National Bank of Ethiopia

(Federal Democratic Republic of Ethiopia)

Financial Statements

For the year ended 30 June 2023

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National Bank of Ethiopia

Financial Statements

For the year ended 30 June 2023

Contents	Page
Statement of Director's Responsibility	1
Independent Auditor's Report	2 – 8
Statement of Profit or Loss and Other Comprehensive Income	9
Statement of Financial Position	10
Statement of Changes in Equity	11
Statement of Cash Flows	12
Notes to the Financial Statements	13 – 108

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National Bank of Ethiopia

Annual Financial Statements For the year ended 30 June 2023

Statement of Director's Responsibility

The Directors are responsible for the preparation and fair presentation of the financial statements of National Bank of Ethiopia ("The Bank"), comprising the statement of financial position as at 30 June 2023, statements of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards.

To enable the Directors, meet those responsibilities, the Board of Directors (the "Board") and management sets standards and management implements systems of internal control, accounting and information systems aimed at providing reasonable assurance that assets are safeguarded, and the risk of error, fraud or loss is reduced in a cost-effective manner. These controls, contained in established policies and procedures, include the proper delegation of responsibilities and authorities within a clearly defined framework, effective accounting procedures and adequate segregation of duties.

To their best knowledge and belief, based on the above, the Directors are satisfied that no material breakdown in the operation of the systems of internal control and procedures has occurred during the year under review. The Directors have reviewed the performance and financial position of the Bank to the date of signing of these financial statements and its prospects based on prepared budgets and are satisfied that the Bank is a going concern and, therefore, have adopted the going concern assumption in the preparation of these financial statements.

Approval of the annual financial statements

The financial statements on pages 9 to 108 were approved by the Governor on behalf of the Board of Directors on 28 March 2025.

Signed on behalf of the Directors

Mamo Esmelealem Mihretu .................................................... Date: 28 March 2025 Mamo Esmelealem Mihretu Governor

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MSE AUDIT SERVICE LLP. CHARTERED CERTIFIED ACCOUNTANTS Guinea Conakry Street, Kazanchis District Grant Thornton Building 4th Floor P.O. Box 1162, Addis Ababa, Ethiopia T +251 11 552 5575 / 552 2632 F +251 11 552 4855 E info@et-mse.com

INDEPENDENT AUDITOR'S REPORT

TO THE BOARD OF DIRECTORS OF THE NATIONAL BANK OF ETHIOPIA

Report on the Audit of the Financial Statements

Audit Opinion

We have audited the financial statements of The National Bank of Ethiopia, which comprise the statement of financial position as at 30 June 2023, and the related statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Bank as at 30 June 2023, and its financial performance and its cash flows for the year then ended in accordance with the International Financial Reporting Standard (IFRSs) and the requirement of the Pronouncements on the application of International Accounting Standards (IAS 29), Financial reporting in Hyperinflationary Economies in Ethiopia by the Accounting and Auditing Board of Ethiopia.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the financial statements section of our report. We are independent of the Bank in accordance with the requirements of the International Ethics Standards Board for Accountants (IESBA), International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA code) and other independence requirements applicable to performing audits of financial statements in Ethiopia. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code and other ethical requirements that are relevant to our audit of financial statements in Ethiopia. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matter to be communicated in our report.

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Key audit matter	How the matter was addressed in the audit
1. Impairment of financial assets	We conducted the following procedures on the Expected Credit Loss (ECL) for these financial instruments:
As discussed under Note 9 of the financial statements, the National Bank of Ethiopia extends various loans to private commercial banks, government banks, and the Government of Ethiopia, summarized as follows:	• We assessed the design and tested the implementation of key controls related to the calculation of impairment losses.
	• In evaluating the control design, we examined its suitability considering the nature and significance of the risk, the competence and authority of the individuals executing the control, and the frequency and consistency of its application.
Loan to government banks: 137,758,663,998	• We verified the completeness of these financial assets by obtaining confirmations and reconciling the carrying amounts of each asset category to ensure that all related exposures were thoroughly evaluated for impairment.
Loans to private commercial banks: 15,054,294,232	• We consulted with our internal specialist to scrutinize the appropriateness of the discount rate used for calculating the present value of cash flows for the assets, confirming that the rate was suitable.
Due from Government of Ethiopia: 583,119,662,333	• We questioned management regarding the appropriate staging and the determination of suitable Loss Given Default (LGD) and Probability of Default (PD) for each investment category.
Total: 735,932,620,563	We consider that the assumptions made by management are reasonable.
The Bank assessed these assets for impairment as of 30 June 2023 and 30 June 2022.	• We also reviewed the disclosures to confirm that they complied with IFRS 9 requirements.
Given the absence of credit ratings for both private commercial banks and government banks, along with the substantial amount due from the Government, we identified the assessment of impairments for these assets as a key audit matter due to the significant judgments applied by management.	Based on the procedures conducted, we concluded that the judgments made by the Bank are reasonable and that the related disclosures are appropriate.
Key areas of significant judgment within the Expected Credit Loss (ECL) process included:
• Assessing the expected cash flows associated with these instruments.
• Evaluating whether an appropriate discount rate was used to calculate the ECL for these assets.
• Determining if there was an increased credit risk associated with other issued instruments.
The accounting policies, critical estimates and judgments, and impairment allowance are outlined in Notes 3(b), 9, and 28(a) of the financial statements.

