.0 2,078.3 18.8 26.1 59.5Others 7.7 0.1 10.5 0.1 46.4 0.4 340.5 502.9
Capital Goods 2,886.3 34.9 2,757.0 33.4 2,961.7 26.8 7.4 2.6Transport 509.8 6.2 688.1 8.3 809.7 7.3 17.7 58.8Agricultural 59.8 0.7 63.6 0.8 119.5 1.1 87.9 99.8Industrial 2,316.7 28.0 2,005.4 24.3 2,032.5 18.4 1.4 -12.3
Consumer Goods 2,515.7 30.4 2,294.8 27.8 3,531.7 31.9 53.9 40.4Durables 865.0 10.5 868.5 10.5 1,105.3 10.0 27.3 27.8Non-durables 1,650.7 20.0 1,426.3 17.3 2,426.4 21.9 70.1 47.0
Miscellaneous 117.3 1.4 130.5 1.6 286.3 2.6 119.3 144.0
Total Imports 8,268.9 100.0 8,253.3 100.0 11,061.2 100.0 34.0 33.8Source: Ethiopian Revenue and Customs Authority
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77
5.2.3 Direction of Trade
Ethiopia’s merchandise exports have vast
market in Europe, accounting for 47.1
percent of the total merchandise exports.
Within European countries, Switzerland,
accounting for about 38.6 percent of the
total exports, was the largest market
mainly for gold. Germany, the second
important market in the continent
accounting for 20.7 percent, mainly
imported coffee, textile & garments,
flower and leather & leather products.
The Netherlands, constituting 14.6
percent of Ethiopia’s export to Europe,
was an important export destination
primarily for flower, gold, vegetable and
coffee. Italy with 5.4 percent of the total
Ethiopian exports to the Europe was the
market for coffee, leather & leather
products, textile & garment and pulses.
About 30 percent of the total Ethiopian
exports were shipped to Asian market, of
which China accounted for 34.6 percent,
Saudi Arabia 21.7 percent, United Arab
Emirates 8.1 percent, Israel 6.4 percent
and Japan 4.8 percent. The prime export
items shipped to China included oilseeds,
leather & leather products, mineral
products, natural gums and vegetables.
Coffee, meat & meat products, oilseeds,
live animals and flower were exported to
Saudi Arabia. Meat & meat products,
pulses, live animals, oilseeds, vegetables,
natural gum, flower and food were the
major export products sold to United
Arab Emirates. Israel bought mainly
oilseeds, coffee and vegetables while
Japan imported mainly coffee, oilseeds,
and flower.
Meanwhile, about 18.9 percent of
Ethiopia’s total exports went to African
nations of which Somalia, Sudan,
Djibouti, and Egypt together accounted
for 93.3 percent of the total exports to the
continent. Exports to Somalia mainly
included vegetables, live animals and
chat. Live animals, coffee, pulses and
spices were the main exports to Sudan.
Djibouti imported vegetables, live
animals, chat, textile & garments, fruits
and pulses whilst Egypt bought live
animals, oilseeds, meat & meat products
and pulses.
Ethiopia’s exports to American accounted
for 3.4 percent of the total export during
National Bank of Ethiopia
78
2011/12 of which United States and
Canada together made up 92.5 percent.
The United States imported mainly
coffee, oilseeds, mineral products and
leather & leather products while Canada
mainly bought coffee.
Africa18.9%
Europe47.1%
America3.4%
Asia30%
Oceania0.6%
Fig VI.6 Export by Destinations
Source: NBE staff compilation
National Bank of Ethiopia
79
Concerning Ethiopia’s imports, about
65.4 percent of the total merchandise
imports in 2011/12 originated from Asia,
23 percent from Europe, 6.2 percent from
America and 5.1 percent from Africa.
Among Asian countries, China accounted
for 25.4 percent, Saudi Arabia 21.2
percent, India 12.8 percent, Kuwait 6.6
percent, Japan 6.3 percent, and Indonesia
3.9 percent. The prime imports from
China included machinery & aircraft,
metal and metal manufacturing, road &
motor vehicles, electric materials,
clothing, textiles and rubber products.
Petroleum products were the major
imports from Saudi Arabia which
accounted for 67 percent of the total
petroleum import of the nation in
2011/12.
The share of European countries in total
imports was just 23 percent, of which
79.4 percent came from six countries;
namely, Italy (15.4 percent), Turkey (14.7
percent), Russia (14.1 percent), Ukraine
(12.3 percent), Germany (7.1 percent)
and France (5.8 percent). Machinery &
aircraft, road & motor vehicles, grain,
metals & metal manufacturing and
electrical materials were imported from
Italy. Metal & metal manufacturing,
machinery & aircraft and electrical
materials were bought from Turkey. The
major imports from Russia were grain
and fertilizer while fertilizer, metal &
metal manufacturing, road & motor
vehicles and grain were the principal
imports from Ukraine. Machinery &
aircraft, road & motor vehicles, metal &
metal manufacturing, medical &
pharmaceutical and electrical materials
import were imported from Germany.
Electrical materials, machinery & aircraft
and metal & metal manufacturing were
imported from France. Spain mainly
exported electrical materials, road &
motor vehicles, metal & metal
manufacturing and machinery & aircraft
to Ethiopia.
About 85.1 percent of Ethiopian imports
from America were from USA and
Brazil. These imports mainly include
glass & glass ware, machinery & aircraft,
road & motor vehicles, grain and medical
& pharmaceutical imports.
African countries were the sources of 5.1
percent of the total Ethiopian imports.
The major imports were from Morocco
(32.1 percent), South Africa (20.9
percent), Sudan (19.4 percent), and Egypt
(15.9 percent) which altogether accounted
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80
for 88.3 percent of the total import from
Africa. Import from Morocco was mainly
fertilizer. Road & motor vehicles, food &
live animals, machinery & aircraft,
medical and pharmaceutical products,
metal & metal manufacturing, paper &
paper manufacturing, fertilizer, grain and
beverages were the major imports from
South Africa. Petroleum products were
the main import from Sudan. Imports
from Egypt included metal & metal
manufacturing, petroleum products,
rubber products, food & live animals,
paper & paper manufacturing.
Africa5.1% Europe
23%
America6.2%
Asia65.4%
Oceania0.2%
Fig. VI. 7 Import by Origin
Source: NBE staff compilation
5.3 Services and Transfers
5.3.1 Services
In 2011/12, net services account recorded
USD 74.9 million inflow, showing 89.1
percent fall compared to the preceding
year on account of higher net payments
and decline in government and travel
services.
5.3.2 Unrequited Transfers
Net transfers in 2011/12 improved by 9.3
percent, owing to 52.2percent increment
in NGO transfers (both cash and food aid)
and 3.2 percent private individual
transfers mainly cash component. Official
transfers, however tended to decline.
