Quarterly Macroeconomic Review First Quarter 2022

Quarterly Macroeconomic Review
First Quarter 2022
Macroeconomic Developments and Outlook
• Overview: Ethiopia’s economy faced six distinct shocks this past quarter, including major RESEARCH & ANALYTICS
price spikes in global markets as well as domestic shocks linked to conflict and drought.
o Global shocks: Four items—namely fuel, food, fertilizers, and freight—will be costing
Ethiopia an extra $4bn this year and raising total imports from $14bn to $18bn.
o Domestic shocks: The devastating recent conflict and worst drought in decades will, in
turn, be bringing record high budgetary spending for security, relief, and recovery.
• Holding it Together: To keep macro conditions intact, the Government is responding with
ETHIOPIA: Key Macro Indicators
a mix of policies that involves adjusting to the shocks (through cuts to budgeted capital
expenditure and reduced fx allocations to the private sector) while also relying on financing 2020-21 2021-22
measures that moderate the impact of these shocks (higher budget deficits, still-high GDP growth 6.3% 1.0%
monetary growth, and a higher drawdown of fx reserves). On the balance of payments Investment/GDP 28.0% 27.0%
side, the big increase in world prices for the “Four Fs” (fuel, food, fertilizers, freight) is being Nominal GDP, Birr bns 4,341.4 5,860.6
Nominal GDP, USD bns $ 110.3 $ 119.9
covered by reductions in private capital imports, by higher exports/services/remittances,
by greater fx supplies from franco valuta importers (who now make up over half of non- Bank deposits, Birr bn 1,361.3 1,701.6
fuel imports), and by a drawdown of NBE reserves. On the fiscal side, the government’s Bank credit, Birr bn 1,389.2 1,806.3
large spending increase is being funded by increased domestic borrowing (mainly from the Deposit growth, % 30.5% 25.0%
Credit growth, % 28.0% 30.0%
T-Bill market) but also through cuts to federal capital expenditure (only 34% of which is
being executed). This mix of policies is keeping fiscal/BOP positions in check, with both Fiscal balance, %GDP -2.8% -3.6%
budget and current account deficits unlikely to exceed 4% of GDP this year. In the monetary Public debt, %GDP 50.4% 48.0%
area, the central bank’s policy response has been to slow the Birr’s monthly depreciation— Exports, USD bns $ 3.6 $ 4.4
seemingly to limit inflation—from an annual ‘run rate’ of 33% last year to just 4% at Imports, USD bns $ (14.3) $ (17.9)
present, though growth in money supply (M2) remains high at 25% above year-ago levels. Service exports, $ bns $ 4.9 $ 6.2
Remittances, USD bns $ 4.9 $ 5.7
Grants, USD bns $ 1.4 $ 1.0
• Risks: While the current mix of policies is limiting macro imbalances in a difficult domestic
Current account, %GDP -2.9% -3.9%
and global environment, there are potentially emerging risks. If prolonged, for example, the FDI, USD bns $ 4.0 $ 3.2
cutbacks being relied upon—in government capital expenditure, in capital goods imports, Govt Ext Loans, USD bns $ 1.0 $ 0.8
and in fx supplies to the private sector—would reduce long-term investment/exports, lower FX reserves, USD bns $ 2.9 $ 1.6
growth, and aggravate inflation. In all likelihood, however, these are exceptional and
Sources: MoPD, MoF, NBE, IMF, and Cepheus projections
temporary measures used only for exceptional and temporary circumstances.
• Outlook: Looking ahead, successfully riding out the global shocks (via a balanced mix of adjustment/financing policies until
commodity price spikes gradually dissipate) and moving towards a deeper post-conflict re-engagement with external partners
(donors, lenders) represent two key turning points that would bring a major improvement in Ethiopia’s macro conditions. The exact
timing for both remains uncertain, of course, but we presume the second half of 2022 is a possibility and this forms the basis for our
macro projections. Accordingly, we still see strong growth returning only next fiscal year and think minimal GDP growth is likely this
fiscal year given presumed crop/activity shortfalls in Northern regions plus the tight fx/credit conditions of recent quarters (the
Government forecasts growth of 6.6% and the IMF 3.8% for this fiscal year, though these projections may partly reflect the exclusion
of conflict-affected areas where data collection—on crops, economic activity, inflation—is not possible under current conditions).
On other aspects of the macro outlook, we anticipate: (1) inflation remaining elevated for the rest of 2022 and for most of 2023 (25%
by end-2022, 15% by June 2023); (2) a fiscal deficit just below 4% of GDP as previously expected; (3) a higher current account deficit
given global price shocks (~4% of GDP this year vs ~3% of GDP last year); (4) continued BOP pressures—and thus severe fx challenges
for private businesses—till late 2022 but with modest improvements likely thereafter; and (5) an exchange rate crawl that follows
the slower pace of recent months and thus takes the Birr rate to 52 per USD by June 2022 and 55 per USD by end-2022.
Disclaimer: This report represents solely the views, analysis, and judgement of the Cepheus research team and does not
necessarily reflect the views or opinions of the Fund’s Managing Partners, Advisors, or Investors.
RESEARCH & ANALYTICS
Economic Activity—Real Sector Indicators, Part 1
• High frequency indicators reveal strong growth for some BOP indicators (notably exports, imports, remittances, and FDI),
drops in foreign grants and loans inflows, and mostly negative real growth rates—after accounting for inflation—for fiscal
and monetary indicators such as revenue and deposits.
• The revenue and profits of Ethiopia’s largest enterprises (SOEs) as well as its commercial banks are growing strongly in
real terms, suggesting strength in the formal economy, but a number of manufacturing indicators (cement production,
capital goods imports) suggest weakening in that particular sub-segment.
Figure 1.1: Economic Activity Indicators
Data available to end-March 2022 FY 2020-21 FY 2021-22 Nominal Real

Nine Months Nine Months growth growth
Tax collections (Birr bns) 212 249 17.0% -16.0%
o/w Direct tax collections 128 145 13.3% -19.7%
o/w Trade tax collections 84 103 22.8% -10.2%
Industrial parks exports ($mns) 129 157 … 21.0%
Exports of goods ($mns) 2,440 2,942 … 20.6%
Imports of goods ($mns) 10,376 13,093 … 26.2%
Foreign Direct Investment ($bns) 2.05 2.43 … 18.5%
External borowing, Public Sector ($mns) 1,135 775 -31.7%
Deposit levels (Birr bns) 1,268 1,597 26% -7.1%
Loan levels (Birr bns) 725 936 29% -3.9%
Tourist arrivals* 405,933 502,880 … 23.9%
Data available to end-December 2021 FY 2020-21 FY 2021-22 Nominal Real

H1 H1 growth growth
Fuel consumption (MT) 1,816,583 1,941,750 … 6.9%
Electricity power generation (Kwh mns) 7,827 7,668 … -2.0%
Ethio Telecom revenue (Birr bns) 26.2 28.0 6.7% -26.3%
Ethio Telecom subscribers (mns) 50.7 60.8 20.0% -13.0%
Source: NBE, Ministry of Revenue, EIC, Banks survey data. *Tourist arrival data updated by the Ministry of Culture
Figure 1.2: High Frequency Indicators, Nine month Nominal Growth in FY 2021-22
SOEs Revenue* 60%
Bank Profits 48%
Imports 26%
Bank deposits 26%
Money suppl y (M2) 25%
Tourist inflows 24%
Industrial park exports 21%
Exports 21%
Foreign investm ent 19%
Revenue Coll ection 17%
Cement Pr oduction -17%
Capital goods im ports -26%
External borrowing -31%
NBE Reserves -34%

-40% -20% 0% 20% 40% 60% 80%
Source: NBE, Ministry of Revenue, Ministry of Industry, Ministry of Culture, EIC, PEHEAA, Banks survey data.
*Data for SOE revenue is on a six-month basis, other line items reflect nine-month data (July 2021-March 2022)
2
• Investment trends show a mixed picture so far in the fiscal year.
• Government capital expenditure and capital goods imports are both registering notable declines. On the other hand,
measures of SOE capital investment (proxied by their bond borrowing from banks) and of foreign investment have shown
positive growth for the first nine months of the fiscal year vs the same period in the prior year.
• On balance, given the large role of government capital expenditure and domestic private investment, we expect it is likely
that the investment-to-GDP ratio will trend slightly lower to 27% of GDP for the fiscal year.
Figure 1.3: Government Capital Expenditure (Birr bns) Figure 1.4: Capital Goods Imports (USD bns)
Capital Goods Imports (USD bns)

Government Capital Expenditure
3.5
58.00
57.35 2.9
3.0
-26%
57.00
2.5
-6% 2.1
56.00
2.0
55.00 1.5
53.9
54.00 1.0
53.00 0.5
-
52.00
FY 2020-21 FY 2021-22
FY 2020-21 H1 FY 2021-22 H1 Nine month Nine month
Source: NBE Source: NBE, ERCA
Figure 1.5: SOE Bond Borrowing (Birr bns) Figure 1.6: Foreign Direct Investment (USD bns)
SOE bond borrowing (Birr bns)

Foreign Direct Investment (USD bns)
480 477
2.5
2.4
470
2.4
9% 19%
460 2.3
450 2.2
439
440 2.1 2.1
430 2.0
1.9
420
1.8
410 FY 2020-21 FY 2021-22
FY 2020-21 H1 FY 2021-22 H1 Nine month Nine month
Source: NBE, EIC

Source: NBE
3
• Seen sequentially, monthly activity indicators point to still expanding export levels across several sub-categories, whether
for total exports, industrial park exports, or textile exports. Two other strong fx sources—tourist inflows and remittances—
are also showing a trend improvement despite high volatility in the monthly data. One indicator of construction activity,
cement output, is declining though this may reflect production challenges rather than weakening demand in the sector.
• Despite Ethiopia’s removal from AGOA (duty-free) trade privileges to the US, textile exports from industrial parks have
actually risen in the first quarter of 2022 (to $46mn for the quarter), compared both to year-ago levels ($34mn) and
compared to the average seen in the two quarters immediately preceding the removal from AGOA ($45mn).
Figure 1.7: Total Monthly Exports (USD mns) Fig 1.8: Industrial Parks Quarterly Exports ($mn)
Value of Exports Quarterly Export

450
60
55
400
50
350 45
40
300 35
30
250
25
20
200
3)
4)
1)
2)
3)
4)
1)
2)
3)
Q
Q
21
1
1
21
21
2
1
2
22
1
0(
0(
1(
1(
1(
1(
2(
2(
2(
-2
-2
-2
2
l-2
-2
2
-2
/2
/2
/2
/2
/2
/2
/2
/2
/2
r-
g-
-
n-
n-
p-
b-
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ec
ar
ar
ov
ay
Ju
Ap
Au
19
19
20
20
20
20
21
21
21
Ju
Ja
Se
Fe
O
M
M
D
M
20
20
20
20
20
20
20
20
20
Source:MOTI Source: EIC
Figure 1.9: Monthly Textile Exports (mns USD)

