Annual Report 2015-2016

National Bank of Ethiopia
1
2015/16 Annual Report
I. The overall Economic Performance
1.1 Economic Growth
The Ethiopian economy which had exhibited
9.8 percent average annual growth during
2010/11-2015/16, registered 8 percent growth in 2015/16 despite challenging macroeconomic and weather conditions. The 8 percent real GDP growth was 3.2 percentage point lower than base case scenario GTPII target set for the fiscal year although it was significantly higher than 1.6 percent average growth estimated for Sub - Saharan Africa (World Economic Outlook Update, July 2016). The growth in real GDP was mainly attributed to 8.7 percent growth in services,
2.3 percent in agriculture and 20.6 percent in
industrial sectors (Table 1.1).
Nominal GDP per capita rose to USD 794 from USD 725 a year earlier depicting 9.5 percent improvement. The Ethiopian economy is targeted to grow
11.1 percent in 2016/17 in contrast to 3.8
and 5.1 percent growth forecast of the IMF for the world and Sub-Saharan Africa (SSA), respectively (WEO, July 2016).

National Bank of Ethiopia 2 2015/16 Annual Report
Table 1.1: Sectoral Contributions to GDP and GDP Growth
(In Billions of Birr)
Items 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Sector Agriculture 212.5 222.9 238.8 251.8 267.8 274.0 Industry 49.8 59.6 73.9 86.5 103.7 125.0 Services 216.6 237.0 259.0 292.0 325.0 353.0 Total 478.9 519.5 571.7 630.3 696.5 752.0 Less FISIM 3.0 4.0 4.0 5.0 Real GDP 475.6 517.0 568.0 627.0 692.0 747.0 Growth in Real GDP 11.4 8.7 9.9 10.3 10.4 8.0 Per capita GDP (USD) (Nominal) 396 523 559 640 725 794 Growth rate in Per capita GDP 32.2 6.8 14.4 13.4 9.5 Mid-year population(in millions)
80.7 82.7 84.8 87.0 89.1 91.2
Share in GDP
(in %)
Agriculture 44.7 43.1 42.0 40.2 38.7 36.7 Industry 10.5 11.5 13.0 13.8 15.0 16.7 Services 45.5 45.9 45.5 46.6 47.0 47.3 Agriculture Absolute Growth 9.0 4.9 7.1 5.4 6.4 2.3 Contribution to GDP growth 4.2 2.2 3.1 2.3 2.5 0.9 Contribution in % 36.6 25.3 31.2 22.3 24.0 11.3 Industry Absolute Growth 18.7 19.6 24.1 17.0 19.8 20.6 Contribution to GDP growth 2.0 2.1 2.8 2.2 2.7 3.1 Contribution in % 17.2 24.1 27.9 21.4 26.0 38.8 Services Absolute Growth 12.4 9.6 9.0 13.0 11.2 8.7 Contribution to GDP growth 5.6 4.4 4.1 5.8 5.2 4.0 Contribution in % 50 50.6 41 56.3 50.0 50.0 Source: National Planning Commission

National Bank of Ethiopia 3 2015/16 Annual Report Fig.I.1: Real GDP Growth by Major Sectors Source: National Planning Commission In 2015/16, the agricultural sector exhibited slower growth rate of 2.3 percent compared with 8.2 percent target mainly due to contraction in grain crop production (Table 1.2) largely on account of Elino effect. The total grain production reached 266.8 million quintals, of which cereal production accounted for 86.7 percent, pulses 10.4 percent and oil seeds 2.9 percent. Cereals production went down by 2 percentage point over the preceding year owing to 1.7 percent reduction in cultivated land area. In contrast, the production of pulses and oilseeds improved by 3.6 and 3.3 percent while cultivated land area expanded by 6.1 and 0.4 percent, respectively during the same period (Table1.2). The total land cultivated for crop production slightly declined by 0.6 percent to 12.5 million hectares, of which cereals production covered 79.9 percent, pulses 13.2 percent and oil seeds 6.9 percent (Table 1.2). 0.0 5.0 10.0 15.0 20.0 25.0 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Agriculture Industry Service Real GDP

National Bank of Ethiopia 4 2015/16 Annual Report Table1.2: Estimates of Agricultural Production and Cultivated Areas of Major Grain Crops for Private Peasant Holdings-Meher Season [Area in thousands of Hectares and Production in thousands of quintals] Agricultural Production 2012/13 2014/15 2014/15 2015/16 Cultivated Area Total Production Cultivated Area Total Production Cultivated Area Total Production Cultivated Area Total Production Cereals 9,601 196,512 9,848 215,835 10,144 236,077 9,974 231,288 (Annual % Change) 0.1 4.5 2.6 9.8 3.0 9.4 -1.7 -2.0 Pulses 1,863 27,510 1,743 28,589 1,558 26,718 1,653 27,693 (Annual % Change) 15.3 18.8 -6.5 3.9 -10.6 -6.5 6.1 3.6 Oilseeds 818.4 7,266.6 816.0 7,112.6 856 7,601 859.1 7,848.1 (Annual % Change) -7.0 -0.6 -0.3 -2.1 4.9 6.9 0.4 3.3 Total 12,282.9 231,288.5 12,406.6 251,536.4 12,558 270,396 12,486 266,829 (Annual % Change) 1.6 5.8 1.0 8.8 1.2 7.5 -0.6 -1.3 Source: Central Statistical Agency (CSA)

National Bank of Ethiopia 5 2015/16 Annual Report The share of agriculture in GDP in 2015/16 went down to 36.7 percent from 38.7 percent a year earlier; lower than GTPII target of 37.5 percent for the fiscal year. Likewise, the sector‘s contribution to GDP growth rate declined to 11.3 percent compared with 24 percent last year (Table 1.1). The lion‘s share of agricultural sector was crop production, comprising 71.9 percent, followed by animal farming & hunting (19.5 percent) and forestry (8.4 percent). In terms of growth rate, crop and forestry increased by 3.4 and 2.2 percent, respectively; while animal farming & hunting went down by 1.5 percent (Table 1.3). Industrial sector showed a 20.6 percent annual growth and accounted for 16.7 percent of GDP. The sector contributed 38.8 percent to the overall economic growth during the fiscal year (Table1.1) and its performance was more or less in line with GTPII target of 21.8 percent growth and
16.6 percent share.
Manufacturing sector increased by 18.4 percent (lower than 20.2 GTPII target) and constituted about 32.4 percent of industrial output. Construction industry, on the other hand, contributed more than half (56.8 percent) to industrial sector and expanded by 25 percent signifying the leading role the construction sector plays in terms growing expansion of roads, railways, dams and residential houses. Electricity & water and mining & quarrying had 6.3 and 4.5 percent contribution to industrial production, respectively (Table1.3). Service sector continued to dominant the economy as its share in GDP rose to about
47.3 percent and its contribution to GDP
growth was about 50 percent meaning, half of the country‘s economic growth was attributed to service sector (Table 1.1). This was largely owing to the expansion of wholesale & retail trade (8.2 percent), real estate, renting & business activities (3.7 percent) and hotels & restaurant (15.6 percent) (Table 1.3).

National Bank of Ethiopia 6 2015/16 Annual Report
Table 1.3: Growth and Percentage Distribution of Major Agricultural, Industrial and Service Sub-sectors
Sectors 2011/12. 2012/13 2013/14 2014/15 2015/16 Growth rate Crop

5.0 8.2 6.6 7.2 3.4
Animal Farming and Hunting

5.4 5.2 2.1 4.7 -1.5
Forestry

3.1 3.3 4.2 3.5 2.2
Fishing

21.3 19.4 32.5 30.6 0.1
Share in
Agriculture
Crop

69.1 69.8 70.6 71.1 71.9
Animal Farming and Hunting

21.7 21.3 20.6 20.3 19.5
Forestry

9.1 8.8 8.7 8.4 8.4
Fishing

0.1 0.1 0.2
Growth rate
Mining and Quarrying

12.7 6.3 (3.2) (25.6) (3.3)
Manufacturing

11.8 16.9 16.6 18.2 18.4
Electricity and Water

13.5 10.0 6.8 4.5 15.0
Construction

31.5 38.7 23.9 31.6 25.0
Share in Industry
Mining and Quarrying

12.9 11.0 9.1 5.7 4.5
Manufacturing

35.6 33.6 33.4 33.0 32.4
Electricity and Water

9.3 8.3 7.6 6.6 6.3
Construction

42.2 47.1 49.9 54.8 56.8
Growth rate
Whole Sale and Retail Trade

12.5 10.1 17.7 12.3 8.2
Hotels and Restaurants

10.1 19.1 26.6 29.6 15.6
Transport and Communications

12.6 16.5 12.7 13.3 13.7
Real Estate, Renting and Business Activities

3.8 3.9 3.9 4.1 3.7
Public Administration and Defense

3.1 7.6 11.0 6.0 7.4
Others*

13.4 5.2 8.1 7.3 7.5
Share in Service
Whole Sale and Retail Trade

33.6 33.9 35.3 35.7 35.6
Hotels and Restaurants

7.9 8.6 9.7 11.3 12.0
Transport and Communications

9.4 10.1 10.1 10.2 10.7
Real Estate, Renting and Business Activities

19.3 18.4 16.9 15.8 15.1
Public Administration and Defense

11.2 11.0 10.8 10.3 10.2
Others* 18.6 18.0 17.2 16.6 16.4 Source: National Planning Commission

• Includes: financial intermediation, education, health and social work, private households with employed persons and other
  community, social and personal services.

National Bank of Ethiopia 7 2015/16 Annual Report
1.2. GDP by Expenditure Components
Total consumption expenditure (public and private) in percent of GDP slowed down to
77.6 percent from 78.1 percent last year
mainly due to 1.1 percentage point decline in private consumption expenditure to GDP ratio despite 0.7 percentage point rise in government final consumption expenditure. Consequently, gross domestic saving to GDP ratio rose to 22.4 percent from 21.9 percent in the previous year, slightly lower than 22.8 percent target (Table 1.4). Hence, domestic saving increased by 20.1 percent, while total consumption expenditure rose by 17.1 percent during 2015/16. During 2015/16, gross capital formation to GDP ratio reached 38.5 percent showing 0.9 percentage point reduction over last year, and domestic absorption reached 116.1 percent of the country‘s GDP.

