Ethiopia’s Money Supply Climbs to 3.77 Trillion Birr Amid Disinflation

Mintesinot Nigussie

Ethiopia’s money supply reached 3.77 trillion birr in the second quarter of the 2025/26 fiscal year, rising 10.6 percent quarter-on-quarter and 39.4 percent year-on-year, even as headline inflation eased to single digits.

Headline inflation fell to 9.7 percent in December 2025, down from 13.2 percent three months earlier, according to the March 2026 quarterly macroeconomic update by the Ethiopian Economics Association. The moderation in prices has coincided with a pickup in liquidity.

The increase in money supply reflects a rebound from slower growth in the previous quarter, driven largely by foreign exchange inflows and changes in credit policy. Export earnings from gold and coffee have strengthened foreign reserves at the National Bank of Ethiopia.

At the same time, the central bank has held its policy rate at 15 percent while allowing banks to expand lending by up to 24 percent during the fiscal year. Private banks have responded with a sharp increase in lending, with loan disbursements rising more than threefold from a year earlier.

Much of the financing has been directed towards international trade, where outstanding loans have exceeded 483.4 billion birr. State-owned banks have continued to prioritise industrial sectors, with manufacturing receiving the largest share of their credit allocation, amounting to more than 206 billion birr.

Participation in the government securities market has also widened. Treasury bill auctions have attracted a growing number of private investors, rising from a single bidder a year ago to 139 participants.

The association notes that while the easing in inflation is a positive development, the rapid expansion in liquidity could pose risks if not carefully managed.

Businesses and investors are closely watching the balance between liquidity growth and price stability as Ethiopia continues its disinflation efforts.

Overall, the latest macroeconomic data shows a healthy expansion in money supply alongside improving inflation trends, signalling cautious optimism for the Ethiopian economy.