Central bank regulators say that a large number of business entities and individual traders are complicit in conducting official transactions through personal or third-party accounts, bypassing their registered business bank accounts.

To address the issue, the bank has instructed all financial institutions to collect and report data on customers—especially business organizations and traders—who are found using personal or third-party accounts for commercial operations. The move, the NBE said, is part of efforts “to safeguard the soundness and integrity of the financial system and the broader economy.”

The statement comes just days after newly-minted NBE Governor Eyob Tekalign issued a “final warning” to remittance providers suspected of involvement in illegal activity, and announced the NBE is embarking on a coordinated crackdown on money laundering and terrorism financing.

The Governor called on the public to refrain from using informal remittance channels.

“Transfers from illicit entities will be identified and accounted for,” said Eyob, a former State Minister of Finance who replaced Mamo Mihretu at the helm of the NBE last month.

“The National Bank will not hesitate to take action. Action is not limited to closing accounts. A wide operation that includes beneficiaries and agents has already begun and will move toward coordinated enforcement,” said the Governor.

Enforcement will presumably be conducted in line with the recently ratified anti-money laundering and asset recovery proclamations.

The Asset Recovery Proclamation ratified by Parliament in January 2025 allows authorities to seize any asset with a value exceeding ten million Birr that lacks proper documentation, including movable and immovable property, money, legal instruments, securities, shares, and virtual assets, among others.

The law retroactively applies to assets acquired up to ten years before its enactment.

Around half of all public debt in Sub-Saharan African countries is now held by domestic institutions, a trend that has steadily increased over the years and is reshaping the region’s financial landscape, the International Monetary Fund (IMF) reported this week.

Abebe Aemro Selassie, head of the IMF’s African department, said the shift toward domestic borrowing has been both a mark of resilience and a source of growing concern.

“This is the point we’ve been highlighting for several years,” he said during a press briefing on Thursday, part of the IMF-World Bank Annual Meetings. “At this moment, our estimation is that about half of total public debt is held by domestic institutions.”

Abebe noted that African governments have turned to domestic banks to sustain spending levels and economic activity in the face of declining external financing. He described the trend as a double-edged sword.

While domestic borrowing has helped African governments cope with tightening external financing conditions, it has also created new risks in economies already burdened by high debt.

In its latest Regional Economic Outlook for Sub-Saharan Africa report, the IMF warned that foreign aid, a vital source of funding for many low-income and fragile states, is falling rapidly.

The organization estimates that bilateral aid to Sub-Saharan Africa could decline by up to 28 percent this year, threatening essential services in countries such as South Sudan, Niger, and the Central African Republic.

“Health, education, and humanitarian programs are particularly vulnerable,” the IMF cautioned, noting that governments already have limited fiscal space to absorb such shocks.

“We are now observing a situation where there are significant vulnerabilities, particularly in those countries where public debt is at very elevated levels,” Abebe also warns. “The risk of distress is higher, and we’re seeing some pressures on bank balance sheets or potential pressures on banks’ balance sheets.”

This pressure varies from country to country depending on the extent of vulnerabilities, and is  particularly concerning for nations where public debt levels and interest rates are particularly “We are working with governments to ensure there is a robust regulatory framework and sound capitalization plans for banks. Most importantly, the first line of defense is to keep public finances on a healthy trajectory to minimize potential spillover risks,” said Abebe.

He recalled an IMF assessment from six months ago, which highlighted the region’s strong performance, with growth exceeding expectations last year. However, he added, the situation has since been affected by a “sudden realignment of global realities” amid increasingly turbulent external conditions, marked by weakened demand, softer commodity prices, and tighter financial markets.

“Today, these global headwinds continue to test the region’s recovery and resilience,” he said. “We now estimate that Sub-Saharan Africa’s economic growth will remain steady at 4.1 percent this year, with a modest pickup expected in 2026.”

Abebe attributes the growth forecast to progress in macroeconomic stabilization and reform efforts across major economies in the region, including in Ethiopia.

He also pointed out that several countries such as Benin, Côte d’Ivoire, Ethiopia, Rwanda, and Uganda are among the fastest-growing economies in the world. However, Abebe cautioned that resource-intensive and conflict-affected countries continue to face significant challenges, achieving only modest gains in per capita income.

The issues are compounded by an increasingly difficult external environment that has seen global growth slow and commodity prices diverge.

“Oil prices are declining, while the prices of copper, coffee, and gold remain fairly elevated,” said Abebe.

He mentioned that external financing conditions have shown some improvement, allowing countries such as Kenya and Angola to recently access international capital markets. However, he cautioned that the global trade and policy landscape has deteriorated further, placing further strain on the region’s fragile recovery.

Tariffs on exports to major markets such as the United States have increased, while the expiration of preferential access under the African Growth and Opportunity Act (AGOA), will hit export-oriented economies like Lesotho and Madagascar.

The IMF has urged African governments to focus on mobilizing domestic revenues and strengthening debt management as a way to safeguard macroeconomic stability and sustain development.