Figure 1.10: Monthly Cement Production (Quintals)
Textile & Textile Products Export Monthly cement production
22.0
750,000
20.0
700,000
18.0 650,000
16.0 600,000
14.0 550,000
12.0 500,000
10.0 450,000
Jun-21
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Apr-21
Mar-21
May-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
400,000
Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22
Source:MOTI Source: Chemical Industry Corporation
Fig 1.11: Monthly Tourist Arrival Numbers Figure 1.12: Quarterly Remittances (USD mns)
Monthly Tourist Arrival Numbers
Quarterly Remittance
85,000
1,500
75,000 1,400
65,000 1,300
55,000 1,200
45,000 1,100
1,000
35,000
900
25,000
QI QII QIII QIV 1Q
I QII QIII QIV QI1 / 22 QII
9/ 20 9/ 20 01 9/ 20 01 9/ 20 2 02 0/ 2 0/ 21 02 0/ 21 02 0/ 21 02 1/ 22 1
2 01 2 01 2 02 2 02
21
21
1
1
21
21
22
1
2
22
1
2 2 2 2 2
-2
-2
-2
-2
l-2
-2
-2
r-
g-
n-
n-
p-
b-
ct
ec
ar
ar
ov
ay
Ju
Ap
Au
Ju
Ja
Se
Fe
O
M
M
D
M
Source:NBE
Source: MoCT
4
• Key monetary and fiscal indicators are up substantially in nominal terms, though given year-on-year inflation of near 36
percent as of April 2022, most such indicators are actually shrinking in real terms.
• As noted earlier, data for state enterprise revenue and profits (six-month basis) as well as for foreign investment (nine-
months basis) are showing strong expansion even in inflation-adjusted or USD terms.
Figure1.13: Deposit Level (Birr bns) Figure1.14: Loan Level (Birr bns)
Deposit Levels Loans

1,800 1,000
1,597 936
1,600 26% 900 29%
1,400 1,268 800 725
1,200 700
1,000 600
800 500
600 400
400 300
200 200
- 100
FY 2020-21 FY 2021-22 -
Nine month Nine month FY 2020-21 FY 2021-22
Nine month Nine month
Source: Banks Survey Data Source: Banks Survey Data
Figure1.15: FDI (USD bns) Figure1.16:Government Revenue (Birr bns)
FDI Revenue
2.5 260
249
2.4 250
2.3 19%
240
17%
2.2
230
2.1
220
212
2
210
1.9
200
1.8
FY 2020-21 FY 2021-22 190
Nine month Nine month FY 2020-21 FY 2021-22
Source: EIC
Source: MoR
Figure1.17:SOEs Revenue (Birr mns) Figure1.18:SOEs Profit (Birr mns)

SOE profits
SOE revenue 60,000
300,000 51,928
271,382
50,000
97%
250,000
60% 40,000
200,000
169,775 30,000 26,399
150,000
20,000
100,000
10,000
50,000
-
FY 2020-21 FY 2021-22
-
FY 2020-21 FY 2021-22
Source: PEHAA
Source: PEHAA
5
• Looking more closely at the performance of Ethiopia’s largest state enterprises, growth in revenue and in profits is
particularly strong for those involved in the transport sector (Ethiopian Airlines, Ethiopian Shipping), financial sector (CBE,
DBE), trading, and manufacturing. More moderate growth is seen for enterprises in agriculture and communications.
• The strong revenue growth of most state enterprises, even after adjusting for inflation, suggests continued strength in
parts of the formal economy, though it is notable that the fastest growing segments are not a very large share of Ethiopia’s
overall GDP (transport and communications together comprises 5% of real GDP while finance is 3% of real GDP).
Figure 1.21: State Owned Enterprise Revenue and Profits, First Half of Fiscal Year
Revenue (Birr mns)

FY 2020-21 FY 2021-22
SOE Sector and Company H1 H1 % Change
Transport Sector 80,320 152,620 90%

Ethiopian Airlines 67,300 118,210 76%
Ethiopian Shipping Lines 12,781 22,906 79%
Ethiopian Electric Service - 11,154 ….
Ethiopian Toll Roads Enterprise 195 275 41%
Ethiopian Railway Corporation 38 60 58%
Shebelle Transport S.C 6 15 150%
Communication Sector 26,921 28,399 5%
Ethio Telecom 26,700 28,012 5%
Ethiopia Postal Service 221 387 75%
Finance Sector 40,169 63,590 58%
Commercial Bank of Ethiopia 35,436 58,200 64%
Development Bank of Ethiopia 3,232 3,540 10%
Ethiopian Insurance Corporation 960 1,300 35%
National Lottery Administration 541 550 2%
Agriculture Sector 6,169 5,765 -7%
Ethiopian sugar Corporation 4,692 4,292 -9%
Ethiopian Agricultural Businesses Corporation 1,477 1,460 -1%
Ethiopian Mineral, Petroleum and Bio-fuel Corporation - 13 ….
Manufacturing Sector 9,518 10,473 10%
Ethiopia Electric Utility 6,364 7,435 17%
Chemical Industry Corporation 1,111 1,229 11%
Ethio-Engineering Corporation 945 599 -37%
National Alcohol and Liquor Factory 356 435 22%
Educational Materials Production and Distribution Enterprise
371 313 -16%
Berhanena Selam Printing Press 238 307 29%
Animal Health Institute 75 89 19%
Ethiopia Pulp and Paper Factory 58 66 14%
Construction Sector 2,809 4,510 61%
Ethiopian Construction Works Corporation 1,545 2,244 45%
Federal Housing Corporation 542 1,107 104%
Ethiopian Construction Design and Supervision Works Corporation
368 602 64%
Industrial Parks Development Corporation 354 557 57%
Trade and Service Sector 3,869 6,025 56%
Ethiopian Trading Businesses Corporation 2,140 3,161 48%
Ethiopian Industrial Inputs Development Enterprise 1,499 2,223 48%
Ethiopian Tourist Trading Enterprise 114 342 200%
Development and Hotel S.C 33 166 403%
FilWeha Spa Service Enterprise 51 82 61%
Ghion Hotels Enterprise 26 40 54%
Genet Hotel 6 11 83%
Total Revenue 169,775 271,382 60%
Total Profits 26,399 51,928 97%
Source: Public Enterprieses Holding and Administration Agency (PEHAA), Press briefing and material, March2022.
6
• Reflecting the trends summarized earlier, we retain our view that minimal GDP growth of near 1 percent is likely for this
fiscal year, given material crop output declines that are presumed to have taken place in northern Ethiopia and the tight
credit/fx conditions that have prevailed for most of the past fiscal year, especially in the July-December 2021 period.
• By contrast, the Government forecasts growth of 6.6 percent and the IMF 3.8 percent for this fiscal year, though these
projections seem to us to reflect the exclusion of conflict-affected areas for which data collection—on crops, economic
activity, inflation—is not possible under current conditions. These growth projections imply that crop output declines in
northern regions have been more than fully offset by recent low-land wheat irrigation initiatives and/or by the strength
of activity seen in other parts of the formal economy (i.e., in services and manufacturing).
• It is likely that the final growth figure for 2021-22 (when reported in late 2022) will end up being very close to the 6.6
percent nine-month figure forecast by Government. If so, nominal GDP is set to surpass Birr 6 trillion for this fiscal year
(ending June 2022) vs the Birr 5.8 trillion that we are currently projecting.
Figure 1.19: Growth Projection by Sector
2016-17 2017-18 2018-19 2019-20 2020-21 2021-22

Overall GDP 10.1 7.7 9.0 6.1 6.3 1.0
Agriculture 6.7 3.5 3.8 4.3 5.5 -6.4

Of which: Major crops 8.2 4.7 3.1 4.7 … -6.4
Industry 20.3 12.2 12.6 9.6 7.3 4.0

Of which: Construction 20.7 15.7 15.0 9.9 7.0 …
Of which: Large Manufacturing 19.2 6.0 7.7 7.5 6.0 …
Services 7.2 8.8 11.0 5.3 6.3 5.0
Source: MoPD and NBE for historical data, Cepheus projections for 2021-22
Figure 1.20: Growth Projections for FY 2021-22
Institution Date of projection Growth projection

Government April 2022 6.6%
IMF April 2022 3.8%

World Bank January 2022 4.3%
Fitch January 2022 5.2%
AfDB 2022 4.8%
Focus Economics May 2022 4.5%
Oxford Economics November 2021 3.7%
Average … 4.7%
Souce: Reports and websites of instituions as listed above.
7
• Inflation has exceeded 30% for nearly a year now and has settled in the mid-30s range for six consecutive months.
• The largest contributors to inflation as of April 2022 continue to reflect mostly food items (cereal grains, cooking oil,
vegetables, and beverages), all of which showed year-on-year price increase of more than 30%. Below-average inflation is
being observed for education, utilities, and clothing (near 25%) while minimal inflation is seen for communications
(reflecting mainly flat or falling prices for telecom services).
Figure 1.22: Year on Year Inflation
Inflation (Y-0-Y)
Start of the
40%
Conflict 36.6%
35%
30%
25%
20%
15%
10%
5%
0%
Jul-14
Oct-14
Jan-15
Jul-15
Oct-15
Jan-16
Jul-16
Oct-16
Jan-17
Jul-17
Oct-17
Jan-18
Jul-18
Oct-18
Jan-19
Jul-19
Oct-19
Jan-20
Jul-20
Oct-20
Jan-21
Jul-21
Oct-21
Jan-22
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Apr-21
Apr-22
Source: CSA
Figure 1.23: Selected Items Inflation for April 2022
Oils and fats 89.5%

Non-alcohol ic Beverages and coffee 83.7%
Furnishing, household equipment etc 46.2%
Fish 44.8%
Recreation & culture 44.6%
Alcoholic Beverages & Tobacco 43.2%
Bread and… 37.7%
Vegetables 37.2%
Miscellanouse goods and services 35.5%
Other Food products 35.4%
Meat 33.2%
Health 32.9%
Restaurants & Hotels 32.8%
Milk, Cheese and eggs 31.5%
Fruits 28.8%
Education 28.2%
Housing, water, electricit y etc 24.2%
Clothing and Foot wear 21.9%
Inflation
Sugar,jam honey, chocolate 21.6%
All Items:
Communication 1.1% 36.6%
Transport 0.9%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%
Source: CSA
8
• The large price spikes being seen for global commodities such wheat, maize, cooking oil, and fuel are being closely mirrored
in local retail prices.
• For fuel prices, which have a major role in feeding through to other domestic prices, a decision to gradually remove
subsidies is narrowing the gap between trends in global oil prices and local retail fuel prices. Still, there has been only a
partial pass-through of global prices, as with local benzine prices are now up roughly 50 percent since end-2020 (from Birr
22 to Birr 32 per liter) though global oil prices rose by over 100 percent over the same period (from $50 to $105 per barrel).
Figure1.24: International and Local Wheat Price Figure1.25: International and Local Maize Price
International and Local Wheat Price International and Local Maize Price
550 50 400 35
500 30
45 350
450
25
40 300
400
20
350 35 250
15
300
30 200
250 10
25
200 150
5
150 20
100 -
Jan-20
Feb-20
Jun-20
Jul-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Jun-21
Jul-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Apr-20
Aug-20
Apr-21
Aug-21
Apr-22
Mar-20
May-20
Mar-21
May-21
Mar-22
Jan-20
Feb-20
Jun-20
Jul-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Jun-21
Jul-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Apr-20
Aug-20
Apr-21
Aug-21
Apr-22
Mar-20
May-20
Mar-21
May-21
Mar-22
International price ($/MT), LHS Local Price (Birr/kg), RHS International price ($/MT), LHS Local Price (Birr/kg), RHS
Source: CSA, indexmundi.com Source: CSA, indexmundi.com
Figure1.26: International and Local Price of Edible Oil Figure1.27: Intenational and Local Price of Fuel
International and Local Price of Fuel