National Bank of Ethiopia 2015/16 Annual Report 8
Table: 1.4: Expenditure on GDP and Gross Domestic Savings (As Percentage of GDP)
Year
Domestic
Absorption
Consumption Expenditure Gross Capital Formation Resource Balance Exports of Goods & Services Imports of Goods & Services Gross Domestic Total Govt. Pvt. Savings 2001/02 117.1 90.7

15.9

74.8 26.4

(14.1)

12.7

26.9 9.3
2002/03 116.7 92.4

14.3

78.1 24.3

(14.2)

13.5

27.7

7.6
2003/04 113.9 84.9

14.0

70.9 29.0

(16.8)

15.1

31.9

15.1
2004/05 116.5 90.5

13.3

77.3 26.0

(20.6)

15.3

35.8

9.5
2005/06 119.3 91.7

13.1

78.7 27.6

(22.9)

14.0

36.9

8.3
2006/07 111.9 87.6

11.2

76.4 24.2

(19.5)

12.8

32.4

12.4
2007/08 115.3 90.8

10.5

80.3 24.5

(19.6)

11.5

31.1

9.2
2008/09 115.1 90.2

9.5

80.7 24.9

(18.4)

10.6

29.0

9.8
2009/10 117.7 90.7

9.2

81.5 27.0

(19.6)

13.8

33.3

9.3
2010/11 114.9 82.8 10.3

72.4 32.1

(14.9)

16.7

31.5

17.2
2011/12 117.9 80.8 8.3

72.5

37.1

(17.9)

13.8

31.6

19.2
2012/13 116.5 82.4 9.0

73.5

34.1

(16.5)

12.5

29.0

17.6
2013/14 117.5 79.5 9.2

70.2

38.0

(17.5)

11.6

29.1

20.5
2014/15 117.5 78.1 9.0

69.0

39.4

(20.9)

9.4

30.3

21.9
2015/16 116.1 77.6 9.7

67.9

38.5

(19.8)

8.0

27.8

22.4
Average
2011/12-
2015/16 117.1 79.7 9.1 70.6 37.4 -18.5 11.1 29.6 20.3 Average 2006/07- 2015/16 116.0 84.0 9.6 74.5 32.0 -18.4 12.1 30.5 16.0 Source: National Planning Commission

National Bank of Ethiopia 2015/16 Annual Report 9 1.3: Micro and Small-Scale Enterprises In 2015/16 alone 190,587 new MSEs were established which employed about 1.7 million people. The number of establishments and the employment created during the review period decreased by29.8 and 40.3 percent, respectively. At the same time, MSEs received more than Birr 5.4 billion in loans which was 18 percent lower than a year ago. The contraction in the number of new enterprises, employment and credit disbursement was attributed to the exclusion of rural enterprises as the Federal Micro and Small Scale Enterprise Development Agency (FeMSEDA) was splited into two, namely Federal Urban Job Creation & Food Security Agency, and Federal Small & Medium Manufacturing Industry Development Agency.
Table 1.5: Numbers, Amount of Credit and Jobs Created through MSEs
(Credit in Millions of Birr) Source: FeUJCFSA Particulars 2014/15 2015/16 Percentage Change A B B/A No. of MSE's 271,519 190,587 -29.8 Amount of credit 6,541.88 5,366.55 -18.0 No of Total employment 2,788,667 1,665,517 -40.3

National Bank of Ethiopia 10 2015/16 Annual Report
Table 1.6: Numbers, Amount of Credit and Jobs Created through MSEs by Region
(Credit in Millions of Birr) Source:FeUJCFSA In terms of regional distribution 44.5 percent of the newly established MSE‘s, were in Amhara followed by Oromia (22.4 percent), Tigray (19.7 percent), SNNPR (6.6 percent) and Addis Ababa (4.2 percent). With respect to total loans, SME‘s in Oromia received 38.1 percent, Addis Ababa 18.8 percent, SNNPR 17.8 percent, Amhara 17.5 percent, and Tigray
4.5 percent.
About 35 percent of the employment was created in Amhara followed by Oromia (31.9 percent), Addis Ababa (11.4 percent), SNNPR (9.7 percent) and Tigray (8.4 percent). Addis Ababa Oromia SNNPR Amhara Tigray Dire Dawa Harari Benish angul Somali Gambela Afar Total No. of MSEs

8,081

42,775

12,549

84,890

37,523

2,124

372

1,045

680

543

5

190,587
Amount of credit

1,009.5

2,046.4

957.1

938.5

240.7

59.8

18.2

1.1

85.6

4.6

4.9

5,366.6
No. of total
Employme nt created by MSEs

189,866

530,989

161,001

582,508

140,518

25,125

8,061

9,413

12,533

3,726

1,777

1,665,517
Regional Percentage Share
No. of
MSEs 4.2 22.4 6.6 44.5 19.7 1.1 0.2 0.5 0.4 0.3 0.0 100.0 Amount of credit 18.8 38.1 17.8 17.5 4.5 1.1 0.3 0.0 1.6 0.1 0.1 100.0 No. of total Employme nt created by MSEs 11.4 31.9 9.7 35.0 8.4 1.5 0.5 0.6 0.8 0.2 0.1 100.0

National Bank of Ethiopia 11 2015/16 Annual Report Fig.I.2: Yearly Distribution of Numbers of MSEs during 2014/15and 2015/16 0% 20% 40% 60% 80% 100% 2015/16 2014/15 Source: FeUJCFSA Fig.I.3: Yearly Distribution of Amount of Credit during 2014/15 and 2015/16 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2015/16 2014/15 Source: FeUJCFSA

National Bank of Ethiopia 12 2015/16 Annual Report Fig.I.4: Yearly Distribution of Employment Created during 2014/15 and 2015/16 0% 20% 40% 60% 80% 100% 2015/16 2014/15 Source: FeUJCFSA
1.4 Access to Water Supply
In 2015/16, the Ministry of Water, Irrigation and Energy employed new standard as per GTP II so as to determine access to potable water. Accordingly, the former standard calculated based on the provision of 20 liters/capita/day for urban and 15 liters/capita/day for rural at a radius of
0.5 and 1.5 kilometers, respectively has
been replaced by new standard.
Accordingly, for rural areas the standard was 25 liter/capita/day with in 1Km radius while for urban areas, it depended on population size and ranged from 40 liter/capita/day to 100 liter/capita/day. During the review period, the proportion of people having access to potable water supply reached 61 percent. At the same time, 63.1 percent of rural and 52.5 percent of urban areas have access to potable water. Rural areas have relatively better access than the urban areas due to difference in standards. Region wise, Afar, Somali and Benishangul Gumuz were the least performers while Addis Ababa, Amhara, Harari and Dire Dawa showed improved performance .

National Bank of Ethiopia 13 2015/16 Annual Report In terms of urban population, Addis Ababa leads by 90 percent followed by Harari (67 percent) and Amhara (59.9 percent). Dire Dawa and Amhara performed relatively well for rural areas by accessing 71.5 and
65.8 percent of the region‘s rural
population, respectively (Table 1.7).
Table 1.7: Percentages of People with Access to Potable Water by Region
Regions
2015/16
Rural Urban Average
Addis Ababa 0.0 90.0 90.0
Tigray 55.0 54.0 54.2
Amhara 65.8 59.9 65.0
Oromia 54.6 45.5 53.3
SNNPR NA* NA* NA*
Afar 34.0 39.0 36.0
Somali 45.6 51.2 46.4
Ben-Gumuz 54.4 45.8 52.6
Harari 60.0 67.0 63.3
Gambella 63.2 34.5 55.9
Dire Dawa 71.5 55.0 61.1
National 63.1 52.5 61.0
Source: Ministry of Water, Irrigation and Energy and NBE Staff Computation *Not calculated as per new standard

National Bank of Ethiopia 14 2015/16 Annual Report Fig.I.5: Access to water supply by Region Source: Ministry of Water, Irrigation and Energy; and NBE Staff Computation
1.5 Road Sector Development
1.5.1 Road Network
Road transport is the dominant mode of transport in Ethiopia, having a wider network and accessibility thereby contributing to mobility of goods and services as well as sustained economic growth and investment. In 2015/16, total road network in Ethiopia has reached 113,066 Km, showing a 2.4 percent annual expansion. Of the total roads, 28,032 Km (24.8 percent) was Federal1 , 31,620 Km (28 percent) rural, 5,357 Km (4.7 percent)

1
Federal roads are roads administered by federal government urban and 48,057 (42.5 percent) Km Woreda roads. The Federal road included 14,632 Km (52.2 percent) asphalt and 13,400 Km (47.8 percent) gravel road which depicted 8 percent annual expansion and 4.7 percent reduction, respectively. The reduction in gravel road network was mainly due to the upgrading of gravel roads to asphalt level. The asphalt road network in 2015/16 constituted about 12.9 percent of the total road network in the country. It 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 Average values in % Region Rural Urban

National Bank of Ethiopia 15 2015/16 Annual Report included 85 Km Addis-Adama Express Way which was completed in 2013/14 and the first of its kind in the country. During the review period, rural road network, administered by regional authorities, increased by 3.2 percent and reached 31,620 Km. Woreda roads also reached 48,057 Km after the community road was replaced as woreda road during 2010/11 (Table 1.8)
Table 1.8: Classification of Road Network (Length in km)
Year
Federal Road
Rural road Woreda road *
Urban Road
Asphalt Gravel Paved Coble Unpaved Total Length Growth rate Length Growth rate Length Growth rate Length Growth rate Length Growth rate 2000 /01 3,924 - 12,467 - 16,480 - NA - NA 32,871 - 2001/02 4,053 3.3 12,564 0.8 16,680 1.2 NA - NA 33,297 1.3 2002/03 4,362 7.6 12,340 -1.8 17,154 2.8 NA - NA 33,856 1.7 2003/04 4,635 636 13,905 12.7 17,956 4.7 NA - NA 36,496 7.8 2004/05 4,972 7.3 13,640 -1.9 18,406 2.5 NA - NA 37,018 1.4 2005/06 5,002 0.6 14,311 4.9 20,164 9.6 NA - NA 39,477 6.6 2006/07 5,452 9.0 14,628 2.2 22,349 10.8 57,763.7 - NA 42,429 7.5 2007/08 6,066 11.3 14,363 -1.8 23,930 7.1 70,038.1 21.3 NA 44,359 4.5 2008/09 6,938 14.4 14,234 -0.9 25,640 7.2 85,767.0 22.5 NA 46,812 5.5 2009/10 7,476 7.8 14,373 1.0 26,944 5.1 100,384.9 17.0 NA 48,793 4.2 2010/11 8,295 11.0 14,136 -1.6 30,712 14.0 854.0 - NA 53,997 10.7 2011/12 9,875 19.1 14,675 3.8 31,550 2.7 6,983.0 717.7 NA 63,083 16.8

2012/13 11,301 14.4 14,455 -1.5 32,582 3.3 27,628 295.6 NA 85,966 36.3 2013/14 12,640 11.8 14,217 -1.6 33,609 3.2 39,056 41.4 NA 99,522 15.8 2014/15

13,551 7.2

14,055 -1.1

30,641 -8.8 46,810 19.9 1,693 850 2,814

110,414 10.9
2015/16

14,632 8.0 13,400 -4.7

31,620 3.2 48,057 2.7 1,693 NA 3,664.0

113,066 2.4
Source: Ethiopian Roads Authority

• Includescommunity road, which was replaced by woreda road and registered as new road in 2010/11
  Total road length does not include community road length till 2010/11as it is non-engineered road; but it includes woreda road.