The Ministry of Transport and Logistics has confirmed that under Ethiopia’s new vehicle plate registration system, organizations, and public figures will be able to order and obtain customized plate numbers.

Alemu Sime (PhD), minister of Transport and Logistics, touched on vanity plates during a press conference earlier this week, where he said that a new registration system is necessary to fill in the gaps left behind by an outdated framework.

The previous system, established over a decade ago, is no longer suitable for the country’s growing transport sector in terms of plate types, symbols, production, distribution, and overall service provision, according to the Minister.

The new registration scheme will be implemented based on a new Ministry directive.

Under the ‘Types of Vehicles Identification Number Plate and Symbols Determination and Service Delivery Directive,’ vehicle plates will display both Geez (“ኢት”) and Latin (“ETH”) characters alongside a geographic outline of Ethiopia.

The directive applies to all vehicles registered or to be registered in Ethiopia, including those owned by manufacturers, importers, assemblers, international organizations, and individuals.

Alemu said the previous system did not comply with international agreements to which Ethiopia is a signatory, and described it as highly inefficient.

“The former vehicle plate registration system was not aligned with current and future road transport sector growth. It was burdened with bureaucracy, wasted time and money, and exposed to corruption and maladministration,” he said.

The Ministry noted that the old plate production and distribution system was poorly supervised, allowing duplication and forgery to become common. Expired or dumped plates were often reused illegally on other vehicles.

“Such practices exposed transport bureaus to unnecessary expenses,” he said, adding that the new system would help Ethiopia use its limited resources more effectively and modernize the vehicle registration process.

The directive, he explained, fills gaps in plate types, production, and distribution while aligning with international standards Ethiopia has ratified.

Alemu stated that the new plates will incorporate advanced digital and security features.

“The new plate registration system is based on a single, technologically backed national production mechanism,” he said. Each registered vehicle will be assigned a unique federal identification number and a corresponding digital sticker, both integrated into a secure database.

“Based on international conventions, including the Vienna Convention, Ethiopia’s code ‘ETH’ will serve as the only identification mark for vehicles. Re-registration will be done only after verifying the legality of previous registrations,” said Alemu.

The new plates will also feature reflective signs for better visibility under different light conditions, as well as hidden security marks.

Alemu emphasized that the system is designed to enhance security and transparency. Features such as holograms, watermarks, barcodes, QR codes, RFID or chips to identify and track vehicles and micro-texts, which will make plate duplication impossible, according to the Minister.

“There will also be a sticker placed on the vehicle’s windshield, which remains valid from registration until the vehicle’s disposal. The sticker and plate number will be interoperable,” Alemu explained.

The embedded technology will allow authorities to verify where a vehicle was registered, who owns it, and its model, strengthening efforts against vehicle-related crimes.

Bareo Hassen, a state minister of Transport, noted the new layout will cut down on the number of paints currently used in plate production, all of which are imported.

The new registration system categorizes vehicles more clearly, including private cars, vehicles for persons with disabilities (marked with ‘PD’), government vehicles, taxis, commercial vehicles, religious institutions, diplomatic missions, and international organizations.

Under the directive, private vehicles will use black letters on a white background, commercial vehicles will use green letters, taxis will have red letters marked ‘Taxi,’ and government vehicles will display the institution’s name or logo.

Religious and civic society vehicles will have orange letters, while international and intergovernmental institutions will have specific abbreviations.

Aid and diplomatic vehicles will use unique tags such as ‘AO’ or ‘CD.’

Motorcycles will feature red text on a white background, and electric vehicles will be identified with green lettering. Vehicles classified as special machinery or equipment will be marked “SME” in both Geez and Latin alphabets, while heavy trucks will also bear names in both scripts.

Bareo explained that the previous system could register only up to nine million vehicles, while the new one, using ten digits, can accommodate as many as 121 million.

“All vehicle data will be digitally stored in chips readable through QR codes,” he said. The initiative, he added, is in line with Ethiopia’s international commitments under the African Continental Free Trade Area, the Africa-Euro Safety Charter, the Tripartite Agreement and the Vienna Convention.

During the press conference, journalists asked why the Ethiopian flag was not included in the new vehicle plate number design. Alemu responded, “What if the national flag changes as a result of the ongoing national dialogue? In that case, the newly produced plates would only be temporary, even after we have ordered two million of them.”

The Ministry deliberately chose not to include the flag in the new designs, according to Alemu.

Alemu disclosed that the first batch of the new plates has already been imported from abroad, and preparations for the digital installation system are underway. The Ministry plans to replace all existing plate numbers with the new version during the 2025/26 fiscal year.

“We’ll start changing the plate numbers within two months,” he said.

Alemu added that the Ministry is currently reviewing technology providers and will select a company capable of completing installation in the shortest time possible.

Vehicle registration in Ethiopia dates back to 1942, with the first plates officially issued in 1964. New designs were introduced in 1981 and again in 2001. The Ministry estimates that over 1.6 million vehicles are currently registered in the country.