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81
Table 5.7 Services Accounts
(In Millions of USD)
S/N Particulars2009/10 2010/11 2011/12 Percentage Change
A B C B/A C/B
1 Investment Income (2+5) -55.3 -69.5 -96.2 25.7 38.4
2 Interest, net (3-4) -28.7 -41.4 -80.7 44.3 94.9
3 Credit 3.2 10.5 8.4 228.1 -20.0
4 Debit 31.9 51.9 89.1 62.7 71.75 Dividend, net -26.6 -28.1 -15.5 5.6 -44.8
6 OTHER SERVICES, net (7-8) 513.0 757.6 171.1 47.7 -77.4
7 Exports of non-factor servies 2,044.0 2,585.5 2,810.5 26.5 8.7Travel 360.1 722.7 680.9 100.7 -5.8Transport 1 1,101.3 1,319.8 1,690.8 19.8 28.1Gov't 2 252.6 262.0 212.1 3.7 -19.0Other 3 330.0 281.0 226.7 -14.8 -19.3
8 Imports of non-factor servies 1,531.0 1,827.9 2,639.4 19.4 44.4
Travel 135.9 147.8 188.2 8.8 27.3
Transport 1 859.9 997.3 1,355.7 16.0 35.9
Gov't 2 27.5 14.6 10.2 -46.9 -30.1
Other 3 507.7 668.2 1,085.3 31.6 62.4
9Net Services(10+11+12+13+14) 457.4 688.1 74.9 50.4 -89.1
10 Travel 224.1 574.9 492.6 156.5 -14.3
11 Transport 241.3 322.5 335.1 33.7 3.912 Gov't 225.1 247.4 202.0 9.9 -18.4
13 Other -177.8 -387.2 -858.6 117.8 121.7
14 Investment Income -55.3 -69.5 -96.2 25.7 38.4Source: MOFED, Transport and Telecommunication Companies, NBE- FEMEMD and Staff Compilation.
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Table 5.8 Unrequited Transfers
(In Millions of USD)
No. Particulars
2009/10 2010/11 2011/12 PercentageChange
A%
Share B%
Share C%
Share B/A C/B
1 Private Transfers 2,709.7 58.7 2,746.7 59.6 3,245.9 64.5 1.4 18.2
1.1 Receipts 2,736.2 58.8 2,788.1 59.6 3,318.4 64.7 1.9 19.0
NGOs 888.9 19.1 901.8 19.3 1,372.5 26.8 1.5 52.2
Cash 860.5 18.5 893.5 19.1 1,186.6 23.1 3.8 32.8
Other 28.4 0.6 0.0 0.0 0.0 0.0
Food 0.0 0.0 8.3 0.2 185.9 3.6
Private individuals 1,847.3 39.7 1,886.3 40.3 1,945.9 37.9 2.1 3.2
Cash 790.3 17.0 1,066.4 22.8 1,347.5 26.3 34.9 26.4
In kind 96.7 2.1 63.9 1.4 70.8 1.4 -33.9 10.7
Underground Transfers(in kind) 960.3 20.6 756.0 16.1 527.6 10.3 -21.3 -30.2
1.2 Payments -26.6 74.5 -41.4 55.7 -72.5 75.0 55.9 75.0
2. Official Transfers 1,905.6 41.3 1,860.8 40.4 1,787.9 35.5 -2.3 -3.9
2.1 Receipts 1,914.7 41.2 1,893.7 40.4 1,812.1 35.3 -1.1 -4.3
Cash 1,741.5 37.4 1,863.5 39.8 1,692.3 33.0 7.0 -9.2
Other 0.0 0.0 0.0 0.0 0.0 0.0
Food 173.2 3.7 30.1 0.6 119.8 2.3 -82.6 297.4
2.2 Payments -9.1 25.5 -32.9 44.3 -24.2 25.0 261.6 -26.5
Total Net Transfers 4,615.2 100 4,607.5 100 5,033.8 100 -0.2 9.3
Source: Disaster Prevention and Preparedness Agency, MoFED and NBE
Net official transfers declined by 3.9
percent owing to lower grants from both
international financial institutions and
bilateral donors. Cash component of
official transfers declined by 9.2 percent to
USD 1.7 billion while food aid increased to
USD 119.8 million compared to USD 30.1
million in the previous year.
5.4. Current Account
As a result of widening trade balance,
decline in net services and public transfers,
the current account deficit widened to USD
2.8 billion in 2011/12 from USD 210.6
million deficits recorded last fiscal year.
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83
5.5 Capital Account
In 2011/12, the balance in capital account
showed a surplus of USD 2.12 billion,
about 16.4 percent lower than that of last
year owing to a fall in official and other
public long term net capital inflows
Likewise, foreign direct investment
declined by 13.7 percent compared to last
year.
5.6 Changes in Reserve Position
Net foreign assets of the banking system at
the end of 2011/12 recorded a reserve
drawdown of USD 972.8 million, due to
decreases in the net foreign assets of NBE
and commercial banks. The gross
international reserve of NBE was adequate
to cover 1.9 months of imports of goods
and non-factor services.
5.7 External Debt
External debt stock of the country at the
end of 2011/12 amounted to USD 8.8
billion, depicting a 20.9 percent increase
over the preceding year. This was attributed
largely to higher debt owed to multilateral
(USD 4 billion) and bilateral creditors
(USD 2.2 billion). Hence, the country’s
external debt stock to GDP ratio rose to
26.5 percent from 23.1 percent in
2010/11. Debt stock to total receipts from
export of goods and non-factor services
ratio also slightly rose to 1.5 percent in
from 1.4 percent a year ago.
Similarly, commercial debt stock, reached
USD2.6 billion in 2011/12. It accounted for
29.6 percent of the total debt stock and
showed a 23.9 percent annual growth. Of
the total debt stock, 45.3 percent was owed
to multilateral and 25.2 percent to bilateral
creditors.
The country’s external debt burden as
measured by debt services to export of
goods and services ratio increased to 7.1
percent from 3.6 percent in the same period
last year.
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84
Table 5.9: External Public Debt
(In Million of USD)
Particulars
2009/10 2010/11 2011/12Percentage
Change
A B C B/A C/B
Debt Outstanding
Lender Total 5,569.8 7,318.8 8,846.3 31.4 20.9
Multilateral 2,729.1 3,480.9 4,001.1 27.5 14.9
Bilateral 1,389.7 1,724.5 2,227.5 24.1 29.2
Commercial 1,451.0 2,113.4 2,617.7 45.7 23.9
Drawing by Lender 1,601.2 1,148.5 1,471.8 -28.3 28.1
Lender Total 1,601.2 1,148.5 1,471.8 -28.3 28.1
Drawing by Sector 1,601.2 1,148.5 1,471.8 -28.3 28.1
Sector Total 1,601.2 1,148.5 1,471.8 -28.3 28.1
Debt Service 106.7 204.5 391.8 91.6 91.6
Principal repayments 74.5 151.6 302.1 103.5 99.3
Interest payments 32.2 52.9 89.7 64.1 69.7
Debt stock to GDP ratio (in percent ) 18.7 23.1 26.5 23.1 14.9Debt stock to export of goods and non-factorservices 1.4 1.4 1.5 -0.5 8.2
Receipts from goods and non-factor services 4,047.0 5,605.6 5557.6 38.5 -0.9
Debt service ratio ( percent )1/ 2.6 3.6 7.1 38.3 93.3
Arrears 0.0 0.0 0.0
Principal 0.0 0.0 0.0
Interest 0.0 0.0 0.0
Relief 12.0 8.4 8.0 -29.8 -5.5
Principal 9.8 7.8 6.7 -20.2 -14.1
Interest 2.2 0.6 1.3 -72.6 106.7Source: MoFED1/ Ratio of debt service to receipts from export of goods and non-factor servicesNote: Outstanding as at end period.
