Africa-Press – Ethiopia. National Bank of Ethiopia (NBE) has released its third Financial Stability Report, highlighting the resilience of Ethiopia’s financial system despite a challenging global economic environment.
Covering the fiscal year from July 2024 to June 2025, the report underscores notable improvements in key macroeconomic indicators, including stronger economic growth and a significant decline in inflation.
Issued in line with the central bank’s mandate to safeguard financial system stability, the report provides a comprehensive assessment of risks, vulnerabilities, and overall system health.
It is intended to guide regulators, policymakers, investors, and other stakeholders while strengthening depositor confidence and supporting sustainable economic growth.
During the review period, Ethiopia’s economy operated under global headwinds, including slowing international growth, persistent geopolitical tensions as well as external shocks.
Despite these pressures, the country recorded clear macroeconomic gains, according to the central bank.
Growth accelerated, inflation eased, and the transition to positive real interest rates improved the effectiveness of monetary policy.
Fiscal performance also strengthened, with reduced budget deficits and more sustainable public and domestic debt levels, helping to lower macroeconomic vulnerabilities and reinforce overall financial stability.
The banking sector remained robust, with improvements across all key indicators, including capital adequacy, asset quality, liquidity and profitability.
Stress tests covering credit, liquidity and foreign exchange risks confirm that banks are well-positioned to withstand potential shocks.
Looking ahead, the outlook for the 2025/26 fiscal year remains positive. Continued economic expansion, single-digit inflation, credit growth, and rising foreign exchange earnings are expected to support further stability.
Ethiopia’s sole systemically important bank successfully passed all major stress tests conducted as of June 2025, signaling low systemic risk, though authorities note that concentration risks require ongoing monitoring.
Other financial sectors also demonstrated strength. The microfinance sector posed minimal risk due to its relatively small size and improved performance, with strong capital, liquidity, and profitability indicators.
Capital goods finance companies similarly showed sound financial health, supported by adequate buffers and low credit risk.
The insurance sector remained stable and resilient, posting solid gains in liquidity, profitability, premium growth, and underwriting performance.
Meanwhile, the capital market and social security sector are playing an increasingly important role in enhancing liquidity, lowering borrowing costs, and supporting government financing through Treasury Bill investments.
Digital financial services saw rapid expansion, with transaction values nearly doubling to exceed ETB 18.5 trillion.
While this growth is boosting financial inclusion and efficiency, it also introduces rising operational, cyber, and fraud-related risks, prompting calls for stronger technological infrastructure, skilled human capital, and enhanced risk management systems.
Overall, the report concludes that Ethiopia’s financial system recorded strong growth in key balance sheet indicators and profitability, remaining safe, sound, and stable throughout the fiscal year, alongside continued progress in developing the Deposit Insurance Fund.
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