The report was released during the Impact Dialogues Ethiopia Conference, held on September 23, 2025, under the theme ‘Aligning Priorities to Accelerate and Scale-Up Impact Investment in Ethiopia.’

It noted that despite being one of Africa’s fastest-growing economies, with growth reaching 7.3 percent in 2023/24, according to the African Development Bank’s Country Focus Report 2025, Ethiopia’s financing needs far outpace its revenue generation capacity.

The federal government currently mobilizes funds from tax and non-tax revenues, which together provide USD 18.13 billion, alongside international public sources such as external debt and official development assistance (USD 4.4 billion), and international private flows like remittances, foreign direct investment, and portfolio capital of USD 16 billion.

Domestic private investment supplements these inflows. Even so, the report estimates that Ethiopia faces an 11.2 percent budget deficit in financing its Ten-Year Development Plan, with large portions of expenditures still uncovered.

Alongside the wider development financing gap, Ethiopia also confronts a climate finance shortfall of USD 252.8 billion by 2030. The report stressed that meeting adaptation and mitigation goals will require innovative capital mobilization, including green bonds, voluntary carbon markets, and debt for climate swaps.

SMEs remain another critical pressure point.

Although they form the backbone of the economy and employ millions, only about 130,000 of the country’s 800,000 SMEs currently have access to credit. The resulting SME financing gap is estimated at USD 4.2 billion. Surveys by the International Finance Corporation and the World Bank indicate that between 2020 and 2024, around 1,500 to 2,000 enterprises sought growth capital of between USD 50,000 and USD 1 million each, amounting to USD 300 to 500 million in capital demand over the past five years.

This unmet demand reflects Ethiopia’s underdeveloped financial ecosystem.

The social implication of these gaps is severe. The country requires 2.5 million new jobs annually to absorb labor market entrants, yet unemployment stands at eight percent overall and 27.2 percent among  youth, while more than 31 million people still depend on humanitarian aid.

Without stronger investment flows, Ethiopia risks deepening unemployment, poverty, and aid dependency, the report further stated.

Yet despite urgent need, Ethiopia has struggled to attract meaningful shares of the region’s impact capital.

East Africa has become a major hub for impact investing, drawing more than USD 9.3 billion across 1,000 deals in recent years, with 155 impact investors managing 203 active vehicles. Ethiopia, however, accounted for four percent of the deals and seven percent of capital until 2015, largely due to regulatory, structural, and market barriers.

The report identified multiple factors discouraging investors, including a limited pipeline of investor-ready businesses, high capital costs, weak financial instruments, policy and regulatory gaps, and broader structural challenges. These conditions have created a cautious investment environment in Ethiopia at a time when it urgently needs to mobilize capital to close its development and climate financing gaps.

The Prime Minister has brought in Eyob from the Ministry of Finance to succeed Mamo Mihretu as the 11th NBE governor. Mamo’s resignation earlier this month to “pursue other passions” was the subject of much speculation.

Sources contend the resignation followed disagreements with the PM on the implementation of IMF-backed reforms, particularly surrounding the issue of central bank autonomy and ending the practice of direct borrowing.

Eyob leaves his post as a state minister of Finance to take the helm at NBE. He holds a postgraduate degree in political economy from the University of Maryland and a master’s in international policy and business from George Washington University. He served as head of the National Planning Commission before joining the Ministry of Finance under the administration of Abiy Ahmed.

Abdulmenan Mohammed (PhD), a seasoned financial analyst keeping a close eye on the Ethiopian finance sector, sees the appointment as an example of the executive’s unchecked power over the central bank.

“The governor should not be appointed by the executive; otherwise, the central bank risks being reduced to an institution that merely executes the agenda of the government,” he told The Reporter.

He stressed that genuine independence must be enshrined in law, as is the practice in many other countries. That is not the case in Ethiopia. The recently amended proclamation governing the NBE, as well as its predecessors, stipulate that the governor and the board of directors are directly accountable to the Prime Minister.

“They may claim operational independence, but real independence is absent,” Abdulmenan said.

He also questioned Eyob’s appointment, pointing out that the new governor has long been part of the government’s executive structure—as a member of the macroeconomic committee, a state minister of finance, and a member of Parliament representing Nekemte.

“He is not even remotely independent,” Abdulmenan argued.

Looking back, he recalled that Ethiopia once appointed central bank governors with strong banking backgrounds, including Leikun Birhanu, Dubale Jale, Tadesse Gebrekidan, Tefera Degefe, and Legesse Tenkir.

“But in the past two decades, there has been a growing tendency to appoint politicians as governors, regardless of their banking experience,” he said.

Abdulmenan observes that Eyob lacks direct banking experience.

“He worked at the Ethiopian embassy in the US and later became state minister of finance after the current Prime Minister came to power. Although he studied economics and worked at the Ministry of Finance, this does not necessarily mean he has specialized knowledge of financial economics, which is a highly technical field,” he explained.

On monetary issues, Abdulmenan acknowledged that the new proclamation bans direct advances from the NBE to the government. Yet, he emphasized that the bank’s ties with the executive branch remain strong.