International and Local Price of Edible Oil
120 34
2,500 200
110
2,300 32
180 100
2,100
90 30
1,900
160
80
1,700 28
70
1,500 140
26
60
1,300
120 50
1,100 24
900 40
100 22
700 30
500 80 20 20
Jan-20
Feb-20
Jun-20
Jul-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Jun-21
Jul-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Apr-20
Aug-20
Apr-21
Aug-21
Apr-22
Mar-20
May-20
Mar-21
May-21
Mar-22
Feb-20
Jun-20
Jul-20
Sep-20
Oct-20
Nov-20
Dec-20
Feb-21
Jun-21
Jul-21
Sep-21
Oct-21
Nov-21
Dec-21
Feb-22
Jan-20
Apr-20
Aug-20
Apr-21
Aug-21
Mar-20
May-20
Jan-21
Mar-21
May-21
Jan-22
Apr-22
Mar-22
Crude Petroleum ($ per barrel), LHS Local Benzil (Birr/lt), RHS

Sunflower ($/MT), LHS Local Cooking oil (Birr/lt), RHS
Source: CSA, indexmundi.com

Source: CSA, indexmundi.com
9
• While month-on-month inflation has averaged 2.7 percent over the past year, it peaked at a recent high of 4% in March
2022 and has since moderated somewhat to 2.2% in April 2022. The most recent m-o-m rate of April 2022, which would
normally provide the best signal of near-term trends, implies 29 percent inflation on an annualized basis.
• The consensus view on the direction of global commodity prices seems—on balance—to be that they will stay elevated
and possibly trend even higher due to given widening export bans affecting wheat/fuel/cooking oil markets as well as
supply bottlenecks still clogging up freight/shipping markets. Accordingly, our inflation projections for the coming few
months assume high month-on-month price increases of 2.5 to 3.0 percent, which imply year-on-year rates of 37-38
percent for the near term. For the latter half of 2022, year-on-year inflation rates should steadily trend downwards as
global commodity price shocks gradually dissipate (thus bringing lower m-o-m inflation rates), as the food harvest season
comes into play (October to December), and as favourable base effects (i.e., the very high levels of the price index last
year) translate into declining year-on-year inflation rates.
Figure 1.28: Month on Month Inflation for the Past Year
Month on Month Inflation for the Past Year

8.0%
7.0%
7.0%
6.0%
5.0%
4.0% 4.0%
4.0% 3.6%
3.5% 3.4%
3.0% Average=2.7%
2.3% 2.2%
2.0%
1.4%
1.2%
1.0%
0.0%
0.0%
May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22
-1. 0% -0.6%
Month on Month I nfla tion Ave rage
Source: CSA
Figure 1.29: Inflation Projections to December 2022
Price index M-o-M inflation Y-o-Y inflation
Actuals
April 2021 199.8 0.8% 19.2%
May 2021 204.4 2.3% 19.9%
June 2021 218.6 7.0% 24.6%
July 2021 226.3 3.5% 26.4%
August 2021 234.5 3.6% 30.4%
September 2021 243.8 4.0% 34.8%
October 2021 243.8 0.0% 34.3%
November 2021 242.3 -0.6% 33.0%
December 2021 245.8 1.4% 35.1%
January 2022 248.7 1.2% 34.5%
February 2022 257.0 3.4% 33.6%
March 2022 267.3 4.0% 34.7%
April 2022 273.1 2.2% 36.6%
Projections
May 2022 281.4 3.0% 37.7%
June 2022 288.4 2.5% 31.9%
July 2022 294.9 2.2% 30.3%
August 2022 300.8 2.0% 28.3%
September 2022 306.8 2.0% 25.8%
October 2022 308.3 0.5% 26.5%
November 2022 308.3 0.0% 27.3%
December 2022 308.3 0.0% 25.4%
Source: CSA and Cepheus Research judgements/projections on m-o-m inflation rates.

10
Monetary Developments and Outlook, Part 1
• The growth in money supply (M2) has ticked up slightly in the latest quarter, reaching 25 percent as of end-March 2022
versus 24 percent at end-December 2021. Money supply is now close to Birr 1.6 trillion, or 27% of GDP.
• Growth in net credit to the government has been running at a rate of 100%-plus for the past two consecutive quarters,
with a doubling seen in the credit to government from Birr 119bn at end-March 2021 to Birr 358bn at end-March 2022.
Figure 2.1: Broad Money and Credit to Government Trend Figure 2.2: Broad Money Growth(%)
Broad Money and Net Credit to Government Trend Broad Money Growth (%)
1,800 45%
1,580
1,600
1,460 40%
1,393 39%
1,348
1,400 1,410
1,339
1,268 1,275 35%
1,200
1,038
1,000 1,040
887 30% 30% 30%
29% 29% 28%
741 854
800 27% 27%
25% 25%
573 683 24% 25%
24%
600
445 546
371 443 20% 20% 21% 20% 20%
400
363 358
287 307 17%
200 214
15%
110 137
85 102 June June June June June June June June June June June June June June Sept Dec Mar
31 48
- 08 09 10 11 12 13 14 15 16 17 18 19 20 21 21 21 22
June 15 June 16 June 17 June 18 June 19 June 20 June 21 Sept 21 Dec 21 Mar 22
Broad Money Growth(Birr mns) Net Credi t to Govt (Birr mns) Credit to Non-govt
Source: NBE
Source: NBE
Figure 2.3: Net Credit to Government from the Banking System, Y-o-Y Growth
Net Credit to Government from the Banking System, % Growth

160%
140% 144.10%
120% 119%
100%
94%
80% 80%
60%
55% 56%
40%
23% 25%
20% 19%
14%
9% 8%
0% -1% 1% 2%
June June June June June June June June June June June June June June Sept Dec 21 Mar
-13%
-20% 08 09 10 11 12 13 14 15 16 17 18 19 20 21 21 22
-25%
-40%
Source: NBE
11
• In line with trends seen at end-2021, there is a deceleration in the growth of credit to the non-government sector (to state
enterprises and private sector), which is now up by 17% from year-ago levels (vs 25% growth rates seen in recent years).
• Reflecting the slower growth of recent quarters, the share of credit to the non-government sector relative to GDP is also
trending downwards, falling to an estimated 23% of GDP as of March 2022 from a peak of 32% in 2019.
• Our estimate of credit to the private sector (derived by taking out state enterprise borrowing from reported credit to the
‘non-government sector’) suggests a slight recent decline is offsetting the trend improvement seen in recent years.
Approximately 45 percent of the stock of total credit is going to the private sector (down from 49%) while the share of
new credit flows going to the private sector is only 21 percent, by our estimates, reflecting the large and exceptional credit
allocations to the Government this fiscal year.
Figure 2.4: Credit to Non-Government Sector Growth Figure 2.5: Credit to Non-Government Sector to GDP Ratio (Percent)
Credit to Non Govrnment Sector Growth (%) Credit to Non-Government Sector to GDP Ratio
60.0% 56.7% 34%
55.0% 32%
49.7% 32% 31% 31%
50.0% 30%
30%
30%
45.0%
28% 28%
40.0% 28%
35.0% 32.8% 26%

29.2% 26%
30.0% 26.2% 24%
25.1% 25.1% 24%
22.1% 23.3% 24%
25.0% 21.8% 21.9% 23%
19.3% 22%
20.0% 16.5% 22%
21%
15.0%
20%
10.0%
Jun-11
Sep-11
Dec-11
Jun-12
Sep-12
Dec-12
Jun-13
Sep-13
Dec-13
Jun-14
Sep-14
Dec-14
Jun-15
Sep-15
Dec-15
Jun-16
Sep-16
Dec-16
Jun-17
Sep-17
Dec-17
Jun-18
Sep-18
Dec-18
Jun-19
Sep-19
Dec-19
Jun-20
Sep-20
Dec-20
Jun-21
Sep-21
Dec-21
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Jun-11
Sep-11
Dec-11
Jun-12
Sep-12
Dec-12
Jun-13
Sep-13
Dec-13
Jun-14
Sep-14
Dec-14
Jun-15
Sep-15
Dec-15
Jun-16
Sep-16
Dec-16
Jun-17
Sep-17
Dec-17
Jun-18
Sep-18
Dec-18
Jun-19
Sep-19
Dec-19
Jun-20
Sep-20
Dec-20
Jun-21
Sep-21
Dec-21
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Source: NBE Source: NBE
Figure 2.6: Credit Outstanding from Banking System to Government, SOEs, and Private Sector, In Birr billions
Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Mar-22

CREDIT OUTSTANDING from Banking System: 604 785 978 1,177 1,482 1,769
Government Sector (net) 85 102 124 137 214 358
Non-Government 518 683 854 1,040 1,268 1,410
State-Owned Enterprises (SOEs) 281 342 412 487 540 623
Private Sector 237 341 442 553 728 788
Loans by Private Banks 133 179 259 347 516 627
Loans by Others (CBE/DBE) 104 162 183 206 212 161
Shares in
New Credit:
9 MONTHS
CHANGE IN CREDIT from Banking System: … 181 194 199 305 287 100%
Government Sector (net) … 17 22 13 77 144 50%
Non-Government 143 50%
SOEs … 61 70 75 53 83 29%
Private … 104 101 111 174 60 21%
COMPOSITION OF CREDIT from Banking System: 100% 100% 100% 100% 100% 100%
Government 14% 13% 13% 12% 14% 20%
State-Owned Enterprises 47% 44% 42% 41% 36% 35%
Private Sector 39% 43% 45% 47% 49% 45%
Source: NBE and IMF Monetary Survey Data, as well as MOF Public Debt Bulletin Public Sector Domestic Debt Tables
Credit to private sector is estimate based on subtracting out SOE debt (using MoF Debt data) from total 'Non-Government Sector' credit.
12
• While growth in bank deposits and loans had slowed somewhat in late 2021 (to around 22%), both have more recently
shown an uptick to near 26%-29% annual growth as of March 2022. These growth rates are in line with M2 growth of 25%.
• Lending at private banks is proceeding at a faster pace (32 percent) than is the case at the CBE (23 percent). By sector, the
trade sectors are showing the highest growth rates (loans are up 55% and 37% respectively for imports and exports), and
in fact these are the only two sectors showing real (inflation-adjusted) growth in bank loans. All other loans are growing
at a rate lower than inflation, and substantially so for sectors such as industry and construction.
• Bank earnings data for the nine months to March 2022 show substantial growth in profits (provisional basis), both at CBE
and at private banks.
Figure 2.8: Bank Deposit, Loans Levels, and Year-on-Year Growth Rates for the Past Ten Quarters
Figure 2.7: Banking Trends (Birr bns)
40%
37%
Y-o-Y
Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 % Change 35%
33%
Bank deposits 729 837 990 1,268 1,597 26.0% 32%

31% 31%
30% 31%
CBE 453 504 582 698.18 879 25.9% 30% 29% 29%
Private Banks 276 333 408 570 718 26.1% 28%
26% 28% 26%

25%
Bank loans outstanding 335 429 567 725 936 29.2% 25%
23%
CBE 163 193 243 251 310 23.3% 21%

22% 22%
Private Banks 172 236 325 474 627 32.3% 20%

18%
Other indicators--all banks 16%
Assets 857 1,069 1,310 1,654.38 2,062 24.6% 15%