Developments in Foreign Exchange Markets
Developments in Nominal Exchange Rate
In the inter-bank foreign exchange market,
the average weighted exchange rate of the
Birr depreciated by 7.1 percent year-on-
year to reach Birr 17.2536/USD
(Table 5.9). Similarly, the Birr weakened
in the parallel foreign exchange market to
Birr17.9883/USD on average, showing 8.8
percent annual depreciation.
8.8 percent annual depreciation.
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85
As a result, the average spread between
the official and parallel market rates
widened to 4.3 percent from 2.6 percent
the previous year, mainly due to relatively
faster depreciation of the Birr in the
parallel market.
Table 5.9 Inter-Bank and Parallel Forex Market Exchange Rates
Period
AverageWeighted
Rate
Amount Traded inmillions of USD Number of Trades
Average Ratesin Parallel
MarketTotalo/w Among
CBs Total o/w Among CBs
2009/10 12.8909 12.6 0.0 252.0 0.0 13.6806
Qtr. I 12.3746 3.3 0.0 65.0 0.0 13.2933
Qtr. II 12.5851 3.3 0.0 66.0 0.0 13.3933
Qtr. III 13.1342 3.0 0.0 60.0 0.0 13.8495
Qtr. IV 13.4697 3.1 0.0 61.0 0.0 14.1863
2010/11 16.1178 90.2 25.1 284.0 11.0 16.5292
Qtr. I 14.5535 3.2 0.0 64.0 0.0 14.9833
Qtr. II 16.4667 3.3 0.0 65.0 0.0 16.9567
Qtr. III 16.6342 3.0 0.0 60.0 0.0 17.1067
Qtr. IV 16.8169 80.8 25.1 95.0 11.0 17.0700
2011/12 17.2536 152.2 90.9 292.0 37.0 17.9883
Qtr. I 17.0011 80.3 28.6 75.0 10.0 17.3900
Qtr. II 17.1522 17.5 14.2 73.0 8.0 17.8333
Qtr.III 17.3107 41.4 38.2 78.0 15.0 18.2400
Qtr. IV 17.5503 13.1 10.0 66.0 4.0 18.4900Source: NBE, Foreign Exchange Monitoring & Reserve Management Directorate and staff compilation
Reflecting the depreciation of the
exchange rate of the Birr in the inter-bank
foreign exchange market, the average
retail buying and selling rates of forex
bureau also depreciated by 2.6 percent
each and stood at Birr 17.2531/USD and
Birr 17.6002/USD, respectively.
The average premium between forex
bureau’s buying and selling rates,
however, remained stable at 2 percent
(Table 5.13).
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Table 5.10: End Period Mid Market Rates (USD per Unit of Foreign Currency)
Currency
2009/10 2010/11 2011/12 Percentage change
A B C C/B C/A
Pound 1.5052 1.6036 1.5563 -2.9 3.4
Swedish Kroner 0.1279 0.1566 0.1416 -9.6 10.7
Djibouti Frank 0.0057 0.0056 0.0056 0.0 -2.2
Swiss Frank 0.9190 1.1989 1.0365 -13.5 12.8
Saudi Riyal 0.2666 0.2666 0.2666 0.0 0.0
UAE Dirhams 0.2723 0.2723 0.2722 0.0 0.0
Canadian Dollar 0.9523 1.0274 0.9745 -5.2 2.3
Japanese Yen 0.0113 0.0123 0.0126 2.0 11.7
Euro 1.2187 1.4434 1.2450 -13.7 2.2
SDR 1.4796 1.5903 1.5139 -4.8 2.3Source: Staff Compilation
Table 5.11: Mid Market End Period Rates (Birr per Unit of Foreign Currency)
Currency
2009/10 2010/11 2011/12 Percentage change
A B C C/B C/A
USD 13.5998 16.9927 17.8192 4.9 31.0
Pound 20.4704 27.2494 27.7320 1.8 35.5
Swedish Kroner 1.7395 2.6612 2.5231 -5.2 45.0
Djibouti Frank 0.0781 0.0954 0.1000 4.9 28.1
Swiss Frank 12.4986 20.3725 18.4693 -9.3 47.8
Saudi Riyal 3.6261 4.5308 4.7513 4.9 31.0
UAE Dirhams 3.7027 4.6264 4.8513 4.9 31.0
Canadian Dollar 12.9510 17.4588 17.3642 -0.5 34.1
Japanese Yen 0.1533 0.2096 0.2243 7.0 46.3
Euro 16.5741 24.5272 22.1849 -9.6 33.9
SDR 20.1222 27.0234 26.9757 -0.2 34.1Source: Staff Compilation
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During the review year, the end period
mid market exchange rate of the US
dollar appreciated against major
international currencies. The highest rate
of appreciation was against Euro (13.7
percent) and Swiss Frank (13.5 percent),
followed by Swedish Kroner (9.6
percent), Canadian Dollar (5.2 percent),
SDR (4.8 percent) and Pound sterling
(2.9 percent).
However, the US dollar has shown slight
depreciated vis-à-vis Japanese Yen, while
it remained stable with respect to Djibouti
Frank, Saudi Riyal and UAE Dirhams
(Table 5.10).
Since USD is an intervention currency in
Ethiopia, the end period exchange rate of
the Birr also followed similar patterns as
it appreciated against Euro (9.6 percent),
Swiss Frank (9.3 percent), Swedish
Kroner (5.2 percent), Canadian Dollar
(0.5 percent) and SDR (0.2 percent). The
Birr also showed annual depreciation of 7
percent against Japanese Yen and 4.9
percent against Djibouti Frank, Saudi
Riyal and UAE Dirham each (Table 5.
11).
5.8.2. Movements in Real Effective Exchange Rate
Following the decline in its rate of
depreciation, the real effective exchange
rate (REER) appreciated by 22 percent in
2011/12 against 10.8 percent depreciation
in the preceding year, mainly due to
higher domestic inflation (Table 5.12).
The nominal effective exchange rate,
however, depreciated by 5.2 percent
compared to 20.6 percent depreciation in
2010/11 as domestic annual inflation
tended to slow down from 38 percent to
20.5 percent during the review period.
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88
Table 5.12: Trends in Real and Nominal Effective Exchange Rates
Year REERI NEERI
Percentage Change
REER NEER
2005/06 108.6 90.6 _ _
2006/07 120.5 87.4 10.98 -3.49
2007/08 126.6 78.2 5.07 -10.50
2008/09 152.8 72.0 20.69 -7.99
2009/10 124.2 57.5 -18.71 -20.10
2010/11 110.7 45.6 -10.83 -20.66
2011/12 135.1 43.2 22.02 -5.24Source: NBE Staff Compilation
An increase in REERI and NEERI indicates appreciation and vice versa.Where: REERI = Real Effective Exchange Rate Index
NEERI = Nominal Effective Exchange Rate Index
5.8.3 Foreign Exchange Transactions
USD 152.2 million was traded in the inter-
bank foreign exchange market during
2011/12, about 68.7 percent higher than last
year. Of the total transactions, USD 90.9
million (or 60 percent) was among
commercial banks while the remaining USD
61.3 million was supplied by the NBE (Table
5.9).