“The NBE still influences interest rates and could pursue policies that stimulate an economic boom ahead of elections, directly benefiting the ruling party,” he warned. “State banks could also receive preferential treatment in supervision, and discount facilities could be used to channel cheap loans into government-favored sectors.”

He also raised concerns about fiscal dominance, noting that Eyob’s transition from the Ministry of Finance to the NBE blurs the line between fiscal and monetary policymaking.

“Normally, fiscal and monetary policies are coordinated, but this raises fears that monetary policy will be subordinate to fiscal needs,” he cautioned.

Still, he acknowledged Eyob’s extensive involvement in Ethiopia’s ongoing debt restructuring process as a useful asset.

Teshome Abebe (Prof.), an economist at Eastern Illinois University in the US, echoed Abdulmenan’s call for central bank autonomy.

“Unless the NBE is administered under an independent committee, there is always a risk that a single individual could order money printing or arbitrarily adjust interest rates—both of which are disastrous policy decisions,” he told The Reporter.

Teshome argued that the success of the new governor will depend largely on institutional independence.

“In a market-led economy, central bank independence is essential. Without it, policies will inevitably be politicized, leading to unintended economic consequences,” he said.

The expert recommended that the NBE be led by a committee of experienced experts with an independent economic perspective.

“If such a structure is in place, the bank will be able to build much-needed trust in the economy,” he concluded.

In contrast, the president of a private bank expressed his optimism about Eyob’s appointment.

“I expect the national financial reform to be implemented strongly under Eyob, given his role in the macroeconomic team,” said the executive, speaking anonymously. “He is likely to encourage healthy competition among banks, which could bring positive results for the economy.”

The bank president acknowledged that central banking is new territory for Eyob but expressed confidence in his leadership qualities.

“The reforms are not personal initiatives but nationwide policies. The key issue is execution capacity, and I believe Eyob has that,” he said.

The report published by the AU Development Agency AUDA-NEPAD, the European Union (EU), and the German Federal Ministry for Economic Cooperation and Development (BMZ) indicates that over 600 million Africans remain without access to electricity, accounting for nearly 85 percent of the global electrification deficit.

At the same time, electricity demand is expected to nearly double by 2040. Yet the continent also has enormous potential: Africa’s generation capacity could rise from 266 GW in 2023 to over 1,200 GW by 2040, with renewables projected to grow from 25 percent to nearly 64 percent of the mix, according to the report.

However, this transition requires massive financing. African leaders and international partners stress that without significant investment in renewable energy generation, transmission infrastructure, and regional integration, the continent risks falling short of its development and climate goals.

Kamugisha Kazaura (PhD), Director of infrastructure and Energy at the African Union Commission for infrastructure and energy, said,
“Africa’s energy future is built on vision, concrete roadmaps, and vast opportunities,” but he stressed the central role of partnerships and financing as crucial measures to deliver reliable and clean power for all.

Teresa Ribera, European Commission Vice President echoed this, highlighting African Single Electricity Market (AfSEM) as a “transformative step” but stressing the importance of removing investment barriers and strengthening regulatory frameworks.

The report highlighted AfSEM’s role in delivering universal access, accelerating integration, and driving green industrialization. Guided by the  Continental Power Systems Master plan (CMP) — key elements of the AU Agenda 2063 designed to create a fully integrated, cross-border electricity market across all AU Member States — AfSEM targets the world’s largest interconnected power market by 2040, with competitive cross-border trade catalyzing the scale-up of Africa’s renewable resources.

Germany’s Parliamentary State Secretary Bärbel Kofler (PhD) called AfSEM a “game changer” for renewable investments, noting that a more integrated market would reduce risks and attract capital.

The paper from the data center service provider based in Ethiopia estimates the country requires an electricity generation capacity of 100 Gigawatts (GW) to achieve middle-income status—a target that aligns with the current global average of one kilowatt per capita.

The nation’s current electricity generation capacity stands at 7,910 megawatts (MW), including power from the Grand Ethiopian Renaissance Dam (GERD), Ashebir Balcha, CEO of Ethiopian Electric Power (EEP), disclosed in a recent press conference.

He stated that once more turbines at GERD become operational, capacity will reach 9,000 MW.

EEP operates a 20,000 kilometer transmission network comprising 308 transmission lines, according to the CEO.

Data from the Ethiopian Investment Commission indicates demand for electricity in Ethiopia is growing by a third each year, while data from the World Bank indicates that nearly half of the country’s population lacks reliable access to electricity.

Demand is expected to continue its rapid growth, with the manufacturing sector alone forecast to need more than 31 billion kWh in 2030, more than seven times it did in 2013.

“In recent years, Ethiopia registered significant strides in electrification—growing from about two gigawatts just five years ago to close to eight gigawatts today. I hope this’s only the beginning of a much larger journey, because Ethiopia will need to reach around 100 gigawatt capacity to achieve middle-income status,” Nemo Semret (PhD), co-founder and CEO of QRB Labs ICT Solutions PLC, told The Reporter.