Dec 2019 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22
Paid-up capital 64 71.8 80 90.31 103 14.1% Bank Deposit Growth Bank Loan Growth
Branches 4,193 5,104 5,875 6,518 7,554 15.9%
Source: Bank Annual Reports and Bank Survey Data

Source: Bank Annual Reports and Bank Survey Data
Figure 2.9: Distribution of Bank Loans by Sector--Fastest growing sectors* Figure 2.10: Bank's Profit (Nine month provisional figures)
Ranked by growth rate to the sector
Nominal % Real %
Bank's Profit, bns Birr
Outstanding Bank loans by Sector (Birr bns) Dec 2019 Dec-20 Dec-21 change change % Total 50.0
45.5
1 Imports 38.3 58.6 91.1 55% 29% 7%
45.0
2 Exports 80.0 115.2 158.2 37% 11% 12%
48%
3 Transport & Communication 12.4 81.5 102.6 26% -1% 7% 40.0
4 Personal 50.0 63.4 76.2 20% -7% 6% 35.0
30.7
5 Domestic Trade 81.5 99.7 119.3 20% -7% 9%
30.0
6 Others 10.4 13.4 15.7 18% -9% 1%
7 Hotels and Tourism 15.5 24.1 26.9 12% -15% 2% 25.0
8 Industry 202.5 242.3 270.4 12% -15% 20% 20.0
9 Housing & Construction 59.0 137.6 150.1 9% -18% 11%
15.0
10 Central Government 49.0 439.0 477.1 9% -18% 35%
11 Mines, Power & Water Resources 1.7 316.5 342.6 8% -19% 25% 10.0
12 Agriculture 21.1 23.0 18.9 -18% -45% 1% 5.0
-
TOTAL LOANS BY BANKS* 646.9 1,175.1 1,372.2 17% -10% 100%
FY 2020-21 Nine Month FY 2021-22 Nine Month
Y-o-Y Credit Growth (%) 29% 82% 17%
Source: NBE, Quarterly Bulletin Source: Bank's survey data

* Note this only covers loans provided by commercial banks, and thus excludes credit extended by banks
in the form of bonds and also excludes credits given by NBE, MFIs, and non-banks.
13
• Given high inflation, trends in many monetary variables give an exaggerated impression of strong growth. In fact, except
for credit to the government, most other monetary aggregates show growth rates that are below the rate of inflation and
are declining relative to nominal GDP. Even for net credit to government, while this has risen sharply in nominal terms, it
only amounts to 1 percentage point of GDP increase, from 4 percent two years ago to 5 percent in March 2022.
• It is also notable that, seen in a cross-country context, Ethiopia’s monetization and financial deepening ratios remain low
and stagnant relative to GDP. Most peer countries have M2/GDP ratios—a metric of financial sector deepening—that are
well above those seen in Ethiopia, such as for Kenya, Egypt, Ghana, South Africa, Vietnam, and India.
Figure 2.11: Monetary Variables: Trends Relative to GDP
In percent of GDP June 2019 June 2020 June 2021 March 2022
Broad Money 33.0% 30.7% 32.2% 27.0%
Reserve Money 7.5% 7.3% 6.3% 6.0%
Credit to the Government 4.1% 4.1% 5.1% 5.2%
Credit to Non-Government 31.7% 30.8% 30.2% 22.8%
Bank Deposits 33.4% 30.9% 32.5% 27.3%
Bank Loans 17.0% 17.5% 19.3% 16.0%
In Birr bns June 2019 June 2020 June 2021 March 2022
Broad Money 887 1,038 1,348 1,580
Reserve Money 201 247 264 353
Credit to the Govt 110 137 214 307.5
Credit to Non-Govt 854 1,040 1,268 1,339
Bank Deposits 899 1,043 1,361 1,597
Bank Loans 456 590 809 936
GDP, bns Birr 2,691 3,374 4,193 5861
Source: NBE, Bank's survey data
Figure 2.12: Cross Country Comparison of Broad Money to GDP
M2/GDP
100%
88%
90%
80% 75%
70% 67%
62%
60%
50%
41%
40%
31% 32%
30% 25% 26% 27%
21% 23%
18% 19%
20%
10%
0%
a
er
e
ia
ia
a
da
an
ia
na
ia
ca
sh
nd
ny
bw
bi
d
er
an
op
ig
an
st
fri
ha
di
m
In
Ke
N
ga
ig
ba
nz
ki
la
hi
A
Rw
G
Za
N
Pa
U
ng
h
Et
Ta
m
ut
Ba
Zi
So
Source: NBE, WB
14
Fiscal Developments and Outlook, Part 1
• Fiscal outturns for the first six months show revenue of Birr 179bn, expenditure of B irr 297bn and a first half of year deficit
of Birr 118bn. Per the 2021-22 budget, the deficit initially targeted was Birr 126bn for the full fiscal year.
• Nine-month data for revenue show growth in nominal terms but are negative in real terms and imply an annualized
revenue/GDP figure of well below 10 percent (annual revenue of Birr 460bn against a nominal GDP anticipated of Birr
5,860bn would translate into a ratio of 8 percent).
• Preliminary data reported for nine-month fiscal outturns further suggest revenue of Birr 266bn, expenditure of Birr 434bn,
for a nine-month deficit of Birr 145bn (and an implied budget deficit figure of close to Birr 200bn when annualized).
Figure 3.1: Budget Performance, Birr bns Figure 3.2 :Budget Performance, % GDP
FY 2020-21 FY 2021-22
FY 2020-21 FY 2021-22 Percent
H1 H1
H1 H1 change
Total revenue and grants 4.0% 3.1%
Total revenue and grants 174.3 179.3 3% Total Revenue 3.7% 3.1%
Total Revenue 162.0 179.3 11% Grants
Grants 12.3 - -100%
Total Expenditure 5.0% 5.1%
Total Expenditure 215.1 297.2 38% Current Expenditure 1.6% 2.5%
Capital Expenditure 1.3% 0.9%
Current Expenditure 71.5 144.8 103%
Regional Transfers 2.0% 1.7%
Capital Expenditure 57.3 53.9 -6%
Regional Transfers 86.3 98.5 Deficit, Birr bns -0.9% -2.0%
Deficit, percent of GDP
Budget Balance -40.8 -117.9 189% GDP (Birr bns) 4,341 5,861
Source: NBE Quarterly Report Source: NBE Quarterly Report
Figure 3.3: Revenue Performance, Birr bns
FY 2020-21 FY 2021-22
Nine Month Nine Month % change
Taxes on domestic activity 128 145.27 13.3%
Direct tax … … …
Indirect tax … … …
Trade taxes 84 103.35 22.8%
Customs tarrif and tax … … …
Non tax revenue … … …
Lottery Sales 0.2 … …
…
TAX REVENUE TOTAL: 212 249 17.0%
Source: MoR
15
• The nine-month increase in Government debt—which is indicative of the underlying fiscal deficit—has reached Birr 220bn
or already 3.9 percent of GDP, per Ministry of Finance debt data.
• All of the debt increase seen for the past nine months can be said to have been financed fully from domestic sources, as
there was actually a net repayment of foreign loans during this period (central government external debt fell from
$19.485bn to $19.218bn between end-June 2021 and end-March 2022, equivalent to a decline of Birr 13bn).
Figure 3.4: Net Change in Government Debt, First 9 Months of Fiscal Year
9 MONTHS FY 2021-22
Birr bns % of GDP % of Total
NET Change in Government Debt, End-June 2021 to End-March 2022: 220.3 3.9% 100.0%
External Debt: NET Change in 9 MONTHS, Birr bns (12.9) -0.2% -5.8%
Domestic Debt: NET Change in 9 MONTHS, Birr bns 233.2 4.0% 105.8%
By lender 233.2 4.0% 100.0%

From Commercial Bank of Ethiopia 71.9 30.8%
From National Bank of Ethiopia 65.6 28.1%
From Private Banks 57.1 24.5%
From Pension Funds 38.5 16.5%
From Development Bank of Ethiopia - 0.0%
From Others (non-banks, non-pension funds) - 0.0%
By instrument 233.2 4.0% 100.0%

Treasury Bills 167.6 71.9%
Direct Advances 66.0 28.3%
Treasury Bonds (0.5) -0.2%
Treasury Notes - 0.0%
Source: MoF Public Debt Bulletin March 2022
16
• The Government’s domestic borrowing has been facilitated by a deepening Treasury Bill market, which is now providing
Birr 288bn in financing versus just Birr 23bn in 2020 (a 12x increase in two years). As of end-March 2022, the largest share
of T-Bills sold were 364-day bills (62%) and 182-day bills (25%), easing the pressure on Government to keep rolling over
short-dated T-Bills (of 28-days and 91-days), which previously provided the bulk of the financing.
• Effective borrowing rates continue to be very favorable (for the government), as they have stayed within the range of 8-
10 percent and remain substantially negative in real terms.
Figure 3.5: T-bills Outstanding, Birr mns Table 3.6: Effective Cost of Borrowing (for Government)
T-bills Outstanding by Different Maturity Groups Effective Cost of Borrowing
350
10.5%
300 288.6 9.9%

10.0%
9.7%
253.5 9.5%
250 9.5%
8.9% 8.9%
200
9.0%
8.6% 8.6%
161.2
8.5%
150
121
8.0%
8.0%
100 7.7% 7.7%
69.7 7.5%
58.9
7.5%
40.5
50
23.7
7.0%
Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22
-
June 2020 Sept 2020 Dec 2020 March 2021 June 2021 Sept 2021 Dec 2021 Mar 2022 Effective cost of borrowing
364 Days 182 Days 91 Days 28 Days
Source: MoFEC Source: NBE, Cepheus Research. Note: Effective cost of borrowing is just on T-Bill related debt.
Figure 3.7: Treasury Bills Market: Financing Amounts in July 2021 to May 2022
Jun-20 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Mar-22 May 22*
T-BIlls Outstanding, Birr bns 23.7 118.8 152.1 187.3 159.8 202.9 208.2 200.6 288.6 260.7
28-Day T-Bills 0.4 9.7 14.5 7.4 3.6 5.3 3.9 0.4 4.1 3.7
91-Day T-Bills 11.6 47.9 59.3 79.4 53.6 48.3 22.6 19.5 32.4 7.2
182-Day T-Bills 11.8 30.7 44.7 61.8 62.1 63.8 68.7 61.4 72.9 67.9
365-Day T-Bills - 30.6 33.7 38.7 40.5 85.5 113.0 119.3 179.3 181.9
Effective borrowing rate: 9.5% 8.6% 9.9% 9.8% 7.7% 8.9% 7.5% 8.9%
Implied net borrowing during month: 33.3 35.2 (27.4) 43.0 5.3 (7.6) 88.1 (27.9)
Cumulative net borrowing via T-Biills since start of FY: 33.3 68.4 41.0 84.0 89.4 81.7 169.8 141.9
Source: Cepheus Research compilation based on MoF Debt Bulletin (end-quarter data to March 2022) and compilation of NBE auction data on website for other months, including May 2022.
17
• One important means of limiting the budget deficit has been the use of cutbacks in spending on previously budgeted
items. In this respect, while the budget on recurrent items is more or less exactly in line with the budget, only 47 percent
of the regional grants budget and only 34 percent of the capital budget is being spent.
• The implication of the large cutbacks in government capital expenditure are that many infrastructure -related projects will
be held back, at the expense of future growth. Based on the approved budget in June 2021, the capex items most likely
to be affected are road-building, urban infrastructure, education (mainly universities), health, and irrigation projects.
Figure 3.8: Budget Execution Rate (FY 2021/22 H1)
Budget Execution Percent Spent
Total Budget Allocation, Birr mns 506.73 297.18 59%