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Key audit matter	How the matter was addressed in the audit
2. Going concern assessment and negative general reserve balance	The National Bank of Ethiopia operates to achieve its policy mandates, which include maintaining price and financial stability. Therefore, the effectiveness of its interventions should always be evaluated based on their success in meeting these mandates. To assess the impact of negative equity on the Bank's operations, we undertook the following procedures:
As disclosed in Note 2(a), the National Bank of Ethiopia reported a negative general reserve balance of Birr 0.986 billion (2022: 2.797 billion deficit). This negative general reserve arose from losses of Birr 1.8 billion during 2022 and Birr 1.4 billion in 2021. The losses were primarily due to: Impairment losses on government and government bank-related securities and loans and advances, Write-downs of gold commodities to net realizable value (NRV) and depreciation of the local currency, leading to significant exchange losses.	• We engaged with management and those charged with governance regarding their assessment of going concern and their strategies to address the negative reserve position.
Despite recording a net operating surplus of Birr 9 billion for the current period and transferring 20% of this balance to the general reserve account, the reserve account still reflects a negative balance of Birr 0.986 billion.	• We reviewed various policy reforms and interventions initiated by the Board aimed at enhancing the Bank's operations and strengthening the equity position to mitigate loss exposures from these interventions.
The going concern assessment of the bank and negative equity is considered a key audit matter due to the significant risks it poses, impacting:	• We analysed the effects of various policy reforms implemented after the year-end, including the newly enacted proclamation which increases the bank capital and its implications for the Bank's equity and liquidity.
• The Bank's ability to meet its operational and debt obligations as they become due.	• We assessed the impact of the Domestic Gold Purchase Program on the Bank's equity and reserve.
• The Bank's capacity to fulfil its policy mandates, including maintaining stable rate of price and exchange, to foster a healthy financial system and to undertake such other related activities as are conducive to rapid economic development of Ethiopia.	• We further examined the associated disclosures.
• The Bank's ability to continue operating as a going concern.	Based on the procedures performed, we determined that the judgments made, and the response strategies employed by the Bank to address the going concern issue and rectify the negative equity position are reasonable. The related disclosures were also found to be appropriate.
This situation necessitates careful evaluation and monitoring to address the going concern issues and implications of the negative general reserve balance.

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Key audit matter	How the matter was addressed in the audit
3. Foreign exchange risk and currency conversion losses	To address this matter, we designed and performed audit procedures to evaluate the accuracy, completeness, and compliance of the Bank's accounting for foreign currency transactions, including:
As disclosed in Note 8(b), the National Bank of Ethiopia incurred a net foreign exchange losses amounting to ETB 12.2 billion for the year ended 30 June 2023, compared to ETB 12.3 billion in the prior year. These losses are primarily attributable to the on-going devaluation of the Ethiopian Birr and the Bank's high exposure to foreign currency-denominated assets and liabilities, including obligations to international financial institutions and foreign currency reserves.	Assessing the accounting policies adopted by the Bank for foreign currency translation and ensuring consistency with IAS 21 requirements.
The Bank operates in a macroeconomic context characterized by significant exchange rate volatility, high inflation, and regulatory interventions affecting foreign currency accessibility. In addition, the Government has announced its intention to reform the exchange regime starting in July 2024, which could introduce further volatility and affect the Bank's financial position and results.	Recalculating the exchange differences for a sample of foreign currency balances (assets and liabilities) to test the mathematical accuracy and appropriateness of applied exchange rates.
The accounting treatment of foreign currency transactions and balances is governed by IAS 21 - The Effects of Changes in Foreign Exchange Rates, which requires entities to apply appropriate spot rates at each reporting date and to recognize exchange differences in profit or loss. Given the magnitude of the losses, the sensitivity of the results to currency movements, and the complexity of the underlying exposures, we determined that the assessment of foreign exchange losses constituted a key audit matter.	Reviewing year-end conversion rates to ensure they were based on observable and reliable sources, and that consistent methodologies were applied across all instruments.
	Testing internal controls over the foreign exchange management process, including approval mechanisms, and controls over the recognition of exchange gains or losses.
	Evaluating post-balance sheet events, including the policy decision on exchange rate reform announced by the Government in July 2024, and assessing the Bank's disclosure regarding the associated uncertainties and potential financial impact.
	We also reviewed the disclosures provided in the financial statements to ensure they were transparent, complete, and informative regarding the nature and sources of foreign exchange losses. Based on the procedures performed, we considered that the accounting treatment and related disclosures were appropriate, and that the Bank had adequately presented the impact of foreign exchange volatility.