“The key point is that the real challenge lies not in generation, but in distribution. A good way to think about it is that during the rainy season, when hydropower generation is at its highest, we actually experience more power outages,” he said, adding, “This shows the problem is with the transmission and distribution network such as poles, transmission lines, and neighborhood distribution systems often getting damaged or overloaded—rather than a lack of generation capacity.”

Meanwhile, the study emphasizes that energy is a fundamental engine for prosperity, with 1 kWh of electricity estimated to generate approximately 0.40 USD in GDP.

Though EEP’s operational performance is strong, its financial statements point to fundamental challenges.

The utility has demonstrated robust growth in revenue, which expanded at 32 percent annually to over 27 billion Birr in 2024, and even more impressive growth in Earnings Before Interests, Taxes, Depreciation, and Amortization (EBITDA), which rose 35 percent in a year to 23.6 billion Birr, which indicates that the core business of generating and selling power is fundamentally sound and profitable on an operational basis.

However, these gains are offset by extremely high financing costs and depreciation from past capital investments, resulting in significant net losses that still amount to billions of Birr. The dichotomy between healthy operating margin and negative bottom line lies at the heart of the nation’s energy challenges, the report further states.

The rapid growth has also created geographic imbalances between supply and demand. As new generation sites such as GERD in the pipeline, transmission and distribution infrastructure often lags, creating pockets of “stranded energy”—power that’s generated but cannot reach end users, according to the report.

Conversely, urban and industrial sectors face congestion and instability as demand outstrips local capacity. The report argues that this stranded energy, which has almost zero marginal cost, represents a massive untapped revenue opportunity.

According to this reality, the report suggests three choices: subsidize the deficit from government funds, slow down new investment to prioritize debt repayment and pursue self-sustaining investment in electrification.

The last option, as per the report is, “The only viable forward to development and prosperity.”

For Ethiopia’s energy future, the white paper endorses a four-phase roadmap to transform the nation’s electricity pricing with a design to optimize the national grid, monetize currently wasted “stranded energy” and attract high-value demand.

The phased approach starts with geographic price differentiation, where power costs would vary by location—often cheaper in areas with excess capacity to attract new industries and more expensive in congested zones to manage load.

Market pricing through annual capacity auctions and allowing customers to bid for energy and revealing actual market demand constitute the second phase. The paper’s authors envision this system evolving into a real-time market, with prices adjusting hourly and every five minutes based on actual grid conditions.

The final phase pertains to integrating cross-border markets through the Eastern Africa Power Pool and exporting excess power at a premium.

The paper also lobbies in favor of cryptocurrency mining operations, which its authors claim can generate up to USD 500 million a year using solely stranded energy.

Million Habte, coordinator of implementation at the AfCFTA Secretariat, told The Reporter that Ethiopia needs a clear and well-structured plan if the continental trade deal is to succeed.

“Plans should be crafted to show in detail how much a country stands to benefit from the agreement,” he said. “For example, we need to calculate how many billions of USD Ethiopia can generate from agricultural, textile, and leather exports, and then outline both the opportunities and challenges, along with mechanisms for follow-up.”

As it stands, the Ministry of Trade and Regional Integration is responsible for coordinating AfCFTA implementation in Ethiopia. Million argued that while the Ministry plays an important role, an independent office will ensure systematic monitoring and provide alternative solutions for the private sector.

He also stressed that Ethiopian embassies across Africa should prioritize trade diplomacy and regional integration to maximize opportunities.

An economist keeping a close eye on AfCFTA, who prefers to remain anonymous, disagrees with the idea of creating a new organ.

He suggested that Ethiopia should instead study best practices from other countries. In Ghana, for example, AfCFTA implementation is coordinated under the President’s office, which allows high-level decisions to be enforced without delay.

“In Ethiopia’s case, the Ministry can continue to serve as a secretariat,” the economist said. “But effective coordination would be much easier if implementation were overseen by the Prime Minister’s office or another top executive body. The Ministry lacks the authority to direct institutions such as the Customs Commission and the National Bank of Ethiopia, which are crucial for tariff reductions, tax administration, and financial transactions.”

The expert warns that unless the Ministry is legally empowered to enforce compliance, it cannot manage implementation effectively.

He argues the Ministry should either be granted the legal mandate to command other implementing institutions or the responsibility should be shifted to the Prime Minister’s office. Otherwise, he worries, any orders it issues could go ignored, undermining progress.

Despite being operational, AfCFTA’s rollout has been slow.

Million admitted that some protocols, such as free movement of people and the right to work, have been delayed because many member states have not yet ratified them. Nevertheless, there has been some progress.

Around 6,000 certificates of origin (CoO)—documents confirming that goods meet AfCFTA rules of origin—have been issued.

Egypt leads with nearly 3,000 certificates, while Tanzania, Ghana, and Nigeria are also active participants. Million expressed optimism that Ethiopia would soon join the list once it fulfills the necessary requirements.