Meanwhile, foreign exchange purchase of
forex bureau of commercial banks declined
by 32.5 percent to USD 134.6 million. Their
sales of foreign exchange, however, surged
from USD 19.7 million in 2010/11 to USD
88 million in 2011/12 (Table 5.13).
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89
Table 5.13: Foreign Exchange Transactions by Forex Bureaux of Commercial Banks
(In Millions ofUSD)
Name of Forex Bureau
2009/10 2010/11 2011/12 Percentage Change
A B C D E F E/C F/D
Purchases Sales Purchases Sales Purchases Sales Purchases Sales
Commercial Bank of Ethiopia 40.64 0.20 55.56 1.94 55.77 2.26 0.4 16.3
Bank of Abyssinia 2.96 4.23 5.67 1.69 5.99 7.24 5.6 329.8
Dashen Bank 13.64 20.57 15.48 5.29 17.24 29.56 11.4 459.0
Awash International Bank 8.96 5.96 25.94 3.01 7.08 14.75 -72.7 389.6Construction & BusinessBank 0.97 0.16 2.27 0.26 4.56 0.91 100.8 247.9
Wegagen Bank 11.78 3.38 16.08 1.29 3.06 4.44 -81.0 245.8
United Bank 30.44 7.90 20.96 2.84 22.30 12.05 6.4 324.2
Development Bank 0.00 0.00 0.00 0.00 0.00 0.00 - -
Nib International Bank 97.41 5.11 52.46 2.33 8.90 7.75 -83.0 232.4
Lion International Bank 7.89 0.97 1.38 0.12 1.94 1.76 40.9 1408.3
Oromia International Bank 2.10 0.25 1.59 0.23 2.35 1.28 48.1 458.9
Zemen Bank 0.54 0.74 0.99 0.61 2.89 3.92 192.3 541.7
Cooperative Bank of Oromia 0.03 0.10 0.03 0.04 0.50 0.70 1727.2 1696.4
Buna International Bank 0.19 0.05 0.92 0.03 1.00 0.05 9.4 38.4
Birhan International Bank 0.00 0.00 0.07 0.04 0.60 1.05 786.2 2752.4
Abay Bank - - - - 0.37 0.21 - -
Addis International Bank - - - - 0.09 0.08 - -
Total 217.5 49.6 199.4 19.7 134.6 88.0 -32.5 346.4
Average Exchange Rate 12.8763 12.8763 16.8116 17.1485 17.2531 17.6002 2.6 2.6Source: Staff Compilation
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90
GENERAL GOVERNMENT FINANCE
Government Finance
The overall fiscal performance of the
general government in 2011/12 resulted
in a deficit of Birr 21.5 billion, which
was less than Birr 24.7 billion
(excluding grants) recorded in 2010/11.
Total revenue (including grants)
depicted a 35.1 percent growth in
2011/12 as compared to the preceding
year. Thus revenue to GDP ratio
increased to 14.0 percent from 13.7
percent a year ago.
Meanwhile, general government
expenditure rose by 32.6 percent during
the review period as all of its
components showed significant
increases. The ratio of expenditure to
GDP became 16.9 which was marginally
less than a year ago (Table 6.1).
6.1 Measuring Fiscal Sustainability (In %)
Fiscal Year PD/GDP IP/RR Debt/GDP R(Debt) R(GDP) Exp/GDP Rev/GDP R(OR)
1999/00 -9.4 9.9 39.8 30.7 13.4 26.6 14.8 2.3
2000/01 -3.7 7.9 40.9 4.9 2.1 23.4 15.7 7.9
2001/02 -7.3 10.1 41.8 0.0 -2.2 26.8 15.8 -1.0
2002/03 -6.6 8.8 38.8 2.4 10.3 28.2 15.3 12.2
2003/04 -3.0 6.1 36.3 10.4 18.0 23.9 16.2 17.2
2004/05 -4.5 5.0 38.2 29.4 22.9 23.5 14.7 13.7
2005/06 -4.7 4.5 37.8 22.3 23.6 22.5 15.0 25.3
2006/07 -3.7 4.1 36.3 25.5 30.6 20.9 12.8 11.6
2007/08 -2.9 3.0 32.5 29.3 44.4 19.1 12.1 36.7
2008/09 -0.9 2.4 26.9 11.5 35.1 17.4 12.1 34.8
2009/10 -1.3 2.4 27.5 17.1 14.2 18.8 14.2 34.1
2010/11 -1.6 2.2 26.8 29.8 33.5 18.5 13.7 28.32011/12 -1.2 1.9 25.7 39.5 45.6 16.9 14.0 48.8Source: Staff ComputationPD = Primary DeficitIP/RR = Share of interest payments in Recurrent revenueDdebt/GDP = Ratio of Domestic Debt to GDPR(Debt) = Growth rate of Domestic DebtR(GDP) = Growth rate of GDP at current market priceExp/GDP = Ratio of General Government Expenditure to GDRev/GDP = Ratio of General Government Revenue to GDPR(OR) = Growth rate of ordinary Revenue
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91
6.2 Revenue and Grants
Under the review period, Birr 115.6
billion (including grants) was collected
from various sources. The performance
against the plan was 94.4 percent.
Total revenue (including grants) depicted
a 35.1 percent annual growth as a result
of improved tax collection and
administration like application of cash
registration machines, enhanced capacity
building, improved awareness of tax
payers and economic growth.
Domestic revenue reached Birr102.9
billion showing102 percent growth over
last year. Of the total domestic revenue,
about 83.4 percent was generated through
taxes and 16.6 percent through non-taxes.
Tax revenue rose by 45.4 percent in the
fiscal year owing to a 47.6 percent
increase in direct taxes, which largely
constitute personal income and business
taxes. These taxes alone accounted for
84.7 percent of the direct taxes. The share
of rural and urban land use fee, however,
was only 3.4 percent.
Revenue from indirect taxes was Birr
56.9 billion and its share in total tax
revenue reached 66.3 percent. About 59.0
percent of the indirect tax revenue was
generated through import duties whose
share grew by about 41.4 percentage
points over last year.
Non-tax revenue reached Birr 17.1 billion
showing a 68.9 percent increment vis-à-
vis preceding year largely due to higher
income from government investment and
property sales.
On the other hand, external grants
dropped by a 22.4 percent compare to a
year earlier.