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Key audit matter	How the matter was addressed in the audit
4. Classification and valuation of financial instruments	Our audit procedures addressed both the classification criteria and the fair value measurement approaches applied by the Bank:
As presented in Notes 3(b), 9, 10, and 28 of the financial statements, the Bank holds a significant portfolio of financial instruments, including government securities, loans to commercial banks, investment placements, and deposits. These instruments are measured at amortized cost, fair value through other comprehensive income (FVOCI), or fair value through profit or loss (FVTPL) in accordance with IFRS 9 - Financial Instruments.	We reviewed the Bank's assessment of its business models, including internal documentation, reporting structures, and evidence supporting whether financial assets were held to collect, to sell, or both.
The classification of financial assets under IFRS 9 requires an evaluation of both the business model for managing the instruments and the results of the SPPI test (Solely Payments of Principal and Interest). These assessments involve significant management judgment, particularly for instruments with non-standard features or where the contractual terms are complex or perpetual in nature.	We evaluated the SPPI test outcomes, ensuring that the contractual cash flows of selected instruments represented only principal and interest. For complex instruments (e.g., perpetual advances), we challenged management's assumptions and classifications.
In addition, the Bank applies IFRS 13 - Fair Value Measurement for the determination of fair values. For certain instruments, especially those falling into Level 2 (observable inputs other than quoted prices) or Level 3 (unobservable inputs) of the fair value hierarchy, the use of valuation techniques and assumptions becomes critical. These include discount rate selection, expected cash flow modelling, and adjustments for liquidity or credit risk.	We tested the valuation techniques and assumptions used for instruments. This included evaluating the appropriateness of discount rates, cash flow forecasts, and liquidity adjustments.
Due to the subjectivity, complexity, and materiality of these judgments, we considered the classification and valuation of financial instruments to be a key audit matter.	We reconciled fair value disclosures with supporting schedules and assessed compliance with IFRS 7 and IFRS 13, particularly in terms of fair value hierarchy classification and sensitivity disclosures.
	Based on our work, we found that the classification decisions were supported by documented evidence and that the valuation methodologies were applied consistently and aligned with IFRS requirements.

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Other information

The Directors are responsible for the other information. The other information comprises the Report of the Directors and the Annual Report, which is expected to be made available to us after the audit report date. The other information does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not and will not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and those charged with governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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As part of an audit conducted in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a bases for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.
• Conclude on the appropriateness of the management's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statement represents the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current year and are, therefore, the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Seid Abdela

MSE Audit Service LLP Chartered Certified Accountants Addis Ababa 31 March 2025

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National Bank of Ethiopia

Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2023 (In Ethiopian Birr)

	Note	30 June 2023	30 June 2022
Interest income	4	22,712,530,273	18,189,401,617
Interest expense	4	(5,342,833,233)	(6,602,487,476)
Net interest income		17,369,697,040	11,586,914,141
Fee and commissions income	5	12,109,205,742	9,437,413,463
Revenue from sale of gold	6	14,098,776,971	22,412,404,942
Other income	7	217,375,911	456,715,700
Net non-interest income		26,425,358,624	32,306,534,105
Net operating income		43,795,055,664	43,893,448,246
Currency costs	8 (a)	(3,816,098,288)	(2,456,268,620)
General and administration costs	8 (b)	(13,221,606,686)	(14,895,446,641)
Salaries and related benefits	8 (c)	(513,580,743)	(421,966,198)
Gold purchase, refinery, and other related costs	8 (d)	(15,522,836,443)	(26,921,025,765)
Impairment losses on financial assets	8(e),9,15	(1,663,471,402)	(1,054,226,975)
Operating surplus/Loss before (un) realised gains / (losses)		9,057,462,102	(1,855,485,953)
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit obligation	25 (b)	(172,418,020)	958,658
Fair value gains/(losses) on monetary gold		-	-
Fair value gains / (losses) on financial assets	10 & 18	1,309,320,567	38,259,168
Other comprehensive income		1,136,902,547	39,217,826
Total comprehensive profit/(loss)		10,194,364,649	(1,816,268,127)

The notes on pages 13 to 108 are an integral part of these financial statements.

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National Bank of Ethiopia

Statement of Financial Position As at 30 June 2023 (In Ethiopian Birr)

