Ethiopia’s interbank money market surpasses 1 trillion Birr in under a year, reshaping financial reform and opening doors to foreign banks.
Ethiopia’s Interbank Money Market (IMM) has achieved a major milestone. In less than a year since its launch in October 2024, the market has crossed 1 trillion Birr ($6.83 billion) in cumulative trades.
The Ethiopian Securities Exchange (ESX) announced the achievement on September 29, 2025, and described it as “historic.” The platform has quickly become central to Ethiopia’s financial reforms.
The IMM currently hosts 26 commercial banks. It gives lenders a transparent venue to borrow short-term funds, trade currencies, and meet reserve requirements.
“Crossing 1 trillion ETB is more than a number. It signals improved liquidity, greater transparency, and a reliable venue for daily funding,” said Michael Habet, Chief Operating Officer of the ESX.
Within six months of operation, the market had already cleared 500 billion Birr, according to Ethiopian Business Review.
A Push Toward Market-Based Policy
The IMM is a key part of the National Bank of Ethiopia’s (NBE) effort to move away from direct monetary controls. It improves price discovery, strengthens liquidity allocation, and makes monetary policy more effective.
The timing matters. In July 2025, Ethiopia began its new fiscal year. The NBE raised the credit-growth ceiling to 24%, up from 16%. At the same time, it pledged to maintain a tight monetary stance to anchor stability.
The central bank stated that reforms would continue, even as inflation slowed and external accounts improved. Ethiopia’s cabinet approved a 2 trillion birr($15B) budget for 2025-26, a 31% increase focused on security, productivity, and disaster relief under IMF-backed reforms this June.
Inflation Eases, Market Rates Drop
Ethiopia’s macroeconomic picture has started to stabilize. Data from the Ethiopian Statistical Service shows inflation fell to 13.6% in August 2025, the lowest since March. It eased slightly from 13.7% in July.
At the same time, money supply grew strongly. Broad money expanded by 23.1% while base money jumped 70.7% year-on-year by August.
Short-term borrowing costs have also declined. The yield on the 91-day Treasury bill dropped to 15.0% in August, down from 17.6% in June 2025.
Economists link the easing to stronger foreign exchange inflows. Exports of gold and coffee, plus tourism, remittances, and a Standing Lending Facility, have eased liquidity pressure.
The IMF expects these reforms to support a current account surplus through 2026 (Reuters).
Foreign Banks Eye Entry
The IMM success comes as Ethiopia opens its banking sector to foreign capital. In June 2025, the NBE issued Directive SBB/94/2025, allowing foreign banks to apply for licenses and acquire stakes in local lenders.
This directive followed a landmark law passed in late 2024 that formally opened the sector, as Reuters reported.
Several large African lenders have already signaled interest. These include Kenya’s KCB Group, Equity Group, Standard Bank Group of South Africa, and Banque pour le Commerce et l’Industrie Mer Rouge (BCIMR) from Djibouti.
“Ethiopia’s banking industry has been closed for decades, but reforms are opening the door to regional champions,” said Dr. Alemayehu Geda, an economist at Addis Ababa University. “The interbank market provides the infrastructure they need.”
The ESX’s progress reflects a shift in Ethiopia’s broader financial landscape. In July 2025, the country launched its first formal securities exchange since Emperor Haile Selassie’s era (Financial Times). Together with the IMM, these platforms are designed to modernize capital markets.
Still, challenges remain. Analysts warn that institutional capacity and regulatory strength must grow to handle greater volumes. Building investor confidence will take time, especially in a country where financial literacy remains low.
Officials, however, see the early gains as proof of momentum.
“The IMM is laying the foundation for a strong domestic market. Reaching a trillion Birr in under a year shows the appetite and urgency for reform,” said Solomon Desta, Deputy Governor of the NBE.