National Bank of Ethiopia 16 2015/16 Annual Report
1.5.2 Road Density
Basically road network is assessed by road density as measured by road length per 1,000 persons or by road length per 1,000 km2 . At the end of 2015/16, the road density per 1,000 square Km improved to 102.8 km from 100.4km a year ago depicting a 2.4 percent annual growth. Road density per 1,000 population in 2015/16 was 1.23 km up by 2.5 percent over the preceding fiscal year (Table 1.9).
Table 1.9: Road Densities
Source: Ethiopian Roads Authority Year Road Density /1000 person Road density /1000 sq. km 2001/02 0.5 30.3 2002/03 0.5 30.8 2003/04 0.5 33.2 2004/05 0.5 33.7 2005/06 0.5 35.9 2006/07 0.6 38.6 2007/08 0.6 40.3 2008/09 0.6 42.6 2009/10 0.6 44.4 2010/11 0.7 48.3 2011/12 0.8 57.3 2012/13 1.0 78.2 2013/14 1.1 90.5 2014/15 1.2 100.4 2015/16 1.23 102.8 Growth Rate 2.5 2.4

National Bank of Ethiopia 17 2015/16 Annual Report
1.5.3 Road Accessibility
In 2015/16, average distance from all￾weather roads declined from 5 km to 4.9 kilometers and the proportion of area more than 5km from all-weather roads went down to 35.8 percent from 36.6 percent a year ago (Table 1.10).About 72 percent of the total road network specifically 73 percent of the asphalt road, 59 percent of the gravel road and 55 percent of the rural road were in good condition (Figure I.6).
Table 1.10: Road Accessibility
Indicators 2014/15 2015/16 Percentage change Proportion of area more than 5Km from all-weather road
36.6 35.8 -2.2
Average distance from all-weather roads 5 4.9 -2.0 Source: Ethiopian Roads Authority Fig.I.6: Status of Road Source: Ethiopian Roads Authority 0 10 20 30 40 50 60 70 80 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Percentage Asphalt Roads in Good Condition Gravel Roads in Goods Condition Rural Roads in Good Condition Total Roads Network in Good Condition

National Bank of Ethiopia 18 2015/16 Annual Report
1.5.4 Road Sector Financing
In 2015/16, total investment in road construction and expansion (excluding urban road) surged by 21.8 percent to Birr 47.5 billion from Birr 37.2 billion a year earlier (Table 1.11 and fig.I.7). The road sector financing including urban road reached Birr 95 billion during the same period. Investment in the Federal road construction and expansion was Birr 29.4 billion accounted for 31 percent of the total road investment. Regional roads constituted 14.8 percent of the sector-wide investment followed by Woreda road investment (4.2 percent). Almost half of the total investment in road construction and expansion was on urban roads (Table 1.10) and (Fig.1.7).

National Bank of Ethiopia 19 2015/16 Annual Report
Table 1.11: Investments in the Road Sector
(In millions of Birr)
Road Type
2014/15 2015/16
Percentage change A
Share
(In %) B
Share
(In %)
Federal roads 27,445.5 73.8 29425.3 31.0 7.2 Regional road 3,663.6 9.9 14085.6 14.8 284.5 Woreda road 6,067.6 16.3 4009.4 4.2 -33.9 Urban road* NA NA 47520.3 50.0 NA Total 37,176.7 100.0 95040.6 100.0 155.6 Source: Ethiopian Roads Authority

• All municipalities‘ maintenance.
  Fig.I.7፡ Investment in Road Construction and Expansion Source: Ethiopian Roads Authority
  1.6 Developments in Education Sector
  The education sector has seen visible improvements both in terms of coverage and quality. During the review period, primary education (1-8 grades) enrolment improved from 18.3 million in 2013/14 to 18.7 million in 20014/15.The number of primary schools 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 In Millions of Birr Federal Road Regional Road woreda Road Urban Road Total Investment

National Bank of Ethiopia 20 2015/16 Annual Report also increased to 33,373 from 32,0488 a year ago showing establishment of 1,325 new schools. Of the total number of primary schools, 28,604 (85.7 percent) were located in rural areas and 4,769 (14.3 percent) in urban centers. Similarly, secondary education enrolment reached 2.1 million, 5.5 percent higher than last year and the number of secondary schools (9-12 grades) reached 2,830 showing 21.5 percent annual increase. At the same time, technical and vocational education and training (TVET) enrolment was 352,144; exhibiting 47.9 percent yearly increment. The share of education in annual government expenditure was 24.9 percent slightly lower than the preceding year.

National Bank of Ethiopia 21 2015/16 Annual Report
Table 1.8: Education Sector Data
Indicators 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2001 2002 2003 2004 2005 2006 2007 Number of primary schools (urban, rural) 25,212 26,951 28,349 29,482 30,534 32,048 33,373
i. Urban 3,206 3,206 3,988 4,241 4,536 4,451 4,769
ii. Rural 21,886 23,745 24,313 25,227 25,998 27,597 28,604
Number of secondary schools (urban, rural) 1,185 1,351 1,392 1,710 1,912 2,329 2,830
iii. Urban 976 1,053 1,053 1,342 1,451 1,636 1891
iv. Rural
209 298 339 368 461 693 939 Number of TVET centers (public, private, mission) 458 448 505 505 437 437 919 Number of tertiary level institutions by universities (public, private), colleges (public, private) 72 70 74 91 99 124 171 Universities 22 22 26 32 32 33 33 Participation of women in higher education institutions (%) 22.2 27 27 21.1 29.5 32 35 Primary enrolment (in million) 15.6 15.8 16.7 17 17.5 18.3 18.7 Secondary enrolment (in thousands) 1,588 1,696 1,760 1,766 1,900 1,998 2,108 TVET enrolment 308,501 353,420 371,347 330,409 237,877 238,049 352,144 Girls' primary enrolment (%) 47.3 47.4 47.3 47.8 48 48 47.2 Grades (1-4) gross enrolment ratio (%) 122.6 118.8 124 122.6 124.9 128.9 137.7 a. Girls' gross enrolment ratio (%) 118.4 114.3 119.1 118.1 119.8 123.6 130.6 b. Boys' gross enrolment ratio (%) 126.7 123.2 128.8 127.0 129.7 134 144.7 Grades (5-8) gross enrolment ratio (%) 63.1 65.5 66.1 65.6 62.9 64.4 66.3 a. Girls' gross enrolment ratio (%) 60.5 63.5 64.8 65.3 62.2 63.4 64.8 b. Boys' gross enrolment ratio (%) 65.6 67.4 67.4 65.9 63.5 64.1 67.8 Girls‘ gross primary enrolment ratio (%) 90.7 101.6 93.2 92.9 92.4 94.3 98.4 Boys' gross primary enrolment ratio (%)
97.6 108.4 99.5 97.9 98.2 100.1 107.0

National Bank of Ethiopia 22 2015/16 Annual Report Indicators 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2001 2002 2003 2004 2005 2006 2007 Gross Primary Enrolment ratio (%)
94.4 93.4 96.4 95.4 95.3 97.2 102.7
Tigray 107.1 103.3 102.1 100.1 98.8 105.3 118.8 Afar 31.2 39.3 40.1 43.7 50.5 53.2 70.3 Amhara
112.5 104.9 104.2 1003 100.7 106.7 110.3
Oromia 89.3 88.4 94.8 92 91.2 89.3 94.8 Somali 35 65.6 61.3 75.1 96.9 84.8 91.7 Ben.Gumuz 112.1 114.6 119.7 115.9 111.9 95.4 107.0 SNNPR 101.0 97.3 102.6 100.7 98.4 100.3 108.4 Gambella 112.5 125.1 132 138.5 126.6 136.4 151.4 Harari 107.9 95.3 91.5 89.3 87.1 98.1 101.8 A.A 109.2 107.3 103.1 102.4 99.2 163.6 150.6 Dire Dawa 92.1 91.3 89.1 87.3 84.9 91.4 67.5 Primary net enrolment rate (%) 83.0 82.1 85.3 85.4 85.9 89 94.3 No. of students registered in the first cycle primary schools(1-4) (in million)
10.6 10.5 11.3 11.4 12.0 12.7 12.8
No. of students registered in the second cycle primary schools(5-8) (in million) 5 5.3 5.5 5.7 5.5 5.6 5.9 Number of students registered in the first cycle secondary schools(9-10) (in million)
1.4 1.5 1.5 1.4 1.5 1.6 1.7
Gross enrolment rate in (9-10 grades) in percent
38.1 39.1 38.4 36.9 38.4 39.3 39.8
Preparatory admission(in million) 0.21 0.24 0.29 0.32 0.36 0.39 0.42 Completion rate of primary school (%) 43.6 47.8 49.4 52.1 52.8 46.7 50 Girls/boys ratio in primary schools (%) 89.7 91 90.4 92 94 91 89.8 Girls/boys ratio in secondary schools (%) 67 75 79 84 88 89 89.9

National Bank of Ethiopia 23 2015/16 Annual Report Indicators 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2001 2002 2003 2004 2005 2006 2007 Girls/boys ratio in (9-10) (%) 72 78 81 86 90 90 92.9 Girls/boys ratio in (11-12)( %) 40 56 83 75 80 82 87.6 Girls/boys ratio inTVET(%) 86 80 86 91 105 105 109.7 Girls/boys ratio in higher education (%) 0.28 36 36 39 42 46 49.9 Grade 1-8(primary) repetition rates (%) 6.7 4.9 8.5 8.5 7.9 8.4 7.3 Primary school dropout rate (%) 18.6 13.1 16.3 16.3 15.7 7.9 9.9 1 st grade dropout rate (%) 22.9 28.1 19.9 25 22.5 23.9 19 Pupil to Teacher Ratio
i. Grade (1-8) 54 51 51 50 49.4 47 46
ii. Grade (9-12) 41 36 31 29 28.7 27.8 26
iii. TEVT 34 NA 29 24.7 18.6 16.5 -
iv. In higher education 28.2 26.8 26.7 25 24.4 25.9 26.4
Pupil to Section Ratio
i. Grade (1-8) 59 57 57 55 53.7 54 54
ii. Grade (9-12) 68 64 58 56.1 59.3 56.9 57
Number of class rooms in primary schools 247,759 254,744 279,292 308,905 324,587 321,468 - Pupil to Textbook Ratio
i. Grade(1-8) 1.5 1.35 1 1
ii. Grade(9-12) 1
Pupil to School Ratio
i. Grade(1-8) 619 573 590 576 571 571 560
ii. Grade(9-12) 1,345 1270 1160 1033 994 857 369
iii. TEVT 673 788 735 654 544 545 383
Proportion of pupils starting grade 1 who reach grade 5(%) 39.6 55 47 50.2 55.5 69.5 61

National Bank of Ethiopia 24 2015/16 Annual Report Indicators 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2001 2002 2003 2004 2005 2006 2007 Percentage of female enrolled in under graduate degree (%) 29 27 27 22 30 30.3 34.7 Percentage of female graduated in under￾graduate degree (%) 29.7 23.4 27.2 25.3 28.7 25.6 28.5 Percentage of female enrolled in post￾graduate degree 11.3 11.9 13.8 20.2 20.6 19.5 23.8 Percentage of female graduated in post￾graduate degree 10.5 13.9 14.4 14.0 14.9 15 16.7 Annual education share of the national expenditure{%} 23.6 25.9 17.5 25.3 25.2 25 24.9 Source: Ministry of Education
1.7. Telecommunication
The telecom sector has confined to exhibit remarkable expansion. In 2015/16, the numbers of mobile subscribers increased by 18.4 percent to 46 million of which 99.6 percent were pre-paid and 0.4 percent post paid subscribers. The number of fixed line subscribers also surged by 33.2 percent to 1.1 million. Similarly, the number of internet subscribers depicted by 44 percent like reached 13.6 million (Table 1.13)