Assets	Note	30 June 2023	30 June 2022
Balances due from foreign entities - Commercial banks	9 (c)	26,546,453,204	34,377,378,326
Balances due from foreign entities - Central banks	9 (d)	27,228,439,137	41,188,035,227
Cash - foreign currencies	9 (e)	654,953,910	1,019,977,052
Funds held with IMF	9 (f),18	106,243,555	322,687,964
IMF Quota Subscription	18	21,941,217,675	29,921,124,958
Gold commodity	11	95,104,815	3,019,331,864
Loans to government banks	9 (b)	137,758,663,898	158,362,399,494
Loans to private commercial banks	9 (g)	15,054,294,232	1,368,705,247
Equity Investment	10	913,787,046	388,607,382
Property and equipment	13	1,434,863,480	1,327,277,937
Other assets	15	18,884,556,376	20,585,719,791
Intangible asset	14	1,234,513	2,563,105
Due from Government of Ethiopia	9 (a)	583,119,662,333	370,965,586,883
Right of use asset	16	2,747,351	1,839,882
Total assets		833,742,221,525	662,851,235,112
Liabilities
Currency in circulation	21	255,855,630,180	209,691,236,124
Deposits due to local financial institutions, government, and government institutions	17	359,930,191,365	252,869,157,723
Due to International Monetary Fund (IMF)	18	90,657,013,578	85,770,695,862
Funds due to international financial institutions	19	9,854,742	2,819,354
Due to other institutions	20	110,269,289,467	105,008,898,212
Due to the Ministry of Finance	24	11,120,875,954	5,374,906,270
Deferred revenue	23 (d)	8,878,846	12,039,039
Lease liability	16	3,090,450	2,116,398
Provisions	22	41,419,704	36,061,905
Employee benefits	25	394,772,324	196,314,922
Other liabilities	26	955,071,700	2,339,251,055
Total Liabilities		829,246,088,310	661,303,496,864
Equity
Capital	27 (a)	500,000,000	500,000,000
General reserve	27 (b)	(985,668,162)	(2,797,160,582)
Retained earnings	27 (b)	-	-
Fair value reserve	27 (e)	1,595,611,321	286,290,754
Defined benefit reserve	25/27(f)	(119,382,448)	53,035,572
International reserve valuation	27 (c)	3,849,198,654	3,849,198,654
Other reserve	27 (g)	(343,626,150)	(343,626,150)
Total equity		4,496,133,215	1,547,738,248
Total liabilities and equity		833,742,221,525	662,851,235,112

• In order to improve comparability, some of the comparative balances has been re-arranged. The notes on pages 13 to 108 are an integral part of these financial statements.

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National Bank of Ethiopia

Statement of Changes in Equity For the year ended 30 June 2023 (In Ethiopian Birr)

	Note	Capital	General reserve	Other Reserve	International reserve valuation	Retained earnings	Defined benefit reserve	Fair value reserve	Total Equity
Balance as of 1 July 2021		500,000,000	(941,674,629)	(343,626,150)	3,849,198,654	-	52,076,914	248,031,586	3,364,006,375
Total comprehensive income:
Profit/Loss for the year	27 (d)	-	-	-	-	(1,855,485,953)	-	-	(1,855,485,953)
Other comprehensive income	27 (f)	-	-	-	-	-	958,658	38,259,168	39,217,826
Total comprehensive income		-	-	-	-	(1,855,485,953)	958,658	38,259,168	(1,816,268,127)
Transactions with owners of the Bank:
Transfer to / (from) General reserve	27 (b)	-	(1,855,485,953)	-	-	1,855,485,953	-	-	-
Transfer to MOF	24/27 (d)	-	-	-	-	-	-	-	-
Balance as at 30 June 2022		500,000,000	(2,797,160,582)	(343,626,150)	3,849,198,654	-	53,035,572	286,290,754	1,547,738,248
Total comprehensive income:
Profit for the year	27 (d)	-	-	-	-	9,057,462,102	-	-	9,057,462,102
Other comprehensive income	27 (f)	-	-	-	-	-	(172,418,020)	1,309,320,567	1,136,902,547
Total comprehensive income		-	-	-	-	9,057,462,102	(172,418,020)	1,309,320,567	10,194,364,649
Transactions with owners of the Bank:
Transfer to / (from) Other reserve	27 (b)	-	1,811,492,420	-	-	(1,811,492,420)	-	-	-
--Transfer to/(from) MOF	24/27 (d)	-	-	-	-	(7,245,969,682)	-	-	(7,245,969,682)
Balance as at 30 June 2023		500,000,000	(985,668,162)	(343,626,150)	3,849,198,654	-	(119,382,448)	1,595,611,321	4,496,133,215

The notes on pages 13 to 108 are an integral part of these financial statements.

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National Bank of Ethiopia

Statement of Cash Flows For the year ended 30 June 2023 (In Ethiopian Birr)