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92
0
20000
40000
60000
80000
100000
120000
140000
In m
illi
on B
irr
Fiscal Year
Fig. VI.1 Trend of General Government Revenue by Component
Total Revenue and Grants Tax Revenue Direct tax revenue
Indirect tax revenue Non-tax revenue Grants
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93
6.2 Summary of General Government Revenue by Components(In Million of Birr)
Particulars
2010/11 2011-12Percentage
ChangePerform-
anceRateA [B] C
[C/A]Pre. ActRevisedBudget Pre. Act [C/B]
Total Revenue and Grants 85,611.2 122,541.8 115,658.5 35.1 94.4
Total Revenue 1/ 69,119.9 101,222.0 102,863.7 48.8 101.6
Tax Revenue 58,980.8 87,131.8 85,739.9 45.4 98.4
1. Direct Tax Revenue 19,549.7 31,610.0 28,857.6 47.6 91.3
1.1 Income and Profit Taxes 18,809.2 27,295.4 27,877.0 48.2 102.1
Personal 5,733.4 8,098.2 8,900.2 55.2 109.9
Business 10,055.2 15,843.1 15,540.0 54.5 98.1
Others 2/ 3,020.7 3,354.1 3,436.8 13.8 102.5
1.2 Rural Land Use Fee 316.6 534.9 320.2 1.2 59.9
1.3 Urban Land Use Fee 423.9 3,779.7 660.3 55.8 17.5
2. Indirect Taxes 39,431.1 55,521.9 56,882.3 44.3 102.5
2.1 Domestic Taxes 15,705.3 22,621.9 23,326.1 48.5 103.1
2.2 Foreign Trade Taxes 23,725.8 32,900.0 33,556.2 41.4 102.0
Import 23,725.8 32,900.0 33,556.2 41.4 102.0
Export -
3. Non-Tax Revenue 10,139.1 14,090.2 17,123.8 68.9 121.5
3.1 Charges and Fees 970.3 762.2 1126.7 16.1 147.8
3.2 Govt. Invt. Income 3/ 4,475.5 4310.3 9178.5 105.1 212.93.3 Reimb. And PropertySales 194.0 364.2 451.0 132.5 123.83.4 Sales of Goods &Services 1,774.6 2920.4 1738.5 (2.0) 59.5
3.5 Others 4/ 2,724.7 5,733.1 4,629.1 69.9 80.7
4. Grants 16,491.4 21,319.8 12,794.9 (22.4) 60.0
Source: Ministry of Finance and Economic Development
1/ It does not include privatization proceeds
2/ Others include rental income tax, with holding income tax on imports, interest income tax,
capital gains tax, agricultural income and other incomes
3/Gov. Investment income includes : Residual surplus, capital charge,interest payments and state dividend4/ Other extra ordinary, miscellaneous, pension contribution and otherrevenue
National Bank of Ethiopia
94
6.3 Expenditure
Total general government expenditure in
2011/12 reached Birr 124.4 billion
compared with Birr 93.8 billion a year
ago. The growth was attributed to higher
out lays in all its components. Hence the
share of expenditure in GDP showed a
marginal decline to 16.9 percent last
year.
Recurrent expenditure was Birr 51.4
billion about 26.9 percent higher than a
year ago. The largest share (41.3
percent) of the current expenditure went
to finance social and general services
and its ratio to GDP was about 5.7
percent.
Likewise, capital expenditure during the
review period increased by 36.9 percent
over the preceding year and reached Birr
73 billion largely on account of higher
spending on economic development
which accounted for 69.1 percent of the
total capital expenditure. Of the total
expenditure on economic development
34.2 percent was allotted to poverty
related programs such as education,
health and agriculture etc. Its share in
GDP stood at about 3.4 percent.
In summary, general government
expenditure performance rate was 90.0
percent of the annual budget.
National Bank of Ethiopia
95
6.3: Summary of General Government Expenditure(In million Birr)
Particulars
2010/11 2011/12Percentage
Change Perform-anceRate[A] [B] [C]
[C/A]Pre
actualRevisedBudget Pre actual [C/B]
Total Expenditure 93,831.4 138,293.5 124,416.7 32.6 90.0
1. Current Expenditure 40,534.7 55,851.6 51,445.5 26.9 92.1
General Services 15,654.5 18,828.3 21,158.8 35.2 112.4
Economic Services 5,324.7 7,119.6 6,577.0 23.5 92.4
Social Services 16,057.3 21,958.6 21,054.8 31.1 95.9
Interest and Charges 1,912.7 3,523.6 2,230.4 16.6 63.3
Others (Miscellaneous) 1,248.0 4,421.5 424.4 (66.0) 9.6
2. Capital Expenditure 53,296.7 82,442.0 72,971.3 36.9 88.5
Economic Development 35,309.8 56,365.8 50,400.7 42.7 89.4
Social Development 14,706.9 20,289.0 17,971.3 22.2 88.6
General Development 3,280.0 5,787.3 4,599.3 40.2 79.5
3,Special programs - - - - -
Source: Ministry of Finance and Economic Development
6.4: Deficit Financing
General government budgetary operation
including grants resulted in a deficit of
Birr 8.7 billion in 2011/12. This was 6.6
percent higher than the deficit recorded a
year earlier. Fiscal deficit as a
percentage of GDP was 1.2 percent.
About 74.6 percent of the deficit was
financed through net external borrowing.
The remaining balance was covered
through net domestic borrowing and
privatization receipts.
National Bank of Ethiopia
96
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.019
96/9
7
1997
/98
1998
/99
1999
/00
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
In P
erce
nt o
f GD
P
Fiscal Year
Fig.6.3 Trends in General Government Expenditure and Revenue(% of GDP)
Expenditure/GDP Revenue/GDP
Source MoFED
National Bank of Ethiopia
97
6.4: Summary of General Government Expenditure (In Million Birr)
Particulars
2010/11 2011/12Percentage
Changeperformance
rate
[A] [B] [C]
[C/A] [C/B]Pre. ActRevisedBudget Pre. Act
Revenue and Grants 85,611.22 122,541.79 115,658.50 35.10 94.38
Revenue 69,119.87 101,222.04 102,863.65 48.82 101.62
Grants 16,491.35 21,319.75 12,794.85 (22.41) 60.01
Total Expenditure 93,831.41 138,293.53 124,416.72 32.60 89.97
Current Expenditure 40,534.71 55,851.56 51,445.45 26.92 92.11
Capital Expenditure 53,296.70 82,441.97 72,971.26 36.92 88.51
Overall Surplus/ Deficit
(Including Grants) (8,220.19) (15,751.74) (8,758.21) 6.55 55.60
(Excluding Grants) (24,711.54) (37,071.49) (21,553.06) (12.78) 58.14
Total Financing 8,220.19 15,751.74 8,758.21 6.55 55.60
Net External Borrowings 7,797.63 5,776.34 6,529.65 (16.26) 113.04
Gross Borrowing 8,435.50 6,807.03 7,443.08 (11.76) 109.34
Amortization Paid 770.31 1,185.06 1,062.55 37.94 89.66
HIPC relief & MDRI 132.44 154.37 149.12 12.59 96.60
Net Domestic Borrowings 111.22 9,974.71 3,793.10 3,310.56 38.03
Banking System (3,039.50) - (3,825.50) 25.86
Non-Banking Systems 3,150.72 - 7,618.60 141.81
Privatization Receipts 1,457.61 - 2,763.90 89.62
Others and Residuals (1,146.26) 0.68 (4,328.44) 277.61 (632,618.24)
Source: Ministry of Finance and Economic Development
National Bank of Ethiopia
98
VII. INVESTMENT
The Ethiopian Investment Agency and
Regional Investment Offices licensed
62,068 investment projects with an
aggregate capital of Birr 1.2 trillion in the
period between 1992/93 – 2011/12. Of these
projects, 52,462 (84.5 percent) were
domestic, 9,498 (15.3 percent) foreign and
108 (0.2 percent) public. In terms of capital,
Birr 483.4 billion (39.5 percent) was from to
domestic investors, Birr 466.2 billion (38.1
percent) from foreign investors and Birr
275.2 billion (22.5 percent) from the public
sector (Table 7.1).