National Bank of Ethiopia 25 2015/16 Annual Report
Table 1.13: Number of Subscribers
Service Type 2014/15 2015/16 Percentage Change
I. Fixed line 837,766 1,115,561 33.2
II. ALL MOBIL 38,803,786 45,962,553 18.4
Total mobile pre-paid 38,629,151 45,769,105 18.5 Total Mobile post-paid 174,635 193,448 10.8
III. Total data and Internet 9,440,289 13,593,866 44.0
Broadband (EVDO,
WCDMA, ADSL) 64,794 4,871,541 7418.5 Narrowband (1X, dialup, ADSL*< 256K) 142,757 248,038 73.7 GPRS 7,398,234 8,474,287 14.5 WCDMA 1,834,504 4,692,185 155.8 Grand Total 39,849,103 47,505,508 19.2 Source: Ethio-Telecom *CDMA (Code Division Multiple Access), GSM (Global System for Mobiles), GPRS (General Packet Radio Service)and ADSL (Asymmetric Digital Subscriber Line) The country‘s telecommunication penetration rate (telecom density) increased from 44 in 2014/15 to 51; mobile density to 49.8; and internet and data density to14.7. Fixed line density however, showed marginal improvement from 1 to 1.2 the review period (Table 1.14).

National Bank of Ethiopia 26 2015/16 Annual Report
Table 1.14: Telecom Density
Tele density/100
Subscribers* 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Fixed line 1 1 0.9 1.2 Mobile 12.9 20.4 27.6 33.3 43 49.8 Total 13.9 21.4 28.5 34.3 44 51 Internet and data 0.2 0.3 5.2 7.3 10 14.7 Source:Ethio-Telecom *Tele-density is mobile plus fixed telephone subscribers per 100 inhabitants Although the number of international outgoing calls increased 49.5 percent, international outgoing minutes in mobile telephone and internet traffic has decreased by 18.8percent from 71 million in 2014/15 to 57.7million in 2015/16. At the same time, the number of incoming calls rose 19 percent, while international incoming minutes, dropped by 33.5 percent. In addition, annual traffic for local calls improved by 31.1 percent (Table 1.15).

National Bank of Ethiopia 27 2015/16 Annual Report
Table 1.15: Annual Traffic for Local and International Calls
Annual Traffic 2014/15 2015/16 Percentage Change Mobile local traffic (In millions) 21,132.2 27710 31.1 International Traffic International outgoing calls (In number) 24,453,237 36,563,778 49.5 International outgoing minutes 71,046,274 57,724,646 -18.8 International incoming calls (In number) 92213852 109,751,868 19.0 International incoming minutes 582,249,947 387,327,476 -33.5 Source:Ethio-Telecom Consequently, income of Ethio-telecom rose by 32 percent over last year and reached Birr
28.4 billion while its expenses reached Birr
12.9 billion showing a 85.6 percent annual
surge.
Hence, Ethio – telecom earned a gross profit of Birr 15.5 billion in 2015/16 about 6.4 percent higher than a year ago(Table 1.16).

National Bank of Ethiopia 28 2015/16 Annual Report
Table 1.16: Financial Performance and Asset of Ethio -Telecom
(In Millions of Birr)
Finance and
Asset
2013/14 2014/15 2015/16 Percentage Change A B C C/A C/B Income 17,358 21,500 28,371.67 63.5 32.0 Expense 5,554 6,945 12,888.36 132.1 85.6 Gross Profit 11,804 14,555 15,483.31 31.2 6.4 Assets 34,323 52,750 37,904.65 10.4 -28.1 Fixed Gross 24,209 24,129 30,949 27.8 28.3 Depreciation 1,673 2,118 8,162 387.9 285.4 Source:Ethio– Telecom

National Bank of Ethiopia 29 2015/16 Annual Report
II. Energy Production
2.1. Electric Power Generation
According to Ethiopian Electric Power (EEP), the country has an estimated hydro-power potential of 45,000 MW, a geothermal potential of 10,000 MW and
1.3 million MW potential from wind farm.
The country‘s generating capacity is largely based on hydropower reservoirs as nine of its major rivers are suitable for hydroelectric power generation. Though it is vulnerable to the effects of climatic changes, hydropower remains the predominant energy source. Considering the increasing power demand and capacity shortfall in the system and to have a better generation mix, the country has been looking to diversify its production of renewable energy to wind and geothermal sources. Wind energy is considered as an immediate, renewable and clean energy solution with short construction period and significant advantage of quick result. Accordingly, the Ethiopian Electric Power has implemented different wind power projects in several parts of the country. Adama II wind farm is the latest and the third project completed and started operation with a generating capacity of 153 MW; raising country‘s wind power to 324 MW (combined with Adama I (51MW) and Ashegoda (120 MW)). In addition, a process is underway to undertake the construction of Aysha300 MW wind power project. Ethiopia is also identified as one of the huge potential sources of solar energy in Africa because of its geographical location near the equator. In its bid to become a major power exporter in East Africa and green economy, the country is building several geothermal power plants. The project will also be a crucial input to enhance Ethiopia‘s economic growth to become a carbon-neutral middle income economy by 2025. The former Ethiopian Electric Power Corporation has been divided into two separate institutions, namely Ethiopian Electric Power (EEP) and Ethiopian

National Bank of Ethiopia 30 2015/16 Annual Report Electric Utility. The former is mandated with the task of network construction and generating energy while the latter is responsible for distributing generated power and selling electricity to users. The EEP generates electricity through two different power supply systems, namely, the Inter Connected System (ICS)2 and Self Contained System (SCS)3 . ICS, constituted almost 100 percent of electric power generating system for the year 2015/16(Table 2.1). The total amount of electric power generated in 2015/16 was about 10,465 billion GWH, showing a 9.9 percent annual growth. During the review period,
92.4 percent of the electric power was
generated through hydropower, 7.5 percent from wind and 0.1 from thermal sources (Table 2.1).

2 Generates power by connecting to other systems 3 Generates power independently In2015/16, the production of wind energy got momentum as the total electric energy generated from wind sources increased to
785.5 GWH from 497.7 GWH last year
depicting 57.8 percent annual growth (Table 2.1).

National Bank of Ethiopia 31 2015/16 Annual Report
Table 2.1: Electric Power Generation in ICS and SCS
(I n ‗000 KWH)
Source
2013/14 2014/15 2015/16
Percentage
Change
[A]
Share
(In %) [B]
Share
(In %) [C]
Share
(In %)

[C/A] [C/B]
ICS
Hydro
Power

8,335,745.7

95.8

9,014,010.6

94.7 9674157.6 92.4 16.1 7.3
Thermal
Power

3,360.3

0.0

1,017.4 0.0
Geothermal

Wind

355,757.9

4.1

497,690.8

5.2

785,505.5 7.5 120.8 57.8
Sub
Total

8,691,503.5

99.9

9,515,061.7

100.0

10,460,680.5 100.0 20.4 9.9 SCS Hydro Power

676.9

0.0 -

• • -100.0
    Thermal
    Power

8,837.0

0.1

4,285.5

0.0

4,259.1 0.0 -51.8 -0.6
Sub
Total

9,513.9

0.1

4,285.5

0.0

4,259.1 0.0 -55.2 -0.6
Total
Hydro
Power

8,336,422.6

95.8

9,014,010.6

94.7

9,674,157.6 92.4 16.0 7.3
Thermal
Power

8,837.0

0.1

7,645.8

0.1

5,276.5 0.1 -40.3 -31.0
Geothermal -

Wind

355,757.9

4.1

497,690.8

5.2

785,505.5 7.5 120.8 57.8
Grand Total

8,701,017.5

100.0

9,519,347.1

100.0

10,464,939.6 100 20.3 9.9
Source:Ethiopian Electric Power
2.2. Volume and Value of Petroleum Imports
In 2015/16, the Ethiopian Petroleum Enterprise imported about 3 million metric tons of petroleum products worth Birr 30.3 billion which was 20.1 percent lower than last year mainly due to a significant drop in international oil price. The volume of petroleum imports however rose 7.8 percent with higher imports of regular gasoline (25.7 percent), gas oil (11.7 percent) and jet fuel (3.3 percent). Fuel oil import dropped by
36.4 percent (Table 2.2) (Fig.II.1& Fig.II.2).

National Bank of Ethiopia 32 2015/16 Annual Report
Table 2.2፡ Volume and Value of Petroleum Imports
(Volume in MT and Value in '000 Birr) Petroleum Products 2014/15 2015/16 Volume Value Volume Value Percentage Change A B C D C/A D/B Regular Gasoline (MGR)

237,744.0

3,393,238.3

298,867.5

6,429,199.4 25.7 89.5
Jet Fuel

712,748.0

10,381,064.6

735,921.7

7,143,231.6 3.3 -31.2
Fuel Oil

168,305.6

1,702,150.3 106,978.39

673,610.9 -36.4 -60.4
Gas Oil (ADO)

1,703,260.8

22,507,794.1

1,901,791.5

16,088,341.8 11.7 -28.5
Total

2,822,058.4

37,984,247.3

3,043,559.1

30,334,383.7 7.8 -20.1
Source: Ethiopian Petroleum Enterprise Fig.II.1: Trends in Volume of Petroleum Imports (In ‘000) 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Volume in MT Year MGR Jet Fuel Fuel Oil Gas Oil Source:Ethiopian Petroleum Enterprise

National Bank of Ethiopia 33 2015/16 Annual Report Fig.II.2: Trends in Value of Petroleum Imports (In ‘000) 0 5000000 10000000 15000000 20000000 25000000 30000000 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Value in Birr Year MGR Jet Fuel Fuel Oil Gas Oil Source: Ethiopian Petroleum Enterprise In line with the decline in international oil prices, domestic retail prices were also adjusted down wards. Accordingly, retail prices of jet fuel went down 23.7 percent, gas oil (12.4 percent), fuel oil (12.2 percent), kerosene (11 percent) and regular gasoline (8.4 percent) (Table 2.3).