	Note	30 June 2023	30 June 2022
Cash flows from operating activities:
Operating surplus/Loss for the year		9,057,462,102	(1,855,485,953)
Impairment of loans and advances	8(e),9, 15	1,663,471,402	1,054,226,975
Depreciation and amortization	13, 14	94,918,477	96,737,619
Net interest income	4	(17,369,697,040)	(11,586,914,141)
Dividend income	7	(18,430,518)	(13,629,225)
Interest paid on lease obligation	16	140,956	127,467
Loss/ (Gain) on disposal of property, plant, and equipment	13	47,310	(19,615)
Loss on inventory write down	11	34,046,877	833,898,065
Losses on currency notes in custody	21	60,261,200	1,479,315,632
		(6,477,779,234)	(9,991,743,176)
Changes in working capital:
Loans to government banks and commercial banks	9 (b, c, g)	2,734,708,450	12,358,195,628
Other assets	15	1,700,978,832	(2,904,525,314)
Deposits due from foreign entities - central banks and commercial banks	9(c,d)	3,922,562,205	(17,330,611,702)
Currency in circulation	21	46,104,132,856	44,502,228,760
Due to International Monetary Fund (IMF)	18	5,780,707,324	21,938,092,672
Due to International financial institutions	19	7,035,388	(4,040,773)
Due to other institutions	20	5,246,854,904	16,699,571,714
Deposits due to local financial institutions, government, and government institutions	17	107,061,033,672	(63,058,237,638)
Gold commodity	11	2,890,180,172	(221,639,390)
Due from Government of Ethiopia	9 (a)	(206,832,576,315)	(75,792,535,445)
Provisions	22	5,357,799	18,913,754
Deferred revenue	23 (d)	(3,160,193)	10,903,484
Employee benefits	25	26,039,382	22,640,717
Other liabilities	26	(1,384,179,355)	391,478,451
Interest income received		28,073,132,486	16,368,701,007
Interest expense paid		(5,242,313,670)	(7,814,950,242)
Net cash provided by operating activities		(16,387,285,297)	(64,807,557,493)
Cash flows from investing activities:
Disposal of property, plant and equipment		-	1,081,230
Increase of ROU assets	16	(1,305,914)	-
Dividends received		18,430,518	13,629,225
Increase in equity investment & IMF quota*	10	(379,880,714)	(9,514,896)
Acquisition of properties and equipment	13	(200,824,293)	(99,901,460)
Net cash used in investing activities		(563,580,403)	(94,705,901)
Cash flows from financing activities:
Payments on finance lease obligations	16	833,096	(247,020)
Remittance of annual profits to the Ministry of Finance	24	(1,500,000,000)	-
Net cash from financing activities		(1,499,166,904)	(247,020)
Increase (decrease) in cash and cash equivalents		(18,450,032,604)	(64,902,510,414)
Cash and cash equivalents at beginning of period	9 (f)	53,212,951,683	118,115,462,097
Cash and cash equivalents at end of period	9 (f)	34,762,919,079	53,212,951,683

*Fair value related adjustments of Equity investment and CVA of IMF quota subscription measured through OCI has been excluded from the cash flow statement (as per IAS-7 p.43). For detail refer (note 10).

The notes on pages 13 to 108 are an integral part of these financial statements.

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National Bank of Ethiopia

Notes to the Financial Statements For the year ended 30 June 2023

1. Reporting entity

National Bank of Ethiopia ("the Bank") is the Central Bank of Ethiopia. It was established by Order No. 30/1963 as an autonomous institution. It is governed by the National Bank of Ethiopia Establishment (as Amended) Proclamation No. 591/2008 and is wholly owned by the Government of the Federal Democratic Republic of Ethiopia.

Its principal place of business is Addis Ababa.

It operates as the Central Bank of Ethiopia and acts as the banker, fiscal agent and financing advisor of the Government of Ethiopia and is domiciled in Ethiopia.

2. Basis of preparation

(a) Going concern The National Bank of Ethiopia recorded a net operating loss in 2021 and 2022 F.Y, which resulted in a negative General Reserve balance of Birr 2.8 billion at the end of 30 June 2022. This was largely due to: (1) an impairment loss on government and government bank related securities plus loans and advances, 2) gold commodity inventory write down to the NRV and (3) a depreciation of the local currency which resulted in exchange losses.

In 2023, total net operating income of the Bank increased by 588% to birr 9 billion. This increase in operating income was driven to a large extent by interest earned on loans and advances and deposit investments held abroad, and fees and charges. The bank transfers 20% of its net profit to the general reserve as per the Proclamation No. 591/2008. As of June 30, 2023, the General Reserve account improved by 64.6%, to a negative balance of Birr 986 million.

In the view of the Board of Directors and Management, the Bank will continue to operate as a going concern. A central bank is considered policy solvent when it generates sufficient realized income to cover the costs associated with monetary policy operations. Given the expectation of more favorable macroeconomic conditions, driven by ongoing and wide-ranging policy reforms, the Directors believe there is minimal risk to the Bank's ability to generate adequate income to sustain its monetary policy operations.

In addition to the anticipated positive impact of macroeconomic conditions on the Bank's financial position, the Board is taking proactive steps to strengthen its equity position in line with the newly enacted NBE Proclamation No. 1329/2025. These steps include:

• Implementing a recapitalization plan in coordination with the Ministry of Finance and defining the distribution of net profits of the bank to enhance the NBE's balance sheet, as per Article 8 of NBE Proclamation No. 1329/2025, which establishes the Bank's total authorized capital to Birr 20 billion and subsequent transfer of the net profit to general reserve until such funds equal to 5% of bank's monetary liabilities.
• Setting a limit on the financing of the Government of Ethiopia in accordance with Article 27 of Proclamation No. 1329/2025.

Based on the above, the Directors have a reasonable expectation that these measures will support the Bank's continued operational efficiency and long-term sustainability.

Thus, the financial statements of the Bank have been prepared under the going-concern assumption.