He added that seven protocols covering goods and services, intellectual property, digital trade, and competition have already been implemented.

“Ultimately, success will be measured by the volume of trade conducted, the benefits to the private sector, the readiness of logistics and customs systems, and the effectiveness of tax and duty incentives,” he said.

Ethiopia, he added, could benefit not only from exports to Europe and Asia but also from new opportunities within Africa, including transactions settled in local currency.

However, the delays mean any potential benefits are still a long way away.

Both Million and the economist pointed to external shocks like the COVID-19 as major factors behind the delays, disrupting decision-making, trade flows, and growth across Africa.

IMF data shows that the continent’s economy contracted for the first time in over two decades in 2020, shrinking by 1.9 percent, while fiscal deficits nearly doubled from 4.7 percent of GDP in 2019 to 8.7 percent. Africa’s share of global trade remains under three percent, with intra-African trade still limited.

A report by the UN Economic Commission for Africa (UNECA) found that African countries continue to trade more with the rest of the world than with each other.

The economist also highlighted global trade tensions as an obstacle to AfCFTA’s smooth rollout.

“Sudden tariffs, retaliatory measures, and the instability caused by sanctions and geopolitical disputes have all undermined the global trading system,” he said.

He pointed to the weakened role of the World Trade Organization (WTO) amid growing disputes between major powers. In his view, uncertainty in global trade has discouraged African governments from fully committing to continental integration.

The economist further argued that the pandemic introduced a new economic principle of “resilience,” which prioritizes self-sufficiency in key industries.

Africa’s difficulty in accessing pharmaceuticals during COVID-19, compared to other regions with stronger local manufacturing, has pushed many countries to pursue domestic production of essential goods. While this move reduces dependency, he warned it may also weaken commitment to regional integration.

“As long as countries commit more to resilience, the momentum for regional integration could decrease,” the economist predicts.

Million, however, insists that AfCFTA remains a long-term opportunity for Ethiopia and the continent. He emphasized that governments’ ability to resolve trade finance shortage challenges and address problems faced by exporters in destination countries would be key to unlocking the benefits.

He also argued that African nations should take advantage of nearby markets, rather than focusing solely on Europe and Asia.

“There are exportable items in our backyard, even those that can be traded in local currencies,” he said.

International trade uncertainty adds to the challenge.

The economist noted that sudden tariffs, sanctions, and rival trade agreements have destabilized the system, making it difficult for countries to commit fully to AfCFTA.

He also blamed global trade politics as one of the biggest barriers to the delayed implementation of the AfCFTA.

“Even trade deals are uncertain on whether regional trade agreements or bilateral trade agreements are more effective,” said the expert. “The way forward is to remain cautious and closely monitor global trends.”

Ethiopia’s financial institutions meet only two percent of an estimated 2.5 trillion Birr in annual demand for credit in the country’s agriculture sector, according to a government document published this week.

Banks and microfinance institutions (MFIs) disbursed just 52 billion Birr in loans to the sector in 2024, far less than total demand. Even counting the 73 billion Birr in credit allocated by the state-owned Commercial Bank of Ethiopia (CBE) for fertilizer purchases, the proportion of disbursements to demand sits at a measly five percent.

The startling figures are included in the national Agri-Finance Implementation Roadmap (NAFIR) jointly launched this week by officials at the Ministry of Agriculture and regulators at the National Bank of Ethiopia (NBE).

The roadmap charts Ethiopia’s agricultural aspirations for the coming five years.

“This total annual potential demand [2.5 trillion Birr] represents a scenario of fully modernized agriculture and comprises the key agri-finance use cases for which producers across Ethiopia’s agricultural value chains would access credit for crop and livestock inputs, irrigation, equipment and mechanization services, and use output finance to support enhanced aggregation and marketing,” reads the document.

It forecasts that demand for agri-finance will grow to 2.93 trillion Birr in 2030, and represents a huge increase on forecasts included in the Ten-Year Perspective Plan, primarily owing to the decision to float the currency in July 2024.

Officials want to see credit to the agriculture sector rise to a minimum of 881 billion Birr annually by 2030, while the roadmap also includes ambitious targets for modernization through a coordinated, data-driven financial framework that promotes rural inclusion and private capital engagement.

Although banks have more than doubled their disbursements to agriculture to 2.54 billion Birr in the four years since 2020, officials argue progress has been too slow. They also caution about an alarming decline in financing from MFIs.

“There has been a declining trend in the microfinance sector over the last four years which has seen their proportion of credit provided to agriculture fall from 30 percent to 18 percent. The drop was even more pronounced for those MFIs which converted to become banks between 2021-22. Between them, Tsedey, Siinqee, Omo and Shabelle Banks experienced a fall in the proportion of lending to agriculture from 57 percent to 32 percent in just one year,” states the document.

Despite contributing 32 percent to the Gross Domestic Product (GDP), 64 percent to employment, and nearly 80 percent of export earnings, the agricultural sector remains severely underfinanced.