National Bank of Ethiopia 34 2015/16 Annual Report
Table 2.3: Annual Retail Prices of Petroleum Products in Addis Ababa (Birr/liter)
Year Quarter
Regular
Gasoline
(MGR) Fuel Oil Gas Oil Kerosene Jet fuel 2013/14 Qtr.1 18.94 14.59 16.91 13.85 20.01 Qtr.2 19.67 15.09 17.49 14.50 21.34 Qtr.3 20.30 15.81 18.28 15.50 22.68 Qtr.4 20.53 16.04 18.70 15.83 23.04 Average 19.86 15.38 17.85 14.92 22.17 2014/15 Qtr.1 20.64 16.13 19.00 16.00 23.09 Qtr.2 20.00 15.42 18.19 15.63 20.75 Qtr.3 17.86 13.94 16.56 14.55 15.88 Qtr.4 17.43 13.59 16.10 14.13 15.89 Average 18.98 14.77 17.46 15.08 18.90 2015/16 Qtr.1 17.96 13.59 16.10 14.13 16.23 Qtr.2 17.96 13.59 16.10 14.13 15.14 Qtr.3 17.06 12.59 14.81 13.00 13.95 Qtr.4 16.61 12.10 14.16 12.43 12.34 Average 17.40 12.97 15.29 13.42 14.41 Annual percentage change -8.4 -12.2 -12.4 -11.0 -23.7 Source: Ethiopian Petroleum Enterprise Fig.II.3: Trends in Average Fuel Price in Addis Ababa 0 5 10 15 20 25 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Birr/Litre Year MGR Fuel Oil Gas Oil Kerosene Source: Ethiopian Petroleum Enterprise.

National Bank of Ethiopia 35 2015/16 Annual Report
III. PRICE DEVELOPMENTS
3.1. Developments in Consumer Price at National Level
Annual average headline inflation was 9.7 percent by end 2015/16, which was 2.0 percentage point higher than the previous year on account of 3.7 percent increase in food & non-alcoholic beverages inflation (Table 3.1). Annualized food & non-alcoholic beverages inflation scaled up to 11.2 percent in 2015/16 from 7.4percent a year ago showing a 3.7 percentage point annual growth due to higher prices of food products, milk, cheese &eggs. In contrast, annual average non-food inflation remained at 8.0 percent in 2015/16. (Table 3.1 and Fig III.1) Meanwhile, year-on-year, headline inflation slowdown to 7.5 percent from
10.4 percent a year ago owing to 5.3
percentage points decline in food& non￾alcoholic beverages inflation and 0.4 percentage points decline in non-food inflation. Annual food & non-alcoholic beverages inflation, which was 12.5 percent in 2014/15, dropped to 7.2 percent, while annual non-food inflation declined to 7.8 percent from 8.2 percent over the same period (Table 4.2 and Fig.III.2).

National Bank of Ethiopia 36 2015/16 Annual Report
Table 3.1: Annual Average Inflation Rates (in percent)
Items 2014/15 2015/16
Change
(Percentage
Points)
Contribution to change in headline inflation (percentage points) A B B-A C General 7.7 9.7 2.0 2.3 Food &Non￾alcoholic beverages
7.4 11.2 3.7 1.4
Non-Food 8.0 8.0 0.0 0.9
Source: CSA and NBE Staff Computation Source: CSA and NBE Staff Computation
Table 3.2: Annual Inflation Rates (in percent)
Items 2014/15 2015/16 Change(Percentage Points) A B B-A General 10.4 7.5 -2.9 Food&Non￾alcoholicbeverages 12.5 7.2 -5.3 Non-Food 8.2 7.8 -0.4 Source: CSA and NBE Staff Computation 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 January February March April May June July August September October November December January February March April May June July August September October November December January February March April May June 2014 2015 2016 Fig III.1 Developments in inflation during 2015/16 General Food&Non-alcoholic bevarages Non Food CPI growth in %

National Bank of Ethiopia 37 2015/16 Annual Report Source: CSA and NBE Staff Computation
3.2 Consumer Price Developments in Regional States
In 2015/16, regional simple average general inflation scaled up to 10.3 percent from 6.3 percent a year earlier where Afar, Tigray, Harari and Oromia regional states registered headline inflation rates greater than the regional average (Table 3.3). Afar regional state experienced the highest headline inflation (18.6 percent) while the lowest 6.4 percent was in SNNP, showing a 12.2 percentage point margin. 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 January February March April May June July August September October November December January February March April May June July August September October November December January February March April May June 2014 2015 2016 Fig III.2 Developments in Inflation of Food , Non Food & Non-alcholic beverages General Food&Non-alcoholic bevarages Non Food CPI growth in %

National Bank of Ethiopia 38 2015/16 Annual Report
Table 3.3: Regional Average Annual Inflation (2015/16 FY)
Regions
2014/15 2015/16 Change
General
Food &Non￾alcoholic beverages Non￾food General Food &Non￾alcoholic beverages Non￾food General Food &Non￾alcoholic beverages Non￾food A B C D E F G=D-A H=E-B I=F-C SNNP 4.4 5.7 3.2 6.4 9.4 4.2 2.0 3.6 1.0 Harari 8.0 10.7 5.1 11.0 7.5 14.8 3.0 -3.3 9.7 Oromia 12.0 13.2 10.6 10.8 13.3 7.8 -1.2 0.1 -2.7 Tigray 4.8 -0.5 9.9 12.3 12.4 12.2 7.5 13.0 2.3 Gambela 3.8 4.5 2.5 8.7 10.0 11.7 4.9 5.5 9.2 Addis Ababa 7.6 12.2 4.4 10.3 16.6 5.8 2.8 4.3 1.4 Dire Dawa 11.0 7.9 13.1 7.6 3.8 10.0 -3.4 -4.1 -3.1 Ben. Gum -0.1 -0.8 0.9 9.5 13.6 4.4 9.6 14.4 3.6 Somali 9.9 6.0 14.2 7.4 5.3 9.7 -2.4 -0.7 -4.5 Afar 2.7 5.7 -1.0 18.6 14.0 24.5 15.9 8.3 25.4 Amhara 5.2 2.4 8.1 10.3 9.9 10.7 5.1 7.4 2.6 Regions Average 6.3 6.1 6.5 10.3 10.5 10.5 Standard deviation 3.7 4.7 5.0 3.3 3.9 5.7 Coefficient of variation 0.6 0.8 0.8 0.3 0.4 0.5 Sources: CSA and NBE‘s staff computation Fig III.3:Variation in Regional Annual Average Headline Inflation 4.4 8.0 12.0
4.8 3.8
7.6
11.0
-0.1
9.9
2.7 5.2
6.4
11.0
10.8
12.3
8.7
10.3
7.6
9.5
7.4
18.6
10.3
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
2015/16
2014/15

National Bank of Ethiopia 39 2015/16 Annual Report Regional simple average food & non￾alcoholic beverages inflation was 10.5 percent in 2015/16 (Table 3.3) where regional states likeAddis Ababa, Afar, BenishangulGumuz, Oromia and Tigray recorded higher than the regional average. The highest food& non-alcoholic beverages inflation was registered in Addis Ababa (16.6 percent); and the lowest in Dire Dawa (3.8 percent) recording 12.8 percentage point margin. Fig III.4: Variation in Regional Annual Average Food & Non-alcoholic Beverages Inflation Meanwhile, simple average regional non￾food inflation was 10.5 percent (Table 3.3) compared with 6.5 percent last year. Afar, Harari, Tigray, Gambela and Amhara regional states saw non-food inflation higher than the regional simple average. The highest (24.5 percentage) non-food inflation was recorded in Afar and the lowest (4.2 percentage) in SNNP with
20.3 percentage point margin.
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
5.7
10.7 13.2
-0.5
4.5
12.2
7.9
-0.8
6.0 5.7
2.4
9.4
7.5
13.3
12.4
10.0
16.6
3.8
13.6
5.3
14.0
9.9
2015/16
2014/15

National Bank of Ethiopia 40 2015/16 Annual Report Fig.III.5: Variation in Regional Annual Average Non-food Inflation Source: CSA and NBE Staff Computation 3.2 5.1
10.6 9.9
2.5
4.4
13.1
0.9
14.2
-1.0
8.1
4.2
14.8
7.8
12.2 11.7
5.8
10.0
4.4
9.7
24.5
10.7
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2014/15
2015/16

National Bank of Ethiopia 41 2015/16 Annual Report
IV. MONETARY AND FINANCIAL DEVELOPMENTS
4.1 Monetary Developments and Policy
In 2015/16, Ethiopia‘s monetary policy confined to focus, among others on keeping inflation rate in single digit. To this end, the National Bank of Ethiopia has made reserve money as its monetary anchor and closely monitored development in monetary aggregates. Accordingly, domestic liquidity, as measured by broad money supply (M2), reached Birr 445.3 billion in 2015/16 reflecting a 19.9 percent annual expansion mainly due to 24.6 percent growth in domestic credit. This growth in domestic credit was attributed to a 54.7 percent surge in credit to government and 22.1 percent increase in credit to non-central government sectors (Table 5.2). All components of broad money witnessed expansion where narrow money grew 15.5 percent due to the increases in demand deposits and currency outside banks. Similarly, quasi-money that comprises savings and time deposits went up 23.1 percent to Birr 266.7 billion as all commercial banks scaled up their deposit mobilization by opening 694 new branches (Table 4.1).

National Bank of Ethiopia 7
Table 4.1: Components of Broad Money
Particulars
Year Ended June 30 Annual Percentage Change 2012/13 2013/14 2014/15 2015/16 (In Millions of Birr) 2013/14 2014/15 2015/16 Narrow Money Supply

114,745.7

134,063.8

154,706.3

178,609.7

16.8

15.4

15.5
. Currency Outside Banks

45,671.0

53,176.0

60,460.9

66,686.2

16.4

13.7

10.3
. Demand Deposits (net)

69,074.7

80,887.8

94,245.4

111,923.5

17.1

16.5

18.8
Quasi-Money

120,567.9

163,682.8

216,622.6

266,656.6

35.8

32.3

23.1
. Savings Deposits

105,866.0

136,334.0

174,632.0

217,034.3

28.8

28.1

24.3
. Time Deposits

14,701.9

27,348.8

41,990.6

49,622.3

86.0

53.5

18.2
Broad Money Supply

235,313.6

297,746.6

371,328.9

445,266.3

26.5

24.7

19.9
Source: National Bank of Ethiopia (NBE) Source: NBE 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 (In Millions of Birr) Fig V.1: Major Components of Broad Money (2004/05 - 2015/16) Currency Outside Banks Net Demand Deposit Quasi- Money Broad Money Year

National Bank of Ethiopia 8
Table 4.2: Factors Influencing Broad Money
Particulars
Year Ended June 30 Annual Percentage Change 2012/13 2013/14 2014/15 2015/16 (In Millions of Birr) 2013/14 2014/15 2015/16 External Assets (net) 45,648.5 45,972.3 37,570.9 21,524.2 0.7 -18.3 -42.7 Domestic Credit 233,404.3 300,026.6 393,421.7 490,230.3 28.5 31.1 24.6 . Claims on Central Gov't (net) 21,965.5 26,929.7 30,735.3 47,548.4 22.6 14.1 54.7 . Claims on Non-Central Gov't 211,438.8 273,096.8 362,686.5 442,682.0 29.2 32.8 22.1 Other Items (net) 43,739.3 48,252.3 59,663.8 66,488.3 10.3 23.6 11.4 Broad Money (M2) 235,313.6 297,746.6 371,328.9 445,266.3 26.5 24.7 19.9 Source: NBE Source: NBE -60.0 -40.0 -20.0 0.0 20.0 40.0 60.0 80.0 100.0 120.0 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Annual Percentage Growth Ethiopian Fiscal year Fig V.2: Major Determinants of Monetary Growth Credit to Central Gov't Credit to Non-Central Gov't Broad Money Net Foreign Assets

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4.1.2. Developments in Reserve Money and Monetary Ratios
In 2015/16, reserve money or base money expanded 16.3 percent in response to inflation expectation pressure, arising from Elnino related drought. This growth was attributed to
34.3 percent rise in deposits of banks at
NBE and 9.8 percent increase in currency in circulation. Domestic credit went up 20.1 percent offsetting a 64.9 percent fall in NBE‘s net foreign assets. Excess reserves of commercial banks reached Birr 13.3 billion at the end of June 2015/16 compared with Birr 9.3 billion a year ago. The ratio of Broad money (M2) to GDP, an indicator of financial deepening, slightly rose to 0.34 points, partly indicating prudent monetary policy measures under taken to mitigate the inflationary pressure. Compared to last year same period, money multiplier defined as narrow money to reserve money remained at 1.5 whereas ratio of broad money to reserve money increased to 3.7 from 3.6 a year earlier, reflecting improvements in domestic deposit mobilization (Table 4.3).