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National Bank of Ethiopia

Notes to the Financial Statements For the year ended 30 June 2023

2. Basis of preparation (Continued)

(b) Statement of compliance The accompanying financial statements of the Bank have been prepared in accordance with the International Financial Reporting Standards ("IFRSs") as issued by the International Accounting Standards Board ("IASB") and National Bank of Ethiopia Establishment (as Amended) Proclamation No. 591/2008.

Pronouncement on the Application of International Accounting standard (IAS 29), Financial Reporting in Hyperinflationary Economies, in Ethiopia by Accounting and Auditing Board of Ethiopia

The Accounting and Auditing Board of Ethiopia is a statutory body established under Ethiopia Council of Ministers Regulation No. 332/2014 basing the financial reporting proclamation 847/2014, to regulate the accounting profession as well as for issuing a national professional accountancy qualification in Ethiopia. As part of its regulatory functions, it issued a Pronouncement on whether Ethiopia is a hyperinflationary economy for the year ended 30 June 2023. The statutory body concluded that, Ethiopia is not operating in a hyperinflationary economy. The requirements of IAS 29 are therefore deemed not applicable in the recognition, measurement, presentation, and disclosures in the financial statements for the financial year ended 30 June 2023.

Accounting standards are applied on the assumption that the value of money (the unit of measurement) is Constant over time. However, when the rate of inflation is no longer negligible, a number of issues arise impacting the true and fair nature of the accounts of entities that prepare their financial statement on historical cost basis. To address such concerns International Accounting Standards Board has issued IAS 29, Financial Reporting in Hyperinflationary Economies. However, IAS 29 does not establish an absolute inflation rate at which an economy is considered hyperinflationary. Instead, it considers a variety of non-exhaustive factors to determine the existence of hyperinflation. The indicators stated under paragraph 3 of the standard include, but are not limited to, the following:

a. The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power; b. The general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency; c. Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short; d. Interest rates, wages, and prices are linked to a price index; and e. The cumulative inflation rate over three years is approaching, or exceeds, 100%.

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National Bank of Ethiopia

Notes to the Financial Statements For the year ended 30 June 2023

2. Basis of preparation (Continued)

(b) Statement of compliance (continued) Given most of the criteria (a-e) stated above and based on the assessments conducted to check whether Ethiopia is hyperinflationary economy or not, the Accounting and Auditing Board of Ethiopia has concluded that Ethiopia is not a hyperinflationary economy in the year ended 30 June 2022 and 2023. Therefore, the requirements of IAS 29 are not applicable for financial reporting for the year ended 30 June 2023.

On 28 March, 2025, the Governor authorized the issuance of the accompanying financial statements.

(c) Basis of accounting The financial statements have been prepared on the historical cost basis, except for the following significant items:

1. Financial instruments measured at amortised cost and at fair value;
2. Monetary gold measured at fair value; and
3. Measurement of defined benefits obligations: key actuarial assumptions.

(d) Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the Bank operates (the "Functional currency").

The financial statements are presented in Ethiopian Birr (ETB), which is the Bank's functional currency, and all values are rounded to the nearest Birr, except when otherwise indicated.

(e) Use of judgments and estimates In preparing these financial statements, management has made judgments, estimates and assumptions that affect the application of the Bank's accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

Judgments Information about judgement made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements is included in the following notes:

Note 3 (b (ii)) - Classification of financial assets: assessment of the business model within which the assets are held and assessment of whether the contractual terms of the financial assets are Solely Payments of Principal and Interest (SPPI) on the principal amount outstanding;

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National Bank of Ethiopia

Notes to the Financial Statements For the year ended 30 June 2023

2. Basis of preparation (Continued)

(e) Use of judgments and estimates (Continued) Note 3 (b (viii)) - Establishing the criteria for determining whether credit risk on the financial asset has increased significantly since initial recognition, determining methodology for incorporating forward-looking information into measurement of Expected Credit Losses (ECL) and selection and approval of models used to measure ECL; and

Note 3 (e) - Leases; whether a contract contains a lease.

Estimates on uncertainties and assumptions Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively in the financial statements.

Information on assumptions and uncertainty of estimates posing a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the year ending 30 June 2023 is included in the following notes as set out below:

Note 3 (b (i; ii)) - identification and measurement of financial instruments; Note 3 (c) and (d) - useful lives and salvage value of tangible and intangible assets; Note 3 (k) - measurement of employee benefits liability: key actuarial assumptions; Note 3 (b) (viii) - impairment of financial instruments: key assumptions used in estimating recoverable cash flows; and Note 3 (j) and (t) - recognition and measurement of provisions and contingencies.

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

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National Bank of Ethiopia

Notes to the Financial Statements For the year ended 30 June 2023

3. Significant accounting policies

(a) Foreign currency transactions Transactions in foreign currencies on a day to day basis are recorded at the respective buying and selling rate. The closing balances on these foreign currency accounts at the close of business are translated using the mid-exchange rate.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the mid-exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortized cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortized cost in the foreign currency translated at the mid-exchange rate at the end of the year.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the spot exchange rate at the date on which the fair value is determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.

Foreign currency differences arising on translation are generally recognised in profit or loss.