In 2023/24, only 52 billion Birr was disbursed in actual agricultural credit—excluding Commercial Bank of Ethiopia’s fertilizer financing—representing two percent of the estimated 2.58 trillion Birr in annual potential demand, NAFIR states.

Including fertilizer financing, the figure rises to 125 billion Birr, but this form of credit does not directly reach farmers.

Officials warn the sector is not receiving enough financial support to achieve its national development priorities.

NAFIR sets out to bridge this gap with a compound annual growth rate of 38.5 percent, boosting agricultural lending from 34.2 billion Birr in 2019/20 to 881 billion Birr by the end of the plan period.

For 2023/24, the policy benchmark was 126 billion Birr, but actual disbursement covered only 41 percent of that, or 99 percent if CBE fertilizer credit is included — highlighting the scale of the challenge.

The roadmap introduces three key mechanisms to mobilize and channel financing: the National Agri-Finance Accelerator (NAFA), Farmer Access to Streamlined Financial Services (FAST), and an Agri-Finance Centre of Excellence (CoE).

NAFA will act as a refinancing and risk-sharing facility pooling resources from government, development partners, commercial banks, and microfinance institutions. It will provide incentives to financial institutions to lend to underserved groups, including smallholders, pastoralists, and women, by reducing the cost and risk of lending, according to the roadmap.

FAST will provide farmers with a digital ID linked to their land, production data, and mobile wallets. Through this system, farmers will receive personalized seasonal credit allowances calculated by automated credit-scoring algorithms. The loans will be bundled with crop or livestock insurance and accessed without the paperwork typically required in rural lending, according to the document.

Officials hope to see the planned digital transformation drastically simplify compliance and cut down disbursement times.

On the other hand, the CoE will serve as a hub for building institutional capacity, financial literacy, and risk management systems. It will work with banks to develop specialized agri-finance products, promote insurance uptake, and drive digital innovation in the sector, according to the roadmap.

This platform will also coordinate with stakeholders to establish a comprehensive risk management framework, addressing the limited availability of crop and livestock insurance and the absence of price risk hedging instruments.

The roadmap seeks to make credit accessible through multiple channels.

Farmers may access funds directly from banks or through cooperatives acting as intermediaries. Other distribution models include digital platforms like Lersha, Kifiya, and Farm Pass, agro-dealers and off-takers, and warehouse receipt systems, where loans are secured against stored produce, according to the roadmap.

“These channels aim to improve outreach and transparency, especially in remote areas with limited banking presence,” it reads.

As of now, lending to agriculture remains minimal across the financial sector.

Private banks established before 2021 have consistently allocated only one to three percent of their loan portfolios to agriculture.

Speaking at the Ethiopian Finance Forum on July 22, 2025, Girma Amente (PhD), minister of Agriculture emphasized the urgency of modernizing the sector.

“To support mechanization, more than 500 pieces of irrigation and mechanization equipment have been imported, with new policy support for local assembly,” he said, calling on banks and microfinance institutions to significantly increase their agricultural financing commitments.

The roadmap does not downplay the challenges.

Financing agriculture remains costlier and riskier than other sectors, due to seasonality, weak collateral systems, and limited borrower capacity. Furthermore, farmers often lack the financial and digital literacy needed to access and manage loans effectively. The scarcity of suitable insurance products also continues to limit bankability.

Yet opportunities are emerging. Ethiopia’s banking sector is opening up to foreign and private investment, potentially unlocking new sources of capital, as the roadmap puts it. Officials also envision building a National Agri-Finance Database to track loan performance and farmer credit histories, enhancing accountability and long-term planning.

The executives of private commercial banks are pushing back against a proposal from the National Bank of Ethiopia (NBE) seeking to force banks that fail to meet a five billion Birr minimum paid-up capital requirement before the June 2026 deadline into mergers.

NBE regulators first introduced the requirement in a directive in April 2021, more than doubling the capital threshold and granting banks five years to comply with the new minimum.

With less than a year to go, the central bank says it is ready to step in and actively oversee the consolidation process, which could affect even the oldest names in the industry.

Speaking during the Ethiopian Finance Forum at the Commercial Bank of Ethiopia (CBE) headquarters last week, NBE Vice Governor Solomon Desta announced that commercial banks that cannot meet the requirement before the end of the fiscal year will be forced into mergers.

“The NBE will decide which banks merge and will enforce that decision. Banks should prepare for this regulatory action,” he stated, eliciting a mix of laughter and uncertainty from industry leaders in attendance.

Despite the NBE’s firm stance, the executives of private commercial banks who spoke to The Reporter voiced their strong opposition to the decision.

“We have no plans to merge with another bank,” a senior manager at a mid-sized bank told The Reporter, speaking anonymously. “We’re already working toward fulfilling the five billion Birr minimum capital requirement. We are not opposed to mergers in principle, but the industry needs the right environment and adequate preparation for it.”

His bank has a paid up capital of over 3.5 billion Birr.

Nonetheless, the manager emphasized that mergers are not a concept to be pursued blindly.