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Table 4.3: Reserve Money and Monetary Ratios
(In Millions of Birr, where applicable) Particulars Year Ended June 30 Annual Percentage Change 2012/13 2013/14 2014/15 2015/16 2013/14 2014/15 2015/16 Reserve Requirement (CB's) 11,708.8 14,479.4 18,250.4 21,745.4 23.7 26.0 19.2 Actual Reserve (CB's) 21,160.9 24,493.3 27,562.6 34,999.4 15.7 12.5 27.0 Excess Reserve (CB's) 9,452.1 10,013.9 9,312.2 13,253.9 5.9 -7.0 42.3 Reserve Money 74,942.3 89,322.5 102,467.8 119,164.7 19.2 14.7 16.3 . Currency in Circulation 54,917.7 64,355.0 75,240.7 82,592.7 17.2 16.9 9.8 . Bank Deposits 20,024.6 24,967.5 27,227.1 36,572.0 24.7 9.1 34.3 Money Multiplier (Ratio):
. Narrow Money to Reserve Money 1.53 1.50 1.51 1.50 -2.0 0.6 -0.7 . Broad Money to Reserve Money 3.14 3.33 3.62 3.74 6.2 8.7 3.1 Other Monetary Ratios (%):
. Currency to Narrow Money 0.48 0.48 0.49 0.46 0.3 1.3 -4.9 . Currency to Broad Money 0.23 0.22 0.20 0.19 -7.4 -6.3 -8.5 . Narrow Money to Broad Money 0.49 0.45 0.42 0.40 -7.7 -7.5 -3.7 . Quasi Money to Broad Money 0.51 0.55 0.58 0.60 7.3 6.1 2.7 M2/GDP Ratio* 0.30 0.31 0.33 0.34 3.4 6.4 4.3 Source: National Bank of Ethiopia (NBE)

• M2/GDP ratio for 2015/16 is calculated on the basis
  of estimated nominal GDP for the same year. Source: NBE 0 20000 40000 60000 80000 100000 120000 140000 Value in Millions of Birr year Fig. V.3: Reserve Money Reserve Requirement (CB's) Actual Reserve (CB's) Excess Reserve (CB's) Reserve Money

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4.2. Developments in Interest Rate
In 2015/16, both minimum and maximum deposit interest rates were unchanged at 5.0 percent and 5.75 percent, respectively. Consequently, average interest rate on savings deposit remained constant at its preceding year level of 5.38 percent. Simple average lending interest rate however, rose to 12.75 percent from 11.88 percent whereas weighted annual average interest rates on time and demand deposits stood at 5.59 and
0.04 percent respectively.
Thus, real rate of interest, except for lending rate, remained negative given 7.5 percent headline inflation (Table 4.4).
Table 4.4: Interest Rate Structure of Commercial Banks
Rates 2007/08 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16

1. Deposit Rate
   1.1 Savings Deposit (Simple Average) 4.08 4.50 5.38
   Minimum 4.00 4.00 5.00
   Maximum 4.15 5.00 5.75
   1.2 Time deposit (Weighted Average) 5.16 4.79 5.49 5.55 5.66 5.66 5.77 5.59
   Up to 1 year 4.67 4.56 5.37 5.48 5.57 5.55 5.71 5.53 1 -2 years 5.23 4.80 5.51 5.57 5.68 5.68 5.78 5.60 Over 2 years 5.59 5.01 5.60 5.61 5.74 5.74 5.81 5.64
   1.3 Demand Deposit (Weighted Average) 0.04 0.06 0.06 0.02 0.03 0.03 0.04 0.04
2. Lending Rate (Average) 11.50 12.25 11.88 12.75
   Minimum 8.00 8.00 7.50
   Maximum 15.00 16.50 16.25 18.00
3. T-bills (Nominal) 0.67 0.89 1.31 1.25 1.86 1.59 1.43 1.44
4. Headline Inflation (Year-onYear) 7.8 7.9 8.8 9.1 8.7 8.5 10.4 7.5
5. Real Rate of Interest on:
   5.1 SavingDeposit (1.1 - 4) -3.74 -3.37 -3.39 -3.75 -3.33 -3.09 -5.07 -2.15
   5.2 Time Deposit (1.2 - 4) -2.65 -3.07 -3.27 -3.57 -3.04 -2.81 -4.68 -1.94
   5.3 Lending (2 - 4) 3.69 4.38 3.11 2.75 3.17 3.41 1.43 5.22
   Source: NBE
   (In percent per annum)

• It is simple average for saving deposit and lending rates, while weighted mean for time and demand deposits. As a result, the
  movements in the average interest rate on time and demand deposits reflect the change in the proportion of commercial bank deposits that would pay higher interest rate on time and demand deposits, rather than the change in interest rate. Source: NBE

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48
Source: NBE
4.3. Developments in Financial Sector
In 2015/16 the number of banks declined to 18 from 19 due to the merger of the Construction & Business Bank with the Commercial Bank of Ethiopia. Of the 18 banks 16 were private and 2public. Banks opened 494 new branches in 2015/16 (of which 363 were private) raising the total branch network to reach 3187 from 2693 last year. As a result, bank branch to population ratio declined from 1:33,4484 people to 1:28,616 in 2015/16. The share of public banks, in total branches declined to 39.5 percent from 41.9 percent last year signifying the growing role of private banks (Table 4.5). About 34.4 percent of bank branches were situated in Addis Ababa.

4Taking total population 90.76 in 2014/15 and 91.2 million in 2015/16 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 Value in % Years Fig. V.4: Interest Rate Structure of Commercial Banks Average Saving Deposit Rate Average Time Deposit Rate Average Lending Rate

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The total capital of the banking system rose
39.8 percent to Birr 43.0 billion by end June
2016 (Table 4.5).
In the meantime, the number of insurance companies stood at 17 (1 public and 16 private) with their branches rising to 426 following the opening of 49 new branches. About 53.5 percent of insurance branches were in Addis Ababa and 83.6 percent of the total branches were private. At the same time, the total capital of insurance companies grew 25.3 percent to Birr 3.6 billion of which the share of private insurance companies was 76.7 percent (Table 4.6). Fig.IV.5: Capital and Branch Network of the Banking system (2010/11-2014/15) Source: Commercial Banks 0 10 20 30 40 50 60 70 Percent(%) Fig V.5: Capital and Branch Network of Banking System (2010/11-2015/16) Total Public Banks Total Private Banks

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1. Public Banks
   Banks
   Commercial Bank of Ethiopia Ethiopia 785 192 977 36.3 888 262 1150 36.1 10,716.4 34.8 13,557.5 31.5 Construction & Business Bank Bank 69 51 120 4.5 0.0 - - - - 0.0 Development Bank of Ethiopia Ethiopia 31 1 32 1.2 106 4 110 3.5 2,269.2 7.4 7,500.8 17.4 Total Public Banks Banks 885 244 1129 41.9 994 266 1260 39.5 12,985.5 42.1 21,058.3 48.9
2. Private Banks
   Banks
   Awash International Bank
   Bank
   95 112 207 7.7 118 127 245 7.7 2,540.3 8.2 3,191.2 7.4 Dashen Bank Bank 76 88 164 6.1 61 57 118 3.7 2,377.2 7.7 2,809.3 6.5 Abyssinia Bank Bank 64 72 136 5.1 84 92 176 5.5 1,594.3 5.2 1,838.2 4.3 Wegagen Bank Bank 63 56 119 4.4 95 66 161 5.1 2,061.9 6.7 2,431.1 5.6 United Bank Bank 62 66 128 4.8 70 74 144 4.5 1,475.0 4.8 1,814.7 4.2 Nib International Bank Bank 50 65 115 4.3 69 86 155 4.9 1,925.3 6.2 2,253.9 5.2 Cooperative Bank of Oromiya Oromiya 106 35 141 5.2 139 45 184 5.8 1,058.7 3.4 1,182.7 2.7 Lion International Bank Bank 50 38 88 3.3 75 46 121 3.8 601.6 2.0 787.2 1.8 Oromia International Bank Bank 103 49 152 5.6 148 62 210 6.6 771.7 2.5 1,069.9 2.5 Zemen Bank Bank 5 2 7 0.3 8 5 13 0.4 650.0 2.1 800.0 1.9 Buna International Bank Bank 47 35 82 3.0 56 49 105 3.3 559.3 1.8 774.7 1.8 Berhan International Bank Bank 32 39 71 2.6 43 45 88 2.8 622.3 2.0 805.9 1.9 Abay Bank 70 19 89 3.3 89 27 116 3.6 591.0 1.9 814.5 1.9 Addis International Bank 10 22 32 1.2 17 26 43 1.3 399.6 1.3 569.8 1.3 Debub Global Bank 13 9 22 0.8 17 11 28 0.9 202.6 0.7 270.9 0.6 Enat Bank 5 6 11 0.4 7 13 20 0.6 392.1 1.3 588.6 1.4 Total Private Banks851.0 713.0 1,564.0 58.1 1,096.0 831.0 1,927.0 60.5 17,822.8 57.9 22,002.5 51.1 3.Grand Total Banks 1736 957 2693 100 2,090.0 1097 3187 100.0 30,808.3 100.0 43,060.8 100.0 % Share % Share Total Capital % Share Total Capital Total % Share Capital 2014/15 2015/16
   Table.4.5: Capital and Branch Network of the Banking System a of June 30, 2016
   (Branch in Number and Capital in Millions of Birr) 2014/15 2015/16 Regions Source: Commercial Banks Banks Branch Network Regio ns Addis Ababa Total Addis Ababa