(b) Financial instruments

(i) Recognition and initial measurement The Bank initially recognizes cash, loans and advances, deposits, and debt securities on the date on which they are originated. All other financial instruments (including assets designated at fair value through profit or loss) are initially recognized on the trade date on which the Bank becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(ii) Classification and subsequent measurement a. Financial assets: On initial recognition, financial assets are classified into one of the following measurement categories:

• Amortised cost;
• Fair value through other comprehensive income (FVOCI);
• Fair value through profit or loss (FVTPL);
• Elected at fair value through other comprehensive income (equities only); or
• Designated at FVTPL

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National Bank of Ethiopia

Notes to the Financial Statements For the year ended 30 June 2023

3. Significant accounting policies (continued)

(b) Financial instruments (continued) (ii) Classification and subsequent measurement (continued) a. Financial assets (continued): Financial assets include both debt and equity instruments. Financial assets are not reclassified subsequent to their initial recognition unless the Bank changes its Business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the Business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not designated as at FVTPL:

• the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Bank may irrevocably elect to present subsequent changes in fair value in OCI. This election is made on an investment-by-investment basis.

All other financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. On initial recognition, the Bank may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Debt instruments, including loans and debt securities, are classified into one of the following measurement categories:

• Amortised cost;
• Fair value through other comprehensive income (FVOCI);
• Fair value through profit or loss (FVTPL); or
• Designated at FVTPL

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National Bank of Ethiopia

Notes to the Financial Statements For the year ended 30 June 2023

3. Significant accounting policies (continued)

(b) Financial instruments (continued) (ii) Classification and subsequent measurement (continued) (a.) Financial assets (continued): Classification of debt instruments is determined based on: (i) The business model under which the asset is held; and (ii) The contractual cash flow characteristics of the instrument.

Business model assessment Business model assessment involves determining how financial assets are managed in order to generate cash flows. The Bank's business model assessment is based on the following categories:

• Held to collect: The objective of the business model is to hold assets and collect contractual cash flows. Any sales of the asset are incidental to the objective of the model.
• Held to collect and for sale: Both collecting contractual cash flows and sales are integral to achieving the objectives of the business model.
• Other business model: The business model is neither held-to-collect nor held-to-collect and for sale.

The Bank makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

• the stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether management's strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of the assets;
• how the performance of the portfolio is evaluated and reported to the Bank's management;
• the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;
• how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and
• the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Bank's stated objective for managing the financial assets is achieved and how cash flows are realised.

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National Bank of Ethiopia

Notes to the Financial Statements For the year ended 30 June 2023

3. Significant accounting policies (continued)

(b) Financial instruments (continued) (ii) Classification and subsequent measurement (continued) a. Financial assets (continued): Business model assessment (continued) Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Bank's continuing recognition of the assets.

Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at FVTPL because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets.

Assessments whether contractual cash flows are solely payments of principal and interest The contractual cash flow characteristics assessment involves assessing the contractual features of an instrument to determine if they give rise to cash flows that are consistent with a basic lending arrangement. Contractual cash flows are consistent with a basic lending arrangement if they represent cash flows that are solely payments of principal and interest on the principal amount outstanding (SPPI).

For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition. 'Interest' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g., liquidity risk and administrative costs), as well as profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Bank considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, the Bank considers:

• contingent events that would change the amount and timing of cash flows;
• leverage features;
• prepayment and extension terms;
• terms that limit the Bank's claim to cash flows from specified assets (e.g. non-recourse asset arrangements); and
• features that modify consideration of the time value of money - e.g., periodical reset of interest rates.

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National Bank of Ethiopia

Notes to the Financial Statements For the year ended 30 June 2023

3. Significant accounting policies (continued)

(b) Financial instruments (continued) (ii) Classification and subsequent measurement (continued) a. Financial assets (continued): Assessment whether contractual cash flows are solely payments of principal and interest (continued) Debt instruments measured at amortized cost Debt instruments are measured at amortized cost if they are held within a business model whose objective is to hold for collection of contractual cash flows where those cash flows represent solely payments of principal and interest. After initial measurement, debt instruments in this category are carried at amortized cost. Interest income on these instruments is recognized in interest income using the effective interest rate method. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. Amortized cost is calculated by taking into account any discount or premium on acquisition, transaction costs and fees that are an integral part of the effective interest rate.

Impairment on debt instruments measured at amortized cost is calculated using the expected credit loss approach. Loans and debt securities measured at amortized cost are presented net of the allowance for credit losses (ACL) in the statement of financial position.

Debt instruments are measured at FVOCI if they are held within a business model whose objective is to hold for collection of contractual cash flows and for selling financial assets, where the assets' cash flows represent payments that are solely payments of principal and interest. Subsequent to initial recognition, unrealized gains and losses on debt instruments measured at FVOCI are recorded in other comprehensive income (OCI). Upon derecognition, realized gains and losses are reclassified from OCI and recorded in non-interest income in the Statement of Profit or Loss and Other Comprehensive Income on an average cost basis. Foreign exchange gains and losses that relate to the amortized cost of the debt instrument are recognized in the Statement of Profit or Loss and Other Comprehensive Income.