Current Expenditure 142.52 144.85 102%
Capital Expenditure 156.93 53.88 34%
Regional Transfer 207.28 98.45 47%
Source: NBE Quarterly Bulletin
Figure 3.9: Government Capital Expenditure Budget FY 2021/22
Sectors Capital expenditure % of total

Road building and Urban Infrastructure 82.5 45%
Education 28.1 15%
Water Resources & Energy 16.9 9%
Health 15.8 9%
Agricultural and Rural Development 15.4 8%
General Service 7.7 4%
Organ of State 4.1 2%
Transport and Communication 3.0 2%
Culture and Sport 2.8 2%
Transfer 2.5 1%
Trade and Industry 2.0 1%
Justice and Security 1.8 1%
Prevention and Rehabilitation 0.7 0%
Mines 0.2 0%
Federal Capital Expenditure Budget 183.5 100%
Source: MoFEC
18
• Public debt stands at $57bn as of March 2022, up by $3bn from year-ago levels. All of this is due to an increase in (Birr
denominated) domestic public debt, reflecting the government’s expanded borrowing, while foreign debt is actually down
by $1bn in nominal USD terms (due to a drop in new foreign loans and on-going external debt repayments).
• Relative to GDP, public debt levels continue to show a steady decline and have now fallen to below 49 percent given this
year’s expected USD GDP of $120bn (Birr 5,861bn nominal GDP and year-average exchange rate of 48.9 Birr/USD).
• Public sector debt service is on pace to surpass $2bn this fiscal year, given $1.6bn of payments already recorded from July
2021 to March 2022. Most public sector debt service is actually affected by state enterprises, and only about one-fourth
of the total paid in the last nine months ($426mn of the $1,646mn) were obligations of the Government.
Figure 3.11: Public Debt, % GDP

Figure 3.10: Public Debt, USD bns
March 2019 March 2020 March 2021 March 2022
Mar-19 Mar-20 Mar-21 Mar-22 % of Total Total Public Debt 54.9% 51.2% 48.9% 47.6%
Total Public Debt $ 52.6 $ 54.7 $ 53.9 $ 57.0 100.0%
External debt 28.2% 25.9% 26.6% 23.7%
Central Government 16.4% 15.6% 17.3% 19.1%
External debt $ 26.9 $ 27.7 $ 29.4 $ 28.5 49.9% State Owned Enterprises 11.7% 10.3% 9.3% 4.6%
Central Government $ 15.7 $ 16.6 $ 19.1 $ 22.9 40.2%
State Owned Enterprises $ 11.2 $ 11.0 $ 10.3 $ 5.5 9.7% Domestic Debt 26.8% 25.3% 22.2% 23.8%
Central Government 12.6% 11.6% 10.9% 13.6%
State Owned Enterprises 14.2% 13.7% 11.3% 10.2%
Domestic Debt $ 25.6 $ 27.1 $ 24.5 $ 28.6 50.1%
Central Government $ 12.1 $ 12.4 $ 12.1 $ 16.4 28.7% Memo items:
GDP, Birr bns 2,691 3,375 4,341 5,861
State Owned Enterprises $ 13.6 $ 14.7 $ 12.5 $ 12.2 21.4%
Exchange rate, year avg 28.9 34.9 43.7 48.9
GDP, USD bns $ 95.7 106.8 $ 110.3 $ 119.9
Source: MoFEC Public Debt Bulletin Source: MoFEC Public Debt Bulletin
Figure 3.12: External Debt (Public Sector), In USD bns
March 2019 March 2020 March 2021 March 2022 % of Total

Total External Debt of Public Sector, USD bns$ 26.9 $ 27.7 $ 29.4 $ 28.5 100.0%
Government $ 15.7 $ 16.6 $ 19.1 $ 19.2 67.5%
EAL & Ethio-telecom $ 7.3 $ 7.3 $ 6.8 $ 6.2 21.8%
Other State Enterprises $ 3.9 $ 3.7 $ 3.5 $ 3.0 10.6%
Total External Debt of Public Sector, % GDP 28.3% 25.9% 26.6% 23.7% …
Government 16.5% 15.6% 17.3% 16.0% …
EAL & Ethio-telecom 7.6% 6.8% 6.1% 5.2% …
Other State Enterprises 4.1% 3.5% 3.2% 2.5% …
GDP, USD bns $ 95.3 $ 106.8 $ 110.3 $ 119.9 …
Source: MoFEC Public Debt Bulletin
Figure 3.13: External Debt Service Payments, as of March 2022
USD mns
Nine-month Public Debt Service: $ 1,646
By payment type $ 1,646

Interest payments $ 1,267
Principal payments $ 379
By debtor $ 1,646
Government $ 426
State Owned Enterprises $ 1,220
By creditor $ 1,646
Multilateral creditors (IMF, WB, etc) $ 211
Bilateal creditors (incl China) $ 537
Private lenders (banks/bondholders) $ 897
Source: MoFEC Public Debt Bulletin; as of March 2022

19
• Looking more closely at domestic debt, which has become the primary source of government funding this year, the main
lenders to the Government are—in descending order—the NBE, CBE, pension funds, and private banks. More private
banks are now active participants in the T-Bill market, with the share of Government debt provided by private banks
reaching 8 percent of the total, from just 1 percent two years ago.
• By instrument, Treasury Bills are now the dominant source of domestic financing, providing 35 percent of Government’s
domestic debt. In line with policy commitments to reduce reliance on central bank financing, the share of domestic debt
provided by NBE direct advances had fallen sharply from 50% to a low of 7% in recent years, but there has been a moderate
reversal on this score as direct central bank advances are now back up to 18% of Government’s domestic debt.
Figure 3.14: Outstanding Stock of Domestic Credit to Government, By Lender and By Instrument--In Birr bns
June 2018 June 2019 June 2020 June 2021 Mar 2022 % Total
By Lender 300.9 361.9 432.4 600.6 833.8 100%

Commercial Bank of Ethiopia 26.7 26.6 26.5 69.0 140.9 17%
National Bank of Ethiopia 160.1 194.7 230.2 281.9 347.4 42%
Pension Funds 78.3 103.9 133.9 181.7 222.0 27%
Private Banks - 0.7 5.6 12.6 69.7 8%
Development Bank of Ethiopia 32.8 32.8 32.8 53.8 53.8 6%
Others (non-banks, non-funds) 3.0 3.3 3.3 1.7 1.8 0%
By Instrument 300.9 361.9 432.4 600.6 833.8 100%

Treasury Bills 111.5 31.8 23.7 121.0 288.6 35%
Direct Advances 152.3 187.3 31.0 83.5 149.5 18%
Treasury Bonds 37.1 142.6 228.3 248.5 248.0 30%
Treasury Notes - - 149.4 147.7 147.7 18%
Source: MOF Debt Bulletin, March 2022, Tables 21 and 23
Figure 3.15: Domestic credit to government--BY LENDER

Figure 3.16: Total Domestic credit to government--BY Instrument(Birr bns)
Domestic credit to government--BY LENDER
900 833.8
Total Domestic credit to government--BY Instrument
800 69.68229 900 833.8
53.8094
800
700
600.6 148
700
600 221.97786
600.6
12.55
600
53.8 248
500 432.4 500 432.4 148
361.9
361.9
5.6
181.7 400 300.9
400 32.8 149 150
300 249
37- 143
300.9 0.65
32.8
133.9 347.4271
300 0
32.8 103.9 200 152 228 84 289
78.3
281.9 100 187
200
112 31 121
230.2 - 32 24
194.7
100 160.1
140.9 June 2018 June 2019 June 2020 June 2021 Mar 2022
68.99
26.7 26.6 26.5
0 Treasury Bills Direct Advances Treasury Bonds Treasury Notes
June 2018 June 2019 June 2020 June 2021 Mar 2022
Commercial Bank of Ethiopia National Bank of Ethiopia Pension Funds

Development Bank of Ethiopia Private Banks Others (non-banks, non-funds)
Source: MOF Debt Bulletin, Table 21, 23 Source: MOF Debt Bulletin, Table 21, 23
20
External Sector Developments and Outlook, Part 1
• Exports continues to be a bright spot within Ethiopia’s overall macro performance, and 21 percent year-on-year growth is
now likely for the year based on nine-month trends. The increase is almost exclusively due to exports of coffee (volumes
up 44%, prices up 25%), which are on track to reach a historic record of $1bn for the year.
• A record high import level—of near $18bn—is also expected this year, reflecting large increases in global commodity
prices. Fuel imports are up 70% and food (cereal) imports up 121%, with both showing $1bn higher imports just in the first
nine months vs same period last year. Imports would have been higher still had it not been for a sharp cutback in capital
goods imports (down 26%), reflecting long forex waiting times and reduced fx allocations to the private sector.
Figure 4.1: Export Performance (USD mns) Figure 4.2: Import Performance (USD mns)
FY 2020-21 FY 2021-22 Percent

Ranked by USD level in FY 2021-22
Nine Months Nine Months change
Total Imports 10,376 13,093 26.2%
FY 2020-21 FY 2020-22 Percent
Nine Months Nine Months change Raw Materials 106 87 -18.0%
Semi-finished Goods 1,952 2,349 20.3%
Total Exports 2,440.1 2,942.5 20.6% Chemicals 361 413 14.2%
Fertilizers 424 495 16.6%
Coffee 514.0 899.0 74.9% Textile Materials 103 143 38.8%
Others 1,064 1,299 22.1%
Gold 450.7 449.7 -0.2%
Fuel 1,341 2,273 69.5%
Flowers 344.8 371.4 7.7%
Crude petroleum 0 0 …
Chat 286.0 313.7 9.7% Petroleum Products 1,268 2,216 74.8%
Oilseeds 259.7 207.1 -20.3% Others 73 56 -22.5%
Pulses 166.0 160.7 -3.2% Capital Goods 2,878 2,130 -26.0%
Textile & Textile Products 109.8 135.6 23.5% Transport 243 282 16.0%
Meat & Meat Products 52.6 84.8 61.4% Aircraft 58 130 124.8%
Agricultural 77 41 -46.2%
Fruts & Vegitables 50.2 73.7 46.9%
Industrial 2,558 1,806 -29.4%
Elecricity 62.4 67.7 8.5% Consumer Goods 3,968 6,149 55.0%
Cereals and Flour 10.0 25.2 151.1% Durables 596 613 2.9%
Leather and Leather Products 26.9 25.0 -7.3% Non-durables 3,372 5,536 64.2%
Live Animals 31.9 20.2 -36.8% Cereals 829 1,833 121.0%
Spices 10.2 15.1 48.0% Other Food 700 1,160 65.6%
Medical & Pharmaceuticals 509 683 34.2%
Electronics 14.2 13.3 -6.1%
Textile Fabrics 398 258 -35.0%
Chemicals & Constr. Inputs 2.7 3.3 18.8% Others 936 1,601 71.1%
Natural Gum 2.5 1.8 -28.8% Miscellaneous 131 105 -19.3%
Bees Wax 1.2 0.5 -57.4%
Others 44.4 74.8 68.3% Non-fuel, non-aircraft imports 8,977.36 10,689.56 19%
Source: MOTI, ERCA