“Mergers are not a cure-all. Before merging, banks need to understand each other’s operational environment, philosophies, strategies, strengths, and weaknesses,” he said.

The manager concedes that mergers are inevitable in the global context, but argues they should be approached strategically rather than enforced through regulatory compulsion.

He also noted that foreign partnerships could be a better path forward for capital enhancement, particularly through strategic investors—an option allowed under the recently amended Banking Business Proclamation.

“If local capital mobilization is insufficient, partnering with foreign investors could enhance competitiveness,” he said.

The manager warned that without groundwork, forced mergers may result in internal conflicts and inefficiencies.

His peers and industry experts seem to agree.

Wolde Bulto serves as president of Gadaa Bank, which benefits from a three-year extension on the capital requirement deadline as a result of it still being under formation when the directive was issued in 2021. He says that while mergers are a potential option, Gadaa is not considering one at the moment.

“Mergers and acquisitions remain a possible strategy, but we haven’t initiated local merger talks. We’re focusing on building capital and exploring strategic partnerships, including foreign investments,” Wolde told The Reporter.

Industry observers like Abdulmenan Mohammed (PhD), a London-based financial analyst keeping a close eye on Ethiopian banking, question the validity of the reasoning behind the requirement. He expressed dissatisfaction with the NBE’s claims that the directive is aimed at strengthening the industry ahead of the foreign banks’ entry.

“Forced mergers don’t necessarily offer more benefits than drawbacks,” Abdulmenan told The Reporter. “Many banks established before 2012 can meet the capital requirement. It’s the newer banks that face challenges.”

At the time the directive was introduced, the banking industry was awash with a flood of new entrants which nearly doubled the number of commercial banks in Ethiopia over the space of a few years.

Entrants like Siinqee and Amhara banks have long since surpassed the capital threshold. Abdulmenan notes the feat may be too much for banks like Hijra and Zamzam, despite them performing well in operational terms.

Others, such as Rammis and Tsehay, have incurred substantial losses and require urgent interventions—but not necessarily forced mergers, according to the expert.

“Merging a healthy bank with a struggling one poses serious governance and valuation issues,” he warned. “How will shareholders of a bank with eight percent returns accept merging with one earning just three? The stronger bank’s shareholders will be diluted, and that creates dissatisfaction across the board,” Abdulmenan explained.

He also pointed to the complex socio-political dynamics at many private banks, which were established along ethnic or religious lines.

“How can two such banks with vastly different cultures and priorities collaborate effectively?” he asked, adding that large-scale staff layoffs and branch closures would likely follow any mergers.

“In developed countries like the US or UK, thousands of banks exist. More banks mean better financial access and competition. Consolidation only for the sake of reducing numbers doesn’t make sense,” said Abdulmenan.

The analyst also dismissed fears over foreign competition.

“Kenya’s KCB Bank, which is expected to enter the Ethiopian market, has assets that are not significantly greater than Awash Bank’s, which holds only about five percent market share in Ethiopia. Is KCB really such a threat to local banks?” asked Abdulmenan.

He estimates that close to a dozen of the 32 commercial banks may struggle to meet the capital requirement, but insists that mergers should be evaluated case by case, not through a blanket policy.

However, not all experts oppose the NBE’s approach.

Dakito Alemu (PhD), an associate professor of accounting and finance at Addis Ababa University, argues the NBE is within its legal rights in forcing banks into mergers. He cites the Banking Business Proclamation, which grants the central bank the mandate to enforce statutory mergers to protect the stability of the financial sector.

Dakito argues the NBE’s move is a proactive measure to help local banks withstand foreign competition and ensure financial stability.

“If some banks cannot meet the minimum requirement, they can still enter voluntary mergers with others under NBE guidance,” he said.

The expert encourages banks to consider raising capital by listing on the Ethiopian Securities Exchange (ESX), which offers an opportunity to attract investment by selling shares to the public.

Although Dakito’s advice is sound, a former banker with a deep understanding of the industry told The Reporter he believes the intention to force mergers has nothing to do with the pending entry of foreign competition.

Speaking anonymously, the ex-banker observes Ethiopian banks currently lack the capital strength necessary to withstand potential macroeconomic shocks.

He emphasized that meeting the capital adequacy ratio—or the minimum required paid-up capital—is a globally accepted standard in banking. To illustrate his point, he compared it to building a house:

 “A house without a strong foundation can be washed away by floods or other natural disasters. Similarly, the NBE is preparing for potential economic disruptions as the country opens up—not just in banking, but across the broader economy,” the ex-banker told The Reporter.

He noted that protecting depositors’ funds and ensuring banks have the capacity to absorb economic shocks is critical, especially as various risks could emerge from multiple sectors.

The global standard for capital adequacy is eight percent, but the NBE requires Ethiopian banks to maintain a 15 percent ratio, he noted.

“Many banks are struggling to meet this requirement, which indicates that they are undercapitalized,” he said.

The insider also highlighted the USD 700 million recently injected into the state-owned CBE by the World Bank as a move aimed at strengthening its shock absorption capacity.