Premiums, discounts, and related transaction costs are amortized over the expected life of the instrument to Interest income in the Statement of Profit or Loss and Other Comprehensive Income using the effective interest rate method.

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National Bank of Ethiopia

Notes to the Financial Statements For the year ended 30 June 2023

3. Significant accounting policies (continued)

(b) Financial instruments (continued) (ii) Classification and subsequent measurement (continued) a. Financial assets (continued): Debt instruments measured at FVOCI (Continued) Impairment on debt instruments measured at FVOCI is calculated using the expected credit loss approach. The allowance for credit losses (ACL) on debt instruments measured at FVOCI does not reduce the carrying amount of the asset in the Statement of Financial Position, which remains at its fair value. Instead, an amount equal to the allowance that would arise if the assets were measured at amortized cost is recognised in OCI with a corresponding charge to provision for credit losses in the Statement of Profit or Loss and Other Comprehensive Income. The accumulated allowance recognised in OCI is recycled to the Statement of Profit or Loss and Other Comprehensive Income upon derecognition of the debt instrument.

Debt instruments measured at FVTPL Debt instruments are measured at FVTPL if assets: i) Are held for trading purposes; ii) Are held as part of a portfolio managed on a fair value basis; or iii) Whose cash flows do not represent payments that are solely payments of principal and interest.

These instruments are measured at fair value in the Statement of Financial Position, with transaction costs recognized immediately in the Statement of Profit or Loss and Other Comprehensive Income as part of non-interest income. Realized and unrealized gains and losses are recognized as part of non-interest income in the Statement of Profit or Loss and Other Comprehensive Income.

Debt instruments designated at FVTPL Financial assets classified in this category are those that have been designated by the Bank upon initial recognition, and once designated, the designation is irrevocable. The FVTPL designation is available only for those financial assets for which a reliable estimate of fair value can be obtained.

Financial assets are designated at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. The decision to designate relates to assets that otherwise meet requirements to be measured at amortized cost or as at FVOCI but are designated as at FVTPL to reduce account mismatch.

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National Bank of Ethiopia

Notes to the Financial Statements For the year ended 30 June 2023

3. Significant accounting policies (continued)

(b) Financial instruments (continued) (ii) Classification and subsequent measurement (continued) a. Financial assets (continued): Debt instruments designated at FVTPL (Continued) Financial assets designated at FVTPL are recorded in the Statement of Financial Position at fair value. Changes in fair value are recognized in non-interest income in the Statement of Profit or Loss and Other Comprehensive Income.

Equity instruments Equity instruments are classified into one of the following measurement categories:

• Fair value through profit or loss (FVTPL); or
• Elected at fair value through other comprehensive income (FVOCI).

Equity instruments measured at FVTPL Equity instruments are measured at FVTPL, unless an election is made to designate them at FVOCI upon purchase, with transaction costs recognized immediately in the Statement of Income as part of non-interest income. Subsequent to initial recognition the changes in fair value are recognized as part of non-interest income in the Statement of Profit or Loss and Other Comprehensive Income.

Equity instruments measured at FVOCI At initial recognition, there is an irrevocable option for the Bank to classify non-trading equity instruments at FVOCI. This election is used for certain equity investments for strategic or longer-term investment purposes. This election is made on an instrument-by-instrument basis and is not available to equity instruments that are held for trading purposes.

Gains and losses on these instruments including when derecognized/sold are recorded in OCI and are not subsequently reclassified to the Statement of Profit or Loss and Other Comprehensive Income. As such, there is no specific impairment requirement.

Dividends received are recorded in Other income in the Statement of Profit or Loss and Other Comprehensive Income. Any transaction costs incurred upon purchase of the security are added to the cost basis of the security and are not reclassified to the Statement of Profit or Loss and Other Comprehensive Income on sale of the security.

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National Bank of Ethiopia

Notes to the Financial Statements For the year ended 30 June 2023

3. Significant accounting policies (continued)

(b) Financial instruments (continued) (ii) Classification and subsequent measurement (continued) a. Financial assets (continued): Reclassifications Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Bank changes its business model for managing financial assets.

b. Financial liabilities The Bank classifies its financial liabilities, other than financial guarantees and loan commitments, as measured at amortised cost.

The financial instruments at NBE have been classified into one of the following categories and their measurement criteria defined as follows based on their nature and business purpose:

Financial assets	Measurement criteria
Due from Government of Ethiopia (Note 9(a))	Amortised cost
Loans to government banks (Note 9(b))	Amortised cost
Due from foreign institutions – commercial banks (Note 9 (c))	Amortised cost
Due from foreign institutions – central banks (Note 9(d))	Amortised cost
Cash - foreign currencies (Note 9 (e))	Amortised cost
Funds held with IMF (Note 9 (f))	Amortised cost
Loans to private commercial banks (Note 9 (g))	Amortised cost
Loans to employees (Note 15 (a))	Amortised