Source: MOTI, ERCA
21
• One notable aspect of recent import trends is the sharp rise in franco valuta imports, which doubled from quarterly levels
of near $0.8bn in 2020 to quarterly levels of $1.8bn now. These imports that are not financed by letters of credit originated
in Ethiopia (via local banks) but rather paid for by importers through whatever fx sources may be accessible to them. Such
imports would include foreign investors financing their imports from own funds, diaspora importers who may have access
to fx from income generated abroad, or local traders/companies who may access fx funds through various means.
• Franco valuta imports are set to reach close to $8bn this fiscal year and will make up a just over half of total non-fuel
imports. In effect, over half of Ethiopia’s imports (excluding fuel, which is imported by government) are now being
financed by fx sources that are not provided by—and emanate outside of—the domestic banking system.
Figure 4.3: Quarterly Franco Valuta Imports, mns USD
Franco Valuta Imports

2,000 50%
1,843 1,826
1,755
1,800 45%
1,600 40%
1,400 35%
1,168 1,198
1,200 1,130 30%
1,037
1,000 922 25%
779 779
800 20%
600 15%
400 10%
200 5%
- 0%
2019-20 2019-20 2019-20 2019-20 2020-21 2020-21 2020-21 2020-21 2021-22 2021-22
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Franco Valuta Impor ts Bns USD % of total imports
Source: NBE
Figure 4.4: Franco Valuta imports, First Half of FY 2021-22
USD mns % of Total

Food and live animals 1,060 29%
Machine 279 8%
Medical and pharmaceuticals products 205 6%
Electrical material 127 3%
Fertilizer 120 3%
Metal & metal manufacturing 112 3%
Textiles 37 1%
Rubber products 19 1%
All Others 1,710 47%
Total Franco Valuta Imports, H1 3,669 100%
Total Imports, H1 8,487 …
Franco Valuta Imports as % Total Imports 43% …

Franco Valuta Imports as % Non-fuel imports 52% …
Source: NBE
22
• The latest available data on official fx reserves data are as of end-December 2021 and reveal NBE fx reserves of $1.6bn
(down from $2.8bn as of June 2021), and roughly similar commercial bank fx assets of $1.7bn. The official fx reserves is
now the lowest it has been for over a decade and represents close to 1 month of imports.
• NBE data for combined fx assets of the banking system (NBE and banks) as of end-March 2022 shows a figure $3bn.
Assuming commercial bank fx assets have remained at their average level seen over the last four quarters (namely $1.4bn
for the Dec 2020 to Dec 2021 period), this then implies that NBE’s fx reserves figure has stabilized at around $1.5bn to
$1.6bn during the January-March 2022 quarter. This would not be surprising given the 70% fx surrender requirement
(applied on commercial banks since end-2021) now providing a steady stream of fx funds that adds to NBE reserves.
Figure 4.5: FX Reserve: NBE and Commercial Banks (USD mns)
FX Reserve: NBE and Commercial Banks (USD mns)

$4,500
$4,000
$3,958 $3,920
$3,500 $3,745
$3,415
$3,000 $3,209 $3,277
$3,069
$2,965
$2,841
$2,500
$2,597 $2,523
$2,450
$2,000
$2,151 $1,729
$1,500 $1,737 $1,669 $1,644

$1,333
$1,000
$1,118 $1,107
$1,011 $944 $987 $1,005
$887 $904
$500 $754 $750
$-
Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
Banks NBE
Source: NBE
Figure 4.6: FX Reserves of NBE, USD mns
Reserves, In months of imports

5.0
4.4
4.5
4.0
3.5
3.0 2.7 2.8

2.5 2.5 2.4 2.4 2.4 2.4
2.5 2.2 2.2
2.0
1.5 1.4
1.0
0.5
-
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 18-19 19-20 20-21 Dec-21
Reserves, months imports
Source: NBE, Cepheus Research
23
• Trends in the prices and yields of Ethiopia’s sole Eurobond continue to suggest a deteriorating assessment of macro
conditions by foreign portfolio investors. However, the Eurobond is not a particularly meaningful proxy of macro
performance in Ethiopia’s case: the pricing mainly reflects the fact that Ethiopia has applied for debt service relief under
the ‘Common Framework’ (a G-20/IMF initiative meant to assist developing countries cope with the COVID pandemic) and
bondholders’ expectations that they would be subject to some form of debt treatment in a prospective debt rescheduling.
• In reality, given the Eurobond’s small share of total debt ($1bn out of $57bn, or below 2%) and its consequently muted
debt service impact, it is likely that the Eurobond will not be included in any upcoming creditor treatment of external debt.
• Given the multiple global commodity price shocks of recent months, Ethiopia stands among 22 countries whose sovereign
debt now shows a yield of more than 10 percent in USD terms. Unlike several of these countries, however, Ethiopia has
not defaulted on its external debt and has been fully meeting its foreign debt service obligations last year and this year.
Figure 4.7: Ethiopia's Sovereign Bond--End Month Prices Figure 4.9: Countries with Eurobond Yields above 10 Percent
Ethiopia's Sovereign Bond--End Month Prices Yield data as of End-May 2022 [Year refers to bond maturity date]
100.0 95.5
92.5 92.2 Countries with Sovereign Bond Yields above 10% Yield (%)
95.0
88.8 88.5 1 Russia [2030] 178.7
90.0 86.5
2 Belarus [2031] 50.9
85.0 81.2
3 Ukraine [2026] 35.2
80.0
75.3 75.2 4 Tunisia [2025] 29.9
75.0 72.0
68.5
5 Argentina [2030] 28.9
70.0 65.9 66.9 6 Ethiopia [2024] 27.7
65.0 61.7 7 El Salvador [2032] 26.1
60.0 8 Ghana [2032] 18.8
9 Tajikistan [2027] 18.4
21
21
21
22
1
2
22
1
2
1
2
1
21
-2
-2
-2
r-2
t-2
r-2
v-2
l-2
c-
n-
n-
p-
b-
g-
ar
ay
ay
Ju
De
Oc
Ap
Ap
No
Ju
Ja
Se
Fe
Au
M
M
10 Pakistan [2027] 16.0

11 Bahamas [2032] 13.7
Source: FactSet 12 Nigeria [2032] 12.3
13 Maldives [2026] 12.0
Figure 4.8: Ethiopia's Soveregn Bond--Yield to Maturity 14 Kenya [2032] 11.6
15 Papau New Guinea [2028] 11.5
Ethiopia's Sovereign Bond--Yield to Maturity 16 Mozambique [2031] 11.5
31.50
17 Egypt [2032] 11.5
28.76
18 Ecuador [2030] 10.5
26.50
19 Honduras [2030] 10.5
22.81 22.58 23.36 20 Congo Rep [2029] 10.5
21.50
20.65 21 Gabon [2031] 10.2
18.04 18.39 22 Angola [2028] 10.0
16.50 14.32
Countries that have defaulted in the past year
11.80
10.65 10.87 1 Sri Lanka
11.50 9.15 9.31
8.08 2 Lebanon
3 Suriname
6.50
4 Venezuela
1
21
21
22
1
2
22
1
2
1
2
1
21
-2
2
-2
-2
r-2
t-2
r-2
v-2
l-2
5 Zambia
c-
n-
n-
p-
b-
g-
ar
ay
ay
Ju
De
Oc
Ap
Ap
No
Ju
Ja
Se
Fe
Au
M
M
Source: Tellimer Research

Source: FactSet
24
• Despite what would be expected in an environment of severe BOP pressures, the pace of Birr depreciation has slowed
sharply in recent months. The average monthly depreciation fell to 41 cents in April and 17 cents in May 2022, versus an
average monthly depreciation of 81 cents during 2021. The annual depreciation rate from year-ago levels was 19.9 percent
in May 2022, down from the annual depreciation rates of more than 25 percent seen through most of 2021.
• The gap between the official and parallel market rate has trended upwards in recent months, and is now well above 35%.
The implied greater demand for dollars in the parallel market seems to reflect the combined impact of: (1) the slower pace
of depreciation in the official market; (2) the lagged effect of the fx surrender requirements that came into being in late
2021 (which reduced bank fx supply to the private sector); and (3) possibly higher demand arising from franco valuta
importers, as is being suggested by many market observers.
Figure 4.10: Trends in Exchange Rate: Last 12 Months Figure 4.11: Birr Depreciation Rate from year-ago levels (%)
Trends in Exchange Rate: Last 12 Months Depreciation Rate from Year-Ago Levels
30.00 29.0%
27.0%
27.0% 26.3%
35.00 25.9%
25.6% 25.8% 25.4% 25.6% 25.7% 25.6%
25.1% 25.1%
25.0%
40.00 23.4%
23.0% 22.5%
43.03
45.00 43.69
44.30 21.0%
45.48 19.9%
46.10
47.16
47.85
50.00 19.0%
49.19
49.80
50.78 50.99
51.40 51.57
17.0%
55.00
1
21
2
1
2
22
1
2
1
2
1
21
-2
2
-2
-2
2
t-2
r-2
v-2
l-2
15.0%
c-
n-
n-
p-
b-
g-
ar
ay
ay
Ju
De
Oc
Ap
No
Ju
Ja
Se
Fe
Au
M
M
Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22
Source: CBE &NBE website Source: CBE, Cepheus Research
Figure 4.12: Gap between parallel and official market (%)
Gap between parallel and official market rates

50%
45%
40%
Average=33.2%
35%
30%
25%
20%
15%
10%
5%
0%
Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22
Source: Cepheus Research
25
• Looking ahead, the slower monthly depreciation of recent months implies a much lower annual ‘run-rate’ if the path of
depreciation were to continue at its current pace. For example, while the 130 cents depreciation of December 2021
implied an annual (forward-looking) run-rate of 33%, the latest May 2022 depreciation of 17 cents implies an annual
depreciation—assuming the current pace—of just 4 percent for the year ahead.
• While the central bank’s exchange rate policy previously seemed to give precedence to competitiveness concerns, thus
ensuring depreciation rates matched or exceeded inflation rates, the exceptionally high domestic/global inflation of recent
months appear to have altered the central bank’s policy priorities in this area. Minimizing any factors (including the
exchange rate) that aggravate inflation is—it seems—being accorded greater importance given current circumstances.
• In light of these apparent policy recent shifts, we presume that a slower exchange rate crawl will guide exchange rate
policy for the rest of 2022 and thus see the Birr at 52.1 per USD for June 2022 and 54.9. per USD for end-2022.
Figure 4.13: Recent Monthly Depreciation expressed at annual 'run-rate'
35.0%
32.9%
30.0%
25.0% 23.6%
20.0%
14.8%
15.0%
9.7%
10.0%
4.9%
5.0% 3.9%
0.0%
DEC 2021: JAN 2022: FEB 2022: MAR 2022: APRIL 2022: MAY 2022:
Source: Cepheus Research. Annual 'run-rate' is based on monthly pace of deprecation continuing for next 12-month period.
Figure 4.14: Exchange Rate: Forecasts to December 2022
Buying Monthly Depreciation

Rate: Change: from
Actuals: End Month Birr/USD In Birr year ago
May-21 43.03 1.08 25.9%
Jun-21 43.69 0.67 25.1%
Jul-21 44.30 0.61 25.6%
Aug-21 45.48 1.18 25.8%
Sep-21 46.10 0.62 25.4%
Oct-21 47.16 1.06 25.6%
Nov-21 47.85 0.69 25.7%
Dec-21 49.19 1.35 25.6%
Jan-22 49.80 0.60 26.3%
Feb-22 50.78 0.98 27.0%
Mar-22 50.99 0.21 23.4%
Apr-22 51.40 0.41 22.5%
May-22 51.57 0.17 19.9%
Projections: End Month