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Fig.IV.6: Capital and Branch Network of Insurance Companies (2010/11-2014/15) Source: Insurance Companies 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 Percentage Fig IV:6 Capital and Branch Network of Insurance Companies (2010/11-2015/16) Total Public Insurances Total Private Insurances 2014/15 2015/16 % Change A.A Regio Total A.A Regio Total A B B/A 1 Ethiopian Ins. Cor. 18.0 48.0 66 18 52 70 643.2 836.5 30.1 2 Awash Ins.Com.S.C. 22.0 14.0 36 24 14 38 219.0 292.3 33.5 3 Africa Ins.Com S.C. 9.0 9.0 18 11 11 22 211.5 240.9 13.9 4 National Ins. Co. of Eth. 9.0 13.0 22 15 14 29 80.8 100.0 23.8 5 United Ins.Com. S.C 18.0 10.0 28 18 10 28 258.4 322.5 24.8 6 Global Ins. Com.S.C 6.0 6.0 12 6 7 13 95.8 109.7 14.5 7 Nile Ins.Com.S.C 14.0 17.0 31 17 19 36 232.6 232.3 -0.1 8 NyalaIns.Com.S.C 13.0 10.0 23 13 10 23 286.3 327.8 14.5 9 Nib Ins. Com.S.C 19.0 9.0 28 21 9 30 263.6 316.3 20.0 10 Lion Ins. Com.S.C 15 10 25 15 13 28 96.6 91.2 -5.6 11 Ethio-Life Ins.Com.S.c 8.0 4.0 12 12 4 16 31.8 81.3 155.9 12 OromiaIns.Com.S.c 17 12 29 17 16 33 138.1 165.6 19.9 13 Abay Insurance 8 9 17 10 9 19 108.3 160.6 48.3 14 Berhan insurance S.C 6 1 7 7 1 8 46.9 71.3 52.1 15 Tsehay Insurance S.C 6 2 8 8 4 12 48.7 80.3 64.9 16 Lucy 3 2 5 6 2 8 64.7 96.4 49.0 17 Bunna Insurance S.C. 8 2 10 10 3 13 38.8 64.6 66.7 Total 199 178 377 228 198 426 2,865 3,590 25.3 Note: A.A=Addis Ababa
Table.4.6: Branch Network &Capital of Insurance Companies as of June 30, 2016
No.
Branch
Source: Insurance Companies Capital 2015/16 Insurance Companies 2014/15 (Branch in Number and Capital in Millions of Birr)

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Similarly, the number of micro-finance institutions remained at 35 while their total capital and total asset increased significantly by 23.5 and 20.0 percent and reached Birr
8.9 billion and Birr 36.7 billion,
respectively.
Their mobilized deposits grew by 24.3 percent to Birr 18.4 billion and their outstanding credit rose by 15.5 percent to Birr 25.2 billion (Table 4.7). The five largest MFIs, namely Amhara, Dedebit, Oromiya, Omo and Addis Credit and Savings institutions, accounted for 83.6 percent of the total capital, 92.9 percent of the savings, 88.3 percent of the credit and
89.2 percent of the total assets of MFIs at
the end of 2015/16.
4.3.1 Resource Mobilization
Total resources mobilized by the banking system (deposit, loan collection and borrowing) rose by 8.0 percent and reached Birr 149.6 billion by end 2015/16 (Table 4.8). As commercials banks expanded their branch network, their, deposit liabilities increased to Birr 438.1 billion showing a
19.3 percent annual growth. Saving
deposits grew by 24.2 percent followed by time deposits (18.6 percent), and demand deposits (13.7 percent).Saving deposits accounted for 49.5 percent of the total deposits distantly followed by demand deposits (39.0 percent) and time deposit (11.4 percent) (Table 4.9). The share of private banks in deposit mobilization increased to 33.6 percent from 32.2 percent last year due to the opening of 363 new branches. CBE alone mobilized 66.1 percent of the total deposits banking system owing to its large branch network. Raising funds through borrowing by the banking system was not an important
Table 4.7: Microfinance Institutions Performance as of June 30, 2016 (In Thousands of Birr)
Particulars 2014/15 2015/16 % Change A B B/A Total Capital 7,187,259.5 8,875,780.6 23.5 Saving 14,832,747.4 18,432,836.7 24.3 Credit 21,827,337.3 25,203,763.0 15.5 Total Assets 30,562,012.2 36,668,011.6 20.0

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55 source of resource mobilization in Ethiopia as virtually all banks were sufficiently liquid aided by increased deposit mobilization and collection of loans. Consequently, total outstanding borrowing of the banking system stood at Birr 32.9 billion slightly higher than Birr
31.5 billion a year ago (Table 4.9). Of
the total borrowing, domestic sources accounted for 89.1 percent and foreign sources the remaining balance. Birr 77.2 billion collected during the review fiscal year was up by 28.6 percent of which, 56.3 percent was the share of private banks (Table 4.8).

National Bank of Ethiopia
56 Public Banks Private Banks Total (A) Public Banks Private Banks Total (B) Public Banks Private Banks Total (C) C/A C/B

1. Deposits (net change) 40,053.9 15,592.7 55,646.6 48,523.8 26,023.7 74,547.5 41,941.1 28,816.2 70,757.3 27.2 (5.1)
   Demand 9,350.1 3,294.4 12,644.6 14,573.5 7,089.8 21,663.3 12,897.7 7,670.4 20,568.0 62.7 (5.1) Savings 20,784.5 9,685.0 30,469.5 23,058.8 15,305.6 38,364.5 25,960.6 16,374.8 42,335.4 38.9 10.4 Time 9,919.3 2,613.2 12,532.5 10,891.5 3,628.3 14,519.7 3,082.8 4,771.0 7,853.8 (37.3) (45.9)
2. Borrowing (net change) 4,034.1 - 4,034.1 3,932.3 - 3,932.3 1,667.8 - 1,667.8 (58.7) (57.6)
   Local 2,925.9 - 2,925.9 3,571.7 - 3,571.7 1,855.9 - 1,855.9 (36.6) (48.0) Foreign 1,108.2 - 1,108.2 360.6 - 360.6 (188.1) - (188.1) (117.0) (152.2)
3. Collection of Loans 26,127.5 25,617.2 51,744.7 27,982.1 32,032.2 60,014.2 33,722.8 43,463.9 77,186.7 49.2 28.6
4. Total Resources Mobilized (1+2+3) 70,215.4 41,209.9 111,425.3 80,438.1 58,055.9 138,494.0 77,331.7 72,280.1 149,611.8 34.3 8.0
5. Disbursement 38,937.9 21,027.5 59,965.4 41,913.2 33,567.8 75,481.0 49,626.3 38,396.8 88,023.1 46.8 16.6
6. Change in Liquidity (4-5) 31,277.5 20,182.4 51,459.9 38,524.9 24,488.1 63,013.0 27,705.4 33,883.3 61,588.7 19.7 (2.3)
   Memorandum It em:
7. Outstanding Credit* 114,664.0 53,691.1 168,355.1 141,751.2 75,617.0 217,368.2 170,719.9 93,181.7 263,901.6 56.8 21.4
   *Includes government borrow ing in the form of bonds and treasury bills from commercial banks and other sectors other than NBE (In M illion Birr)
   Table 4.8: Annual Resource Mobilization & Disbursing Activities of Commercial Banks and DBE (Specialized Bank) as at June 30, 2016
   Percent Change
   Source: Commercial Banks &Staff Computation Particulars 2013/14 2014/15 2015/16

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4.3.2 New Lending Activities
Banks, including Development Bank of Ethiopia (DBE) disbursed fresh loans to the tune of Birr 88.0 billion in 2015/16 which was a 16.6 percent higher than a year ago. Of the total new loans, about
43.6 percent was made by private banks,
and the rest by public banks (Table 4.10). About 29.0 percent of the loans went to industry followed by domestic trade (17.1 percent), housing and construction (15.5 percent), agriculture (15.20 percent) and international trade (10.8 percent) and others (12.4 percent) (Table 4.12). 2013/14 2014/15 2015/16 S/R T/S R S T A. Deposits -Demand 128,788.1 150,451.5 171,019.5 16.8 13.7 -Savings 136,347.8 174,712.3 217,047.8 28.1 24.2 -Time 27,711.9 42,231.7 50,085.5 52.4 18.6 T o t a l 292,847.9 367,395.4 438,152.7 25.5 19.3 B. Borrowings 0.0 -Local 23,900.8 27,472.4 29,328.4 14.9 6.8 -Foreign 3,409.4 3,770.0 3,581.9 10.6 -5.0 T o t a l 27,310.1 31,242.4 32,910.2 14.4 5.3 (in Million Birr)
Table 4.9: Deposits and Borrowings of Commercial Banks and Specialized Bank as at June 30, 2016
Source: Commercial Banks

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Fig.IV.7: Deposit Mobilization, Lending and Loan Collection of the Banking System (2004/05- 2015/16) Source: Commercial Banks and DBE 0 10000 20000 30000 40000 50000 60000 Val ue in Millions of Birr Year & Bank Ownership - Net Deposit Lending Loan collection

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Table.4.10: Loans and Advances by Lenders 1/ (In Millions Birr)
D* C* O/S* D* C* O/S*
A B C D E F D/A E/B F/C
A.Public Banks
1.Commercial Bank of Ethiopia 33715.5 22474.1 111,435.3 42378.2 28610.7 138,854.3 25.7 27.3 24.6
3. Construction & Business Bank of Ethiopia 1354.8 1421.5 2,735.5 918.5 1003.3 - -32.2 -29.4 -100.0
2.Development Bank of Ethiopia 6842.9 4086.4 27,580.4 6329.6 4108.8 31,865.6 -7.5 0.5 15.5 Sub-Total 41,913.2 27,982.1 141,751.2 49,626.3 33,722.8 170,719.9 18.4 20.5 20.4 B. Private Banks 4 Awash International Bank 3723.6 3967.0 12482.0 4476.2 5383.3 15450.8 20.2 35.7 23.8
5. Dashen Bank 5179.8 5903.7 11479.1 5372.6 6727.7 12683.4 3.7 14.0 10.5
6. Bank of Abyssinia 1818.7 2436.4 5992.2 3025.6 2287.2 8149.0 66.4 -6.1 36.0
7. Wegagen Bank 3089.5 3287.0 6169.5 3137.2 4888.2 7630.3 1.5 48.7 23.7
8. United Bank 3188.8 4145.3 6860.1 3174.0 5211.8 8534.4 -0.5 25.7 24.4
9. Nib International Bank 4629.1 3489.4 7000.1 4041.2 3708.8 7647.1 -12.7 6.3 9.2
10. Cooperative Bank of Oromia 1736.4 918.5 6738.3 2182.8 3042.9 6177.3 25.7 231.3 -8.3
11. Lion Interenational Bank 1612.2 1127.7 2878.3 2302.8 1851.5 4389.7 42.8 64.2 52.5
12. Oromia International Bank 1266.2 1241.3 2275.5 1572.4 1744.7 3403.8 24.2 40.6 49.6
13. Zemen Bank 2393.0 1668.5 4767.2 1647.6 2243.2 5258.3 -31.1 34.4 10.3
14.Berhan International Bank 809.1 790.7 1908.6 2150.5 1920.2 3766.0 165.8 142.8 97.3 15.Bunna International Bank 1447.3 795.0 2433.9 2031.6 1313.1 3675.2 40.4 65.2 51.0 16.Abay Bank 1353.4 1228.9 2376.5 1722.6 1567.8 3118.6 27.3 27.6 31.2
17. Addis International Bank 343.0 322.3 771.6 382.9 438.6 1063.1 11.6 36.1 37.8
18. Debub Global Bank 242.7 241.4 338.9 546.6 481.9 599.3 0.0
19. Enat Bank 735.1 469.0 1145.3 630.1 652.8 1635.3 0.0
Sub-Total 33,567.8 32,032.2 75,617.0 38,396.8 43,463.9 93,181.7 14.4 35.7 23.2 Grand Total 75,481.0 60,014.2 217,368.2 88,023.1 77,186.7 263,901.6 16.6 28.6 21.4 Source: Commercial Banks