In 2011/12, a total of 5,649 investment
projects with a combined capital of Birr
146.2 billion were approved.
Domestic investment accounted for more
than 89 percent of the total projects
approved during the review period.
The number of foreign projects reached 604
which were 36.6 percent lower than the
same period last year.
With regard to investment capital, domestic
private projects which made up Birr 59.3
billion or 41 percent while foreign
investment projects accounted for Birr 84
billion (or 57.5 percent) of the total
approved investment capital the rest
investment was carried out by the
government.
Upon commencement of operation, the
approved investment projects are expected
to create job opportunities for 147,400
permanent and 375,657 casual workers
(Table 7.2).
National Bank of Ethiopia
99
Table 7.1: Number and Investment Capital of Approved Projects by Ownership since 1992/93
(Investment capital in millions of Birr)
Fiscal Year
Domestic projects Foreign Projects Public Projects Total Projects
No. ofProjects
InvestmentCapital
No. ofProjects
InvestmentCapital
No. ofProjects
InvestmentCapital
No. ofProjects
InvestmentCapital
1992/93 542 3,750 3 233 0 0.00 545 3,9831993/94 521 2,926 4 438 1 57.00 526 3,421
1994/95 684 4,794 7 505 2 39.00 693 5,3381995/96 897 6,050 10 434 1 6.00 908 6,490
1996/97 752 4,447 42 2,268 1 7.00 795 6,7221997/98 816 5,819 81 4,106 1 14.00 898 9,9391998/99 674 3,765 30 1,380 9 4,915.00 713 10,060
1999/00 561 6,740 54 1,627 9 5,760.00 624 14,1272000/01 635 5,675.7 45 2,923 7 257.00 687 8,856
2001/02 756 6,117.3 35 1,474 10 1,598.80 801 9,190.22002/03 1,127 9,362.9 84 3,369 6 706.11 1,217 13,437.92003/04 1,862 12,177.7 347 7,205 16 1,837.04 2,225 21,220
2004/05 2,240 19,571.7 622 15,405 10 1,486.48 2,872 36,463.32005/06 5,100 41,841.1 753 19,980 6 18,215.08 5,859 80,036.3
2006/07 5,322 46,630.1 1,150 46,949 0 0.00 6,472 93,5792007/08 7,307 77,868.2 1,651 92,249 3 261.56 8,961 170,378.5
2008/09 7,184 83,630.2 1,613 73,111 10 82,783.52 8,807 239,524.82009/10 5,080 40,852.2 1,413 55,169 3 393.89 6,496 96,415.42010/11 5,360 42,093 952 53,357 10 154,019 6,322 249,469
2011/12 5,042 59,316 604 83,975 3 2,877 5,649 146,168AverageAnnual 2,625 23,248 515 21,868 5 13,638 3,103 61,241Cumulative 52,462 483,427 9,498 466,156 108 275,233 62,068 1,224,818Source: Ethiopian Investment Agency
National Bank of Ethiopia
100
Source: Ethiopian Investment Agency
Source:EthiopianInvestmentAgency
National Bank of Ethiopia
101
Table 7.2 Numbers, Capital and Expected Job Opportunities
(Capital in millions of Birr)
Type of Projects Items2009/10 2010/11 2011/12 Percentage change
A B C C/A C/B
1.Total Investment
Number 6,496 6,322 5,649 -13.0 -10.6
Capital 96,415 249,469 146,168 51.6 -41.4
Permanent Workers 224,633 227,715 147,400 -34.4 -35.3
Casual Workers 488,330 586,380 375,657 -23.1 -35.9
2. Total Private
Number 6,493 6,312 5,646 -13.0 -10.6
Capital 96,022 95,450 143,291 49.2 50.1
Permanent Workers 223,161 212,470 147,286 -34.0 -30.7
Casual Workers 488,162 412,117 375,504 -23.1 -8.9
3. Domestic
Number 5,080 5,360 5,042 -0.7 -5.9
Capital 40,852 42,093 59,316 45.2 40.9
Permanent Workers 152,283 146,378 104,582 -31.3 -28.6
Casual Workers 311,185 283,277 254,733 -18.1 -10.1
4. Foreign
Number 1,413 952 604 -57.3 -36.6
Capital 55,169 53,357 83,975 52.2 57.4
Permanent Workers 70,878 66,092 42,704 -39.7 -35.4
Casual Workers 176,977 128,840 120,771 -31.8 -6.3
5.Public
Number 3 10 3 0.0 -70.0
Capital 394 154,019 2,877 630.4 -98.1
Permanent Workers 1,472 15,245 114 -92.3 -99.3
Casual Workers 168 174,263 153 -8.9 -99.9Source: Ethiopian Investment Agency
National Bank of Ethiopia
102
Table 7.3 Number and Capital of Investment Projects Approved by Sector(Capital in millions of Birr)
Sectors 2009/10 2010/11 2011/12
Percentage Share to
Total in 2011/12
No. ofProjects
InvestmentCapital
No. ofProjects
InvestmentCapital
No. ofProjects
InvestmentCapital
No. ofProjects
InvestmentCapital
Manufacturing 1,433 35,583 1,294 43,530 1,211 45,482 21.44 31.12
Agriculture, hunting andforestry 1,342 21,625 907 82,769 435 23,268 7.70 15.92
Real estate, renting andBusiness activities 1,155 11,617 1,652 10,439 2,694 23,165 47.69 15.85
Hotel and restaurants 617 10,463 609 9,968 271 12,322 4.80 8.43
Education 181 1,464 143 1,586 57 465 1.01 0.32
Health and social work 99 2,519 87 1,143 52 2,814 0.92 1.92
Construction 942 9,924 947 11 747 29,794 13.22 20.38
Construction MachineryLeasing 0 0 0 0 0 0 0 0
Wholesale, retail tradeand repair service 154 893 158 586 22 322 0.39 0.22
Transport, storage andcommunication 477 1,596 413 1,743 101 578 1.79 0.40
Fishing 8 19 1 8 2 32 0.04 0.02
Mining and quarying 9 358 17 222 9 159 0.16 0.11
Electricity, gas, steam andwater supply 4 33 7 85,570 2 7,129 0.04 4.88
Public administration anddefense; compulsorysocial security 0 0 0 0 0 0 0 0Other community, socialand personal serviceactivities 75 321 87 756 46 639 0.81 0.44
Grand Total 6496 96415 6322 249,469 5649 146168 100 100
Source: Ethiopian Investment Agency
National Bank of Ethiopia
103
7.1 Investment by Sector
About 21 percent of the approved
projects were in manufacturing; 8
percent in agriculture, hunting and
forestry; 48 percent in real estate, renting
and business activities; 13 percent in
construction and 5 percent in hotel and
restaurants.