Jun-22 52.05 0.48 19.1%
Sep-22 53.47 0.48 16.0%
Dec-22 54.90 0.48 11.6%
Mar-23 56.32 0.48 10.5%
Jun-23 57.75 0.48 11.0%
Source: CBE website for historical data and Cepheus Research for projections
26
• The impact of four major global price shocks—namely for fuel, food, fertilizer, and freight—will add an extra $4bn in fx
outflows this fiscal year. Several other line-items will also contribute to a further deterioration in BOP flows, including
service imports (up by $0.6bn), loans (down by $0.4bn) and grants (down by $0.4bn).
• Offsetting these adverse developments, improvements are expected for service exports (up by $1.3bn), goods exports (up
by $0.8bn), remittances (up by $0.8bn), and borrowing by SOEs (up by $0.4bn, mainly due to Ethiopian Airlines).
Figure 4.15: Global Price Shocks and their Impacts on Ethiopia--Balance of Payments effects
Fiscal Year 9M Actual FY Estimate Fiscal Yr Fiscal Yr

Data in USD mns 2020-21 2021-22 2021-22 USD change % change
The "Four Fs" 6,372 7,237 10,383 4,011 63%

Fuel imports 1,839 2,273 3,350 1,511 82%
Food imports (cereals only) 1,337 1,833 2,444 1,107 83%
Fertilizer Imports 699 495 1,075 376 54%
Freight costs* 2,497 2,636 3,514 1,017 41%
Other imports 10,413 8,492 10,991 578 6%

Capital goods imports 3,880 2,130 2,840 (1,040) -27%
All other imports 6,533 6,362 8,151 1,618 25%
Total Imports 14,288 13,093 17,860 3,572 25%
Source: NBE and MoT for historical data; Cepheus estimates for FY 2021-22 based on 6M or 9M actual data.
* Transport payments in services account of balance of payments. Data is for July-Dec 2021, and the nine-month figure is extrapolated.
Figure 4.16: BOP line-items showing the largest deterioration and largest improvement this fiscal year
Ranked by change in USD terms
FY 2020-21 FY 2021-22 Change in

DETERIORATION in FX/BOP flows Actual Projected USD mns Change in percent
1 Imports of goods (14,288) (17,860) (3,572) 25%

2 Imports of services (4,308) (4,911) (603) 14%
3 Borrowing by Government, net 894 475 (419) -47%
4 Grants (budgetary) 1,369 1,000 (369) -27%
5 Income account, net (557) (607) (50) 9%
SUB-TOTAL, Selected Deteriorating line-items: … … (5,013)
FY 2020-21 FY 2021-22 Change in

IMPROVEMENT in FX/BOP flows Actual Projected USD mns Change in percent
1 Exports of services 4,895 6,217 1,322 27%

2 Remittances 4,931 5,720 789 16%
3 Exports of goods 3,617 4,395 778 22%
4 Other private capital flows (335) 200 535 -160%
5 Borrowing by SOEs, gross 417 820 403 97%
6 Other private tranfsers 1,187 1,401 214 18%
7 Foreign investment 3105 3150 45 1%
SUB-TOTAL, Selected Improving line-items: … … 4,085
NET Change above BOP line-items: … … (928)
Other BOP line-item movements: … … (402)
NBE FX Reserves, end of fiscal year 2,881 1,550 (1,331) -46%
Source: Cepheus compilation based on NBE data for FY 2020-21 and projections for 2021-22. 27
• Taking into account the net effect of all balance of payment flows, we project an overall deficit of $1.3bn for the year,
paralleling the drop in official reserves from $2.8bn last June to an expected $1.55bn by end of this fiscal year (June 2022).
• The BOP deterioration has occurred despite