In terms of approved investment
capital, manufacturing accounted
for 31 percent followed by
construction (20 percent),
agriculture, hunting and forestry
(16 percent) and real estate,
renting and business activities
(16 percent).
Source: Ethiopian Investment Agency
National Bank of Ethiopia
104
7.2: Distribution by Region
Of the total 5649 projects approved
in2011/12, Addis Ababa attracted 4,170
projects (73.8 percent) with Birr 62.3
billion investment capital, followed by
Amhara (612 projects with Birr 38.6
billion capital), Oromia (510 projects
with Birr 25.7 billion capital) and Dire
Dawa (134 projects with Birr 660
million capital).
Table 7.4: Number and Capital of Approved Projects by Region
(Capital in millions Birr)
Regions2009/10 2010/11 2011/12
percentage shareto Total
No. ofProjects
InvestmentCapital
No. ofProjects
InvestmentCapital
No. ofProjects
InvestmentCapital
No. ofProjects
InvestmentCapital
Tigray 626 7,224 349 11,112 7 130 0.12 0.09
Afar 32 1,307 26 399 50 190 0.89 0.13
Amhara 743 17,371 722 32,753 612 38,642 10.83 26.44
Oromia 1,558 20,739 1,386 32,219 510 25,714 9.03 17.59
Somali 58 345 127 2,738 50 1,001 0.89 0.68
Benishangul-Gumuz 111 1,389 56 81,611 50 354 0.89 0.24
SNNPR 163 2,020 160 49,751 49 2,845 0.87 1.95
Gambella 11 2,675 14 3,920 11 6,265 0.19 4.29
Harari 2 7 48 276 4 974 0.07 0.67
Addis Ababa 2,902 29,195 3,221 30,627 4,170 62,264 73.82 42.60
Dire Dawa 172 1,455 207 2,995 134 660 2.37 0.45
MultiregionalProjects 118 12,689 6 1,067 2 7,129 0.04 4.88
Grand Total 6496 96415.44 6322 249,469 5649.00 146,168 100 100Source: Ethiopian Investment Agency
National Bank of Ethiopia
105
VIII. INTERNATIONAL DEVELOPMENTS
8.1 International Economic Developments
8.1.1 Overview of the World Economy6
Global economic growth momentum
weakened in 2011, albeit the firming of
momentum in the global economic growth
in the final quarter of 2010 continued in the
onset of 2011. Growth has been 1.6 percent
for advanced economies (against 3.2 percent
in 2010) and 6.2 percent for emerging and
developing economies (against 7.3 percent
in 2010). As a reflection of this, the external
imbalances, which had decreased in 2009 in
the context of global financial crisis, stopped
narrowing and remained at elevated levels in
2011. The slowdown is contributed by
several factors such as; dampening of real
incomes in major advanced economies due
to rising commodity prices and the
disruption of global supply chain as a result
of the Great East Japan Earthquake.
During the period, the divergence in growth
patterns continued not only between
advanced and emerging economies but also
6 It Extracted from European Central Bank annualreport 2011& monthly reports, through January toJune, 2012 and World Economic Outlook, October2012.
among advanced economies. Emerging
economies growth remained robust in the
earlier period of 2011 but the moderation of
growth in the later part of year helped
alleviate the build-up of overheating
pressures.
In advanced economies growth has been
restrained by the continuing repair of public
and private sector balance sheets and the
persistent weaknesses in the labour and
housing markets as well as high rate of
unemployment specifically in the OECD
area.
The second half of the year is characterized
by continued deterioration of business and
consumer sentiment on account of increased
financial market stress & uncertainty, the
escalation of the sovereign debt crisis in the
euro area and the drawn-out discussions on
the US debt ceiling.
National Bank of Ethiopia
106
Table 8.1: Overview of World Economic Outlook and Projection
(Annual Percentage Change)
Particulars 2010 2011Projection
2012 2013 2014
World Output 5.1 3.9 3.2 3.5 4.1
Advanced Economies 3.0 1.6 1.3 1.4 2.2
United States 2.4 1.8 2.3 2.0 3.0
Euro Area 2.0 1.4 –0.4 –0.2 1.0
Japan 4.5 –0.6 2.0 1.2 0.7
Emerging Market & DevelopingEconomies
7.46.3 5.1 5.5 5.9
World Trade Volume (goods & services) 12.6 5.9 2.8 3.8 5.5
Imports
Advanced Economies 11.4 4.6 1.2 2.2 4.1
Emerging Market & DevelopingEconomies
14.98.4 6.1 6.5 7.8
Exports
Advanced Economies 12.0 5.6 2.1 2.8 4.5
Emerging Market & DevelopingEconomies
13.76.6 3.6 5.5 6.9
Commodity Prices (U.S. dollars)
Oil 27.9 31.6 1.0 –5.1 –2.9
Non- oil 26.3 17.8 –9.8 –3.0 –3.0
Consumer Prices
Advanced Economies 1.5 2.7 2.0 1.6 1.8
Emerging Market & DevelopingEconomies
6.17.2 6.1 6.1 5.5
Source: IMF, World Economic Outlook, October 2012
National Bank of Ethiopia
107
In the US, economic activities continue to
recover though at a slower pace as the real
GDP growth declined to 1.7 percent from
3.0 percent in 2010. Lower government
expenditure at both the federal and state
levels together with external factors led to
sluggish growth in the first half of 2011.
However, the economy gained momentum
in the second half of the year as private
consumption posted gains albeit low
consumer confidence and weak growth in
disposable income. Supported by strong
corporate profits and an environment of very
low interest rates, non–residential
investment continued its substantial and
positive contribution to growth, while
residential investment started to contribute
positively to GDP growth from the second
quarter of 2011.
Similarly, the pace of employment growth in
the labour market was insufficient to recover
the job losers recorded two-three years later
and markedly bring down the
unemployment rate, which averaged 8.9
percent in 2011, compared with 9.6 percent
the preceding year.
In 2011, Japan’s Economy experienced
fluctuation in real GDP due to various
factors. Sharp decline in production and
exports as well as domestic private demand
as a result of the earthquake in March and
the ensuing nuclear disaster intensely
affected its growth which led to significant
decline in real GDP in the first half of the
year. However, the economic activity has
recovered in the third quarter as the supply
constraints caused by the earthquake eased
faster than initially expected. Yet again, the
real GDP contracted following a weakening
of global demand and the disruption to
Asian trade caused by the floods in
Thailand. Japan faced the first annual deficit
in the trade balance since 1980 which is led
by weak exports, partly caused by the
appreciation of yen along with increasing
imports of raw materials following the
earthquake.
With regard to Emerging Asia, economic
growth decelerated after an exceptionally
strong expansion the year before. The
moderation in global growth considerably
reduced export growth in the second half of
the year. However, annual GDP growth was
7.3 percent, close to its long-term average as
domestic demand remained robust.
National Bank of Ethiopia
108
In China, real GDP growth, which is mainly
driven by domestic demand while the
contribution of net exports tuned negative,
declined to 9.2 percent from 10.3 percent in
2010. Domestic demand was driven by
ample liquidity built up in previous years
where as construction was sustained by the
government’s social housing program of
2011, which set out to provide 36 million
new housing units by the end of 2015.
In Latin America, real GDP growth has
declined on account of slower expansion of
domestic demand due to the tightening
monetary policy stance in most countries of
the region. Year-on-year growth was 4.9
percent in the first half for the region as a
whole compared with 6.3 percent in the
previous year. However, the decline in real
GDP growth was partly by the less negative
contribution from external demand as
private consumption continued to be the
main engine of growth and labour market
conditions remained favorable and lending
standards eased.
8.1.2 World Trade
In line with the developments in global
economic activity, a rebound in the volume
of world merchandise trade over the final
quarter of 2010 continued into the first
quarter of 2011. At the same time, the
second quarter global supply chain
disruptions caused by the natural disaster in
Japan coupled with the floods in Thailand
resulted in global trade contraction for the
first time since mid-2009. Though, the most
pronounced decline in exports being
recorded in Japan and the newly
industrialized countries in Asia, the
slowdown was distributed across regions.
Consistent with all these developments,
evidence shows that trade made minor
positive contribution to growth, in net terms.
This has great implication of the need for
some stabilization in global trade.
In the US, the current account deficit
remained almost unchanged as it stood at
about 3.2 percent of GDP in the first nine
months of the year.
National Bank of Ethiopia
109
In Emerging Asia, trade surplus narrowed to
USD 155 billion in 2011 from USD 181
billion in 2010. This is due to decline in
export growth in the second half of the year,
mainly as a result of weaker global growth,
while import growth held up relatively well
supported by robust domestic demand.
8.1.3 Inflation and Commodity Prices
In 2011, gradual increase in annual inflation
rate is observed in advanced economies
though it slightly declined at the end of the
year. The surge in oil prices continued
owing to the rise in global oil demand
coupled with the severe disruption to the oil
supply from Libya amid the political turmoil
in that region. Despite the slow down in
global growth, oil prices stayed to be strong
in the second half of 2011. The price of
Brent crude oil was 38 percent above the
average in 2010. In the contrary, the prices
of non-energy commodities declined
substantially during 2011 as it was 15
percent lower towards the end of 2011 than
at the beginning of the year.
In OECD countries, average headline
consumer price inflation was 2.9 percent up
from 1.9 percent in the preceding year.
Excluding food and energy, average
consumer price inflation stood at 1.7 percent
compared with 1.3 percent in 2010.
In the US, headline inflation was elevated
during 2011, despite the slack in product and
labor markets, due to rising food and energy
costs. The downward trend that had started
with the economic downturn in 2008 has
been reversed as annual CPI inflation was
3.1 percent in 2011 up from 1.6 percent the
year before. Excluding food and energy, CPI
inflation surged to 1.7 percent from 1
percent the previous year.
In Euro area, there was evidence of upward
pressure on overall inflation, averaging 2.7
percent in 2011, up from 1.6 percent in
2010, mainly owing to commodity prices.
Concerning the monthly profile of annual
HICP, the rate gradually increased from 2.3
percent in January to a peak of 3.0 percent
from September to November, before edging
down to 2.7 percent in December, reflecting
mainly developments in energy and other
commodity prices. According to March
2011 ECB staff macroeconomic projections,
annual HICP inflation was in a range
between 2 percent and 2.6 percent in 2011
mainly due to higher energy and food prices.
National Bank of Ethiopia
110
Japanese economy continued with its
deflationary environment as CPI inflation
remained negative throughout most of 2011.
All through the year, the Bank of Japan
maintained an accommodative monetary
stance in order to stimulate the economy and
fight deflation.
Emerging economies, inflationary pressures
remained strong in 2011. In the first half,
annual inflation rates increased on account
of the surge in food and other non food
commodity prices though the increase later
on became more broadly based. However, it
peaked in the third quarter of the year as
both imported demand and domestic
demand pressures eased. In the last quarter
of the period, annual inflation marginally
declined, prompting some central banks to
halt their monetary tightening cycle they had
begun in the second half of the preceding
year.
In China, inflation remained high mainly
driven by high commodity prices and
adverse domestic supply shocks to food
items, but eased to 3.1 percent by the end of
the year.
For Latin America, headline inflation stood
at 6.7 percent in the first half of 2011. The
solid growth performance coupled with
rising food prices resulted in a wide spread
increase in inflationary pressures, which
prompted several central banks to increase
their policy rates during this period.
8.1.4 Exchange Rate
In 2011, developments in foreign exchange
markets were the reflection of prospect for
the global economic recovery and financial
market conditions. During the year, effective
exchange rate of Euro declined moderately
with high volatility. After continuous
appreciation till April 2011, the Euro
depreciated overall against the US dollar,
Japanese Yen and Pound Sterling in the
second half of the year amid temporarily
declining volatility. On 30 December 2011,
the Euro traded at USD 1.29, JPY 100.2 and
GBP 0.84, which was 2.4 percent, 13.9
percent and 2.7 percent below its average in
2010, respectively.
However, the Euro’s subsequent decline
against these currencies was partly offset by
a strengthening against other currencies,
particularly those of central and eastern
National Bank of Ethiopia
111
European currencies. As a result, the
nominal effective exchange rate of the Euro,
as measured against the currencies of 20 of
the Euro areas most important trading
partners, declined by 2.2 percent over the
year.
By the end of 2011, in nominal effective
terms, the Euro stood at 4 percent below its
average level in 2010 and close to its
average level since 2009.
The real effective exchange rates of the Euro
based on different cost and price measures
increased during the first half of 2011 and
there after depreciated to levels close to
those prevailing at the end of 2010.
8.1.5 Capital Flows
In the course of 2011, risks to euro area
financial stability increased considerably as
the sovereign debt crisis worsened and its
harmful interplay with the banking sector
intensified. Vulnerabilities grew as the
sovereign debt crisis spread from some
smaller to some larger euro area countries in
the second half of the year.
In addition, substantial capital outflows from
emerging Asia occurred at the end of the
year as a reflection of concerns about the
global outlook which triggered financial
market volatility.
National Bank of Ethiopia
112
8.2 Implications for Ethiopia
The moderation in the global economic
activities has been partly reflected in the
external sector of Ethiopia as its momentum
of growth tended to decline.
Following the gradual global economic
recovery, total export growth slowed down
to 14.8 percent in 2011/12 compared with
37.1 percent in the preceding year. Net
receipts from private transfers; however,
surged by 18.2 percent vis-à-vis 1.4 percent
a year before.
[[
On the other hand, FDI dropped by 17.2
percent presumably in line with the
slowdown in global economic activities.
Furthermore, Ethiopia’s total import bill
significantly rose as a result of higher world
commodity prices. Hence, this had negative
effect on Ethiopia’s current account balance.
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