a 20%-plus Birr depreciation, implying it
Figure 4.17: Balance of Payment Projections--Conventional Presentation
would have been even higher had the
currency not declined by as much as it did. FY 2020-21 FY 2021-22
It is also worth noting that the observed Balance of Payments in USD mns Actual Projection USD change % change
BOP deficit and reserves drawdown is itself
limited to only $1.3bn because excess Trade Balance (10,671) (13,465) (2,794) 26%
demand under the current exchange rate Exports 3,617 4,395 778 22%
regime is simply reflected in longer queues Imports (14,288) (17,860) (3,572) 25%
and longer waiting times for those seeking
Services, net 30 699 669 2228%
access to foreign exchange. Eliminating
Non-factor services, net 587 1,306 719 122%
such excess demand would of course Exports of non-factor services 4,895 6,217 1,322 27%
require a fundamental shift in Ethiopia’s Imports of non-factor services (4,308) (4,911) (603) 14%
managed exchange rate regime, whose Factor services (income account) (557) (607) (50) 9%
reform remains a government priority but O/w Gross official interest payments (565) (616) (51) 9%
has been put on pause on account of
prevailing domestic and global conditions. Private transfers, net 6,118 7,121 1,003 16%
Remittances 4,931 5,720 789 16%
In the interim, the policy mix of making
Other private transfers, net (NGOs etc) 1,187 1,401 214 18%
some policy adjustments and tolerating
unmet fx demand (via queueing) continues Current account balance excluding grants (4,523) (5,646) (1,123) 25%
to ‘hold together’ the balance of payments, Official transfers, net 1,369 1,000 (369) -27%
though such a state of affairs will contribute Current account balance including grants (3,154) (4,646) (1,492) 47%
to a build-up of major economic stresses -
and undermine future growth the longer it Capital account 3,666 3,316 (350) -10%
Government Borrowing, net 894 475 (419) -47%
is prolonged.
Disbursements 1,018 835 (183) -18%
Amortization (124) (360) (236) 190%
• Pending major reform in the exchange rate State Enterprise Borrowing, net (848) (509) 339 -40%
regime, an improvement in near-term Disbursements 417 820 403 97%
foreign exchange conditions is nonetheless Amortization (1,265) (1,329) (64) 5%
still possible if global commodity prices Foreign Direct Investment, net 3,955 3,150 (805) -20%
Private sector, long term - 200 200 …
moderate from their current highs and
Short term Capital (335) - 335 -100%
when a deeper (post-conflict) engagement
is re-established with donors, lenders, Errors and omissions (213) - 213 -100%
investors, and trading partners. Both are a -
reasonable prospect in the second half of Overall balance 299 (1,331) (1,630) -545%
2022, and this presumed backdrop forms -
the baseline assumption for our overall Financing (299) 1,331 1,630 -545%
-
macro outlook and projections as laid out in
Net Foreign Assets Change [Increase(-), Decrease (+)] (299) 1,331 1,630 -545%
Appendix 1. Central Bank 386 1,331 945
Commercial banks (685) - 685
-
NBE Foreign Exchange Reserves stock 2,881 1,550 (1,331) -46%
Source: NBE Annual Report 2020-21 for historical data and Cepheus projections.
28
Appendix 1
Ethiopia: Key Macroeconomic Indicators: FY 2011-12 to FY 2022-23
FY 2011/12 FY 2012/13 FY 2013/14 FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22 FY 2022/23
Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Projection Projection
Real Sector: GDP, Prices, and Investment
Real GDP growth 8.7% 9.9% 10.3% 10.4% 8.0% 10.2% 7.7% 9.0% 6.1% 6.3% 1.0% 6.5%
Agriculture growth 4.9% 7.1% 5.4% 6.4% 2.3% 6.7% 3.5% 3.8% 4.3% 5.5% -6.4% 6.0%
Industry growth 19.7% 24.0% 17.1% 19.9% 20.5% 20.3% 12.2% 12.6% 9.6% 7.3% 4.0% 7.0%
Services growth 9.6% 9.0% 13.0% 11.1% 8.6% 7.2% 8.8% 11.0% 5.3% 6.3% 5.0% 6.5%
Inflation: CPI (period average) 34.1% 13.5% 8.1% 7.7% 9.7% 7.2% 13.1% 12.6% 19.9% 20.2% 33.7% 22.9%
Inflation: CPI (end-of-period) 20.7% 7.4% 8.5% 10.4% 7.5% 8.8% 14.7% 15.3% 21.6% 24.6% 31.9% 15.0%
Nominal GDP growth 45.1% 16.0% 22.4% 22.4% 20.8% 16.9% 20.0% 22.3% 25.4% 28.6% 35.0% 30.9%
Nominal GDP level (Birr billions) 747.3 866.9 1,060.8 1,298.0 1,568.1 1,832.8 2,200.1 2,690.8 3,374.7 4,341.4 5,860.6 7,671.5
Nominal GDP level (USD billions) $ 43.2 $ 47.6 $ 55.5 $ 64.5 $ 74.1 $ 81.6 $ 83.9 $ 95.7 $ 106.8 $ 110.3 $ 119.9 $ 139.1
GDP per capita (in USD) $ 516.4 $ 554.0 $ 631.1 $ 715.8 $ 803.9 $ 864.6 $ 869.3 $ 969.8 $ 1,059.5 $ 1,070.9 $ 1,139.7 $ 1,296.5
Exchange rate (Birr/USD, year-average) 17.28 18.23 19.11 20.13 21.16 22.47 26.23 28.12 31.5899 39.36 48.90 55.13
Exchange rate (Birr/USD, end-period) 17.73 18.64 19.58 20.57 21.80 23.11 27.26 28.91 34.93 43.69 52.05 57.75
Exchange rate annual depreciation (year-average) 7.3% 5.5% 4.8% 5.3% 5.1% 6.2% 16.7% 7.2% 12.3% 24.6% 24.2% 12.8%
Investment-to-GDP ratio 34.6% 32.6% 38.0% 39.3% 37.3% 38.4% 34.2% 35.3% 30.6% 28.0% 27.0% 30.0%
By investor category:
Public sector investment-to-GDP ratio 26.1% 24.3% 17.0% 17.6% 16.8% 14.4% 12.6% 11.0% 10.0% 10.0% 9.5% 12.0%
Private sector investment-to-GDP ratio 8.5% 8.3% 21.0% 21.7% 20.5% 24.0% 21.6% 24.3% 20.6% 18.0% 17.5% 18.0%
By source of financing:
Domestic Savings-to-GDP ratio 16.5% 15.9% 20.5% 21.8% 22.4% 22.4% 24.1% 22.1% 20.8% 19.0% 17.5% 18.0%
External Savings-to-GDP ratio 18.1% 16.7% 17.5% 17.5% 14.9% 16.0% 10.1% 13.2% 9.8% 9.0% 9.5% 12.0%
Banking Sector FY 2011/12 FY 2012/13 FY 2013/14 FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22 FY 2022/23
Deposits at all commercial banks (Br bn) 189.3 237.8 292.9 366.5 436.7 567.7 729.1 899.1 1,042.8 1,361.3 1,701.6 2,161.1
Loans by all commercial banks (Br bn) 85.4 116.5 145.6 189.3 232.1 289.8 355.4 456.1 589.8 808.8 1,035.3 1,345.8
NBE Bills held by all comm banks (Br bn) 11.0 19.1 25.1 37.4 49.9 54.6 70.1 88.9 81.0 81.0 81.0 81.0
Treasury Bills held by all comm banks (Br bn) … … … … … … … … 9.5 54.5 195.0 234.0
Bonds held by all commercial banks (Br bn) 64.5 82.8 111.8 152.7 188.7 237.8 291.4 338.6 405.2 444.9 495.0 569.3
Total bank financing: Loans/Bills/Bonds (Br bn) 160.9 218.4 282.5 379.4 470.7 582.2 716.9 883.6 1,085.5 1,389.2 1,806.3 2,230.1
Deposit-to-GDP ratio (%) 25.3% 27.4% 27.6% 28.2% 27.8% 31.0% 33.1% 33.4% 30.9% 31.4% 29.0% 28.2%
Total bank financing-to-Deposit ratio (%) 85.0% 91.8% 96.5% 103.5% 107.8% 102.5% 98.3% 98.3% 104.1% 102.0% 106.1% 103.2%
Total commercial bank financing-to-GDP ratio (%) 21.5% 25.2% 26.6% 29.2% 30.0% 31.8% 32.6% 32.8% 31.9% 30.7% 27.5% 26.0%
Annual growth in bank deposits (%) 32.1% 25.6% 23.2% 25.1% 19.2% 30.0% 28.4% 23.3% 16.0% 30.5% 25.0% 27.0%
Annual growth in total bank financing (%) 49.0% 35.7% 29.4% 34.3% 24.1% 23.7% 23.1% 23.3% 22.8% 28.0% 30.0% 23.5%
Data Sources: NBE, MoF, MoPD, CSA, and IMF; Cepheus Capital Research for estimates and projection years.
29
Disclaimer: This report represents solely the views, analysis, and judgement of the Cepheus research team and does not necessarily reflect the views or opinions of the
Fund’s Managing Partners, Advisors, or Investors.
Ethiopia: Key Macroeconomic Indicators: FY 2011-12 to FY 2022-23
Fiscal Sector FY 2011/12 FY 2012/13 FY 2013/14 FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22 FY 2022/23
Revenue and grants (Birr bns) 115.7 137.2 158.1 199.6 243.7 269.1 287.6 344.9 395.0 478.9 462.0 555.9
Revenue (Birr bns) 102.9 124.1 146.2 186.6 230.7 256.6 269.6 311.3 354.3 444.6 447.0 509.0
Grants to budget (Birr bns) 12.8 13.1 11.9 13.0 13.0 12.5 17.9 33.6 40.7 34.3 15.0 46.9
Expenditure (Birr bns) 124.4 153.9 185.5 230.5 272.9 329.3 354.2 413.0 480.2 599.0 674.0 786.0
Fiscal balance after grants (Birr bns) -8.7 -16.7 -27.4 -30.9 -29.3 -60.2 -66.6 -68.1 -85.2 -120.1 -212.0 -230.1
External budget financing (Birr bns) 6.5 16.8 20.5 18.7 26.0 29.0 28.1 35.4 59.5 21.8 23.2 68.4
Domestic budget financing (Birr bns) 3.8 1.8 13.5 18.5 24.7 34.6 14.9 36.3 42.1 138.9 188.8 106.6
Other/exceptional financing (Birr bns) -1.6 -1.9 -6.6 -6.3 -21.4 -3.4 23.6 -3.6 -16.4 -45.5 0.0 55.1
Revenue and grants (% GDP) 15.5% 15.8% 14.9% 15.4% 15.5% 14.7% 13.1% 12.8% 11.7% 11.0% 7.9% 7.2%
Expenditure (% GDP) 16.6% 17.8% 17.5% 17.8% 17.4% 18.0% 16.1% 15.3% 14.2% 13.8% 11.5% 10.2%
Fiscal balance after grants (% GDP) -1.2% -1.9% -2.6% -2.4% -1.9% -3.3% -3.0% -2.5% -2.5% -2.8% -3.6% -3.0%
External budget financing (% GDP) 0.9% 1.9% 1.9% 1.4% 1.7% 1.6% 1.3% 1.3% 1.8% 0.5% 0.4% 0.9%
Domestic budget financing (% GDP) 0.5% 0.2% 1.3% 1.4% 1.6% 1.9% 0.7% 1.3% 1.2% 3.2% 3.2% 1.4%
Other/exceptional financing (% GDP) -0.2% -0.2% -0.6% -0.5% -1.4% -0.2% 1.1% -0.1% -0.5% -1.0% 0.0% 0.7%
Public Sector Debt (% GDP) 30.6% 41.9% 45.7% 52.9% 52.4% 55.2% 58.9% 56.2% 51.8% 50.4% 48.0% 44.5%
External Debt (% GDP) 20.6% 23.6% 25.2% 29.6% 29.0% 28.7% 30.8% 28.2% 27.0% 26.7% 23.7% 21.2%
Domestic Debt (% GDP) 10.1% 18.3% 20.5% 23.3% 23.4% 26.5% 28.1% 28.0% 24.7% 23.7% 24.2% 23.3%
External Sector: Balance of Payments FY 2011/12 FY 2012/13 FY 2013/14 FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22 FY 2022/23
Exports of goods (USD mn) 3,153 3,116 3,300 3,019 2,868 2,908 2,840 2,667 2,988 3,617 4,395 5,186
Exports of services (USD mns) 2,811 2,853 3,174 3,028 3,196 3,331 4,220 4,949 4,664 4,895 6,217 7,087
Imports of goods (USD mn) (11,018) (11,461) (13,712) (16,458) (16,725) (15,803) (15,253) (15,112) (13,881) (14,288) (17,860) (20,539)
Imports of services (USD mns) (2,639) (2,281) (2,461) (3,107) (3,442) (3,393) (3,983) (4,910) (4,245) (4,308) (4,911) (5,255)
Remittances (USD mn) 2,260 2,489 2,968 3,797 4,420 4,428 5,121 5,693 4,722 4,931 5,720 6,178
Private transfers, other (USD mn) 986 1,086 1,071 1,085 2,008 1,058 953 683 904 1,187 1,401 1,681
Foreign official grants (USD mn) 1,788 1,530 1,461 1,508 1,391 1,428 1,226 2,087 1,488 1,369 1,000 1,400
Current account balance (USD mn) (2,755) (2,781) (4,352) (7,401) (6,657) (6,528) (5,253) (4,534) (3,969) (3,154) (4,646) (4,920)
Current account balance (% GDP) -6.4% -5.8% -7.8% -11.5% -9.0% -8.0% -6.3% -4.7% -3.7% -2.9% -3.9% -3.5%
Foreign direct investment (USD mn) 1,072 1,232 1,467 2,202 3,269 4,171 3,723 3,015 2,419 3,955 3,150 4,500
Foreign borrowing, net: GOVT (USD mn) 938 1,270 2,309 3,352 1,628 1,402 1,632 1,158 1,947 894 475 1,240
Foreign borrowing, net: SOEs (USD mn) 231 882 332 2,347 1,052 626 937 1,326 (234) (848) (509) (229)
Overall External Balance (USD mn) (973) (7) (97) (521) (831) 659 (201) 58 (730) 299 (1,331) 955
Stock of Foreign Reserves, (USD mn) 2,262 2,368 2,496 3,249 3,402 3,197 2,843 3,415 3,209 2,881 1,550 2,505
Stock of Foreign Reserves, months imports 2.5 2.5 2.2 2.4 2.4 2.4 2.2 2.7 2.8 2.4 1.0 1.5
External Debt Stock (Public Sector, USD bn) 8.9 11.2 14.0 19.1 21.5 23.4 25.8 27.0 28.9 29.5 28.5 29.5
External Debt Stock (Public Sector, % GDP) 20.6% 23.6% 25.2% 29.6% 29.0% 28.7% 30.8% 28.2% 27.0% 26.7% 23.7% 21.2%
Growth of Goods Exports 14.8% -1.2% 5.9% -8.5% -5.0% 1.4% -2.3% -6.1% 12.0% 21.1% 21.5% 18.0%
Growth of Goods Imports 33.5% 4.0% 19.6% 20.0% 1.6% -5.5% -3.5% -0.9% -8.1% 2.9% 25.0% 15.0%
Data Sources: NBE, MoF, MoPD, CSA, and IMF; Cepheus Capital Research for estimates and projection years.
30
Disclaimer: This report represents solely the views, analysis, and judgement of the Cepheus research team and does not necessarily reflect the views or opinions of
the Fund’s Managing Partners, Advisors, or Investors.

Quarterly Macroeconomic Review First Quarter 2022

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Quarterly Macroeconomic Review First Quarter 2022

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Quarterly Macroeconomic Review

First Quarter 2022

Macroeconomic Developments and Outlook

Economic Activity—Real Sector Indicators, Part 1

Figure 1.1: Economic Activity Indicators

Data available to end-March 2022 FY 2020-21 FY 2021-22 Nominal Real

Data available to end-December 2021 FY 2020-21 FY 2021-22 Nominal Real

SOEs Revenue* 60%

Bank Profits 48%

Bank deposits 26%

Money suppl y (M2) 25%

Tourist inflows 24%

Industrial park exports 21%

Foreign investm ent 19%

Revenue Coll ection 17%

Cement Pr oduction -17%

Capital goods im ports -26%

External borrowing -31%

NBE Reserves -34%

Economic Activity—Real Sector Indicators, Part 2

• Investment trends show a mixed picture so far in the fiscal year.

Capital Goods Imports (USD bns)

Source: NBE Source: NBE, ERCA

SOE bond borrowing (Birr bns)

Source: NBE, EIC

Economic Activity—Real Sector Indicators, Part 3

Value of Exports Quarterly Export

Figure 1.9: Monthly Textile Exports (mns USD)

Source:MOTI Source: Chemical Industry Corporation

Economic Activity—Real Sector Indicators, Part 4

Deposit Levels Loans

Source: Banks Survey Data Source: Banks Survey Data

Figure1.15: FDI (USD bns) Figure1.16:Government Revenue (Birr bns)

Figure1.17:SOEs Revenue (Birr mns) Figure1.18:SOEs Profit (Birr mns)

Economic Activity—Real Sector Indicators, Part 5

Revenue (Birr mns)

Transport Sector 80,320 152,620 90%

Total Profits 26,399 51,928 97%

Economic Activity—Real Sector Indicators, Part 6

Figure 1.19: Growth Projection by Sector

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22

Agriculture 6.7 3.5 3.8 4.3 5.5 -6.4

Industry 20.3 12.2 12.6 9.6 7.3 4.0

Services 7.2 8.8 11.0 5.3 6.3 5.0

Figure 1.20: Growth Projections for FY 2021-22

Institution Date of projection Growth projection

IMF April 2022 3.8%

Souce: Reports and websites of instituions as listed above.

Economic Activity—Real Sector Indicators, Part 7

Figure 1.22: Year on Year Inflation

Figure 1.23: Selected Items Inflation for April 2022

Oils and fats 89.5%

Economic Activity—Real Sector Indicators, Part 8

Source: CSA, indexmundi.com Source: CSA, indexmundi.com

International and Local Price of Fuel

Crude Petroleum ($ per barrel), LHS Local Benzil (Birr/lt), RHS

Source: CSA, indexmundi.com

Economic Activity—Real Sector Indicators, Part 10

Figure 1.28: Month on Month Inflation for the Past Year

Month on Month Inflation for the Past Year

Month on Month I nfla tion Ave rage

Figure 1.29: Inflation Projections to December 2022

Price index M-o-M inflation Y-o-Y inflation

Source: CSA and Cepheus Research judgements/projections on m-o-m inflation rates.