1. O/S Credit excludes centeral government borrowing
   D*=Disbursement, C*=Collection, O/S*= Outstanding Credit Lenders 2014/15 Percentage Change 2015/16

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4.3.3 Outstanding Loans
Total outstanding credit of the banking system expanded by 20.4 percent and reached Birr 280.3 billion at the end of June 2016. Specifically, outstanding claims on private sector rose by 23.8 percent on public enterprises 21.2 percent and on the central government 6.2 percent. (Table 4.13) Credit to industry accounted for 40.2 percent followed by international trade (19.7 percent), domestic trade (10.8 percent), housing and construction (10.6 percent) and agriculture (7.7 percent) (Table 4.12). The share of private sector in outstanding credit was Birr 179.2 billion (or 63.9 percent) depicting a 21.5 percent annual growth (Table 4.13).
Table 4.11: Percentage Share of Loans and Advances by Lenders
D* C* O/S* D* C* O/S*
A B C D E F D/A E/B F/C
A.Public Banks
1.Commercial Bank of Ethiopia 44.668 37.4 51.3 48.1 37.1 52.6 7.8 -1.0 2.6 2.Development Bank of Ethiopia 9.066 6.8 12.7 1.0 1.3 0.0 -88.5 -80.9 -100.0
3. Construction & Business Bank of Ethiopia 1.795 2.4 1.3 7.2 5.3 12.1 300.6 124.7 859.5
Sub-Total 55.528 46.6 65.2 56.4 43.7 64.7 1.5 -6.3 -0.8 B.Private Banks 4 Awash International Bank 4.9 6.6 5.7 5.1 7.0 5.9 3.1 5.5 2.0
5. Dashen Bank 6.9 9.8 5.3 6.1 8.7 4.8 -11.1 -11.4 -9.0
6. Bank of Abyssinia 2.4 4.1 2.8 3.4 3.0 3.1 42.7 -27.0 12.0
7. Wegagen Bank 4.1 5.5 2.8 3.6 6.3 2.9 -12.9 15.6 1.9
8. United Bank 4.2 6.9 3.2 3.6 6.8 3.2 -14.6 -2.2 2.5
9. Nib International Bank 6.1 5.8 3.2 4.6 4.8 2.9 -25.1 -17.4 -10.0
10. Cooperative Bank of Oromia 2.3 1.5 3.1 2.5 3.9 2.3 7.8 157.6 -24.5
11. Lion Interenational Bank 2.1 1.9 1.3 2.6 2.4 1.7 22.5 27.7 25.6
12. Oromia International Bank 1.7 2.1 1.0 1.8 2.3 1.3 6.5 9.3 23.2
13. Zemen Bank 3.2 2.8 2.2 1.9 2.9 2.0 -41.0 4.5 -9.1
14.Berhan International Bank 1.1 1.3 0.9 2.4 2.5 1.4 127.9 88.8 62.5 15.Bunna International Bank 1.9 1.3 1.1 2.3 1.7 1.4 20.4 28.4 24.4
16. Abay Bank 1.8 2.0 1.1 2.0 2.0 1.2 9.1 -0.8 8.1
17. Addis International Bank 0.5 0.5 0.4 0.4 0.6 0.4 -4.3 5.8 13.5
18. Debub Global Bank 0.3 0.4 0.2 0.6 0.6 0.2 0.0
19. Enat Bank 1.0 0.8 0.5 0.7 0.8 0.6 0.0
Sub-Total 44.5 53.4 34.8 43.6 56.3 35.3 -1.9 5.5 1.5 Grand Total 100.0 0.0 D*=Disbursement, C*=Collection, O/S*= Outstanding Credit Lenders 2014/15 Percentage change 2015/16

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Table 4.12: Loans & Advances by Economic Sectors
D* C* O/S* D* C* O/S* D* C* O/S* A B C D E F D/A E/B F/C Government Deficit Financing 0 0 15,514.4 0 0 16,471.6 - - 6.2 Agriculture 13,077.1 11,456.2 18,579.8 13,375.7 12,863.4 20,377.5 2.3 12.3 9.7 Industry 23,437.4 11,782.9 86,212.3 25,495.6 15,954.1 106,164.0 8.8 35.4 23.1 Domestic Trade 15,589.0 12,183.2 25,336.4 15,040.5 15,297.7 28,550.6 (3.5) 25.6 12.7 International Trade 8,415.0 11,790.8 43,303.9 9,528.0 15,707.9 51,900.4 13.2 33.2 19.9 Export 3,780.4 5,587.3 17,581.3 4,404.9 8,429.6 23,028.4 16.5 50.9 31.0 Import 4,634.6 6,203.5 25,722.6 5,123.1 7,278.3 28,872.0 10.5 17.3 12.2 Hotels and Tourism 1,620.3 1,510.9 3,590.6 1,893.8 2,406.5 4,818.8 16.9 59.3 34.2 Transport and Communication 3,625.5 2,340.6 7,289.0 4,494.1 3,336.8 10,026.1 24.0 42.6 37.6 Housing and Construction 6,720.1 7,040.4 22,529.1 13,641.9 8,422.3 28,080.8 103.0 19.6 24.6 Mines, Power and Water resource 165.2 83.4 844.7 341.2 145.5 851.8 106.5 74.4 0.8 Others 2,163.8 1,449.8 7,827.7 3,160.8 2,393.9 10,297.7 46.1 65.1 31.6 Personal 667.5 363.4 1,796.9 1,051.4 652.9 2,779.6 57.5 79.7 54.7 Interbank Lending - 12.66 57.8 - 5.72 54.3 - (54.8) (6.2) Total 75,481.0 60,014.3 232,882.6 88,023.1 77,186.7 280,373.3 16.6 28.6 20.4 D*=Disbursement, C*=Collection, O/S*= Outstanding Credit Source: Commercial Banks &Staff Computation 2014/15 2015/16 Percentage Change Economic Sectors

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Fig.IV.8: Sectoral Breakdown of Bank Credit (1999/00-2015/16) Source: Commercial Banks including DBE & Staff Computation - 100,000.00 200,000.00 300,000.00 400,000.00 500,000.00 600,000.00 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 In Millions of Birr Fiscal Year - Total Others Housing & Construction International Trade Domestic Trade & Services Industry Agriculture

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Table 4.13: Loans and Advances by Borrowers (In Millions of Birr)
2012/13 2013/14 2014/15
O/S* O/S* O/S* D* C* O/S*
A B C E F G G/B G/C
Central Government 5,797.4 12,969.5 15,514.4 - 0.0 16,471.6 27.0 6.2 Public Enterprises 40,888.6 53,703.7 69,841.6 16,114.6 8,058.3 84,675.6 57.7 21.2 Cooperatives 12,219.7 12,664.7 13,850.7 12,213.7 13,281.7 13,704.4 8.2 -1.1 Private & Individuals 82,558.2 101,920.7 133,618.1 59,694.8 55,841.0 165,467.4 62.3 23.8 Inter-bank Lending 163.3 65.9 57.8 0.0 5.7 54.3 -17.7 -6.2 Total 141,627.3 181,324.6 232,882.6 88,023.1 77,186.7 280,373.2 54.6 20.4 Total less Inter-bank Lending 141,463.9 181,258.6 232,824.8 88,023.1 77,181.0 280,319.0 54.7 20.4 D*=Disbursement, C*=Collection, O/S*= Outstanding Credit 2015/16 Borrowing Sector Percentage change Source: Commercial Banks &Staff Computation

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4.4. Financial Operations of NBE
Outstanding claims of NBE on the central government was Birr 109.2 billion on account of 21.0 percent growth in direct advance which reached Birr 100.7 billion or 92.4 percent of the total claims. At the same time, outstanding claims of NBE on DBE reached Birr 25.6 billion about 9.6 percent higher than last year. Meanwhile, total deposit liabilities of NBE increased by 20.0 percent to Birr
51.7 billion, as a result a 34.6 percent rise
in deposits of financial institutions (Table 4.14). 2013/14 2014/15 2015/16 A B C B/A C/B Loans and Advances (1+2) 82,551.5 115,532.3 134,687.4 40.0 16.6 1.Claims on Central Gov’t 64,394.5 92,175.3 109,080.4 43.1 18.3
1.1 Direct Advance 64,264.9 83,264.9 100,764.9 29.6 21.0
1.2 Bonds 129.6 8,910.4 8,315.5 6775.3 -6.7
2. Claims on DBE 18,157.0 23,357.0 25,607.0 28.6 9.6
3. Deposit Liabilities 35,140.8 43,077.7 51,697.0 22.6 20.0
3.1 Government 13,412.5 15,098.5 14,042.3 12.6 -7.0
3.2 Financial Institutions 21,728.3 27,979.2 37,654.7 28.8 34.6
Particulars % Change
Source: NBE and Staff Computation ( In Millions of Birr)
Table 4.14: Financial Activities of National Bank of Ethiopia at the Close of June 30, 2016

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4.5. Developments in Financial Markets
4.5.1Treasury Bills Market The amount of T-bill offered and demanded in the Treasury-bill market showed a similar pattern. The amount of Treasury-bills offered surged by 46.5 percent and reached Birr 147.6 billion while the demand grow
18.3 percent to Birr 161.6 billion. Total T￾bills sold during the review year was Birr
161.5 billion indicating Birr 13.9 billion
(9.4 percent) oversubscription Hence, at end of 2015/16, total outstanding T-bills went up by 37.3 percent and reached Birr 57.3 billion, all of which was held by non-banks. The average weighted yield on T￾bills increased slightly to 1.438 percent a year earlier (Table 4.15). The highest yield was recorded for the 364-day T-bills (3 percent) and the lowest (0.78 percent) for 28- day bills.

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Table 4.15: Results of Treasury Bills Auction
C/A C/B
Number of Bidders -47.7 -12.5 Amount Demanded (Mn.Birr) 42.3 18.3 28-day bill -95.9 -29.7 91-day bill 102.7 25.5 182-day bill -19.3 -53.1 364-day bill 25.1 53.3 Amount Supplied (Mn.Birr) 61.9 46.5 28-day bill -95.1 0.0 91-day bill 146.5 59.7 182-day bill -21.7 -38.7 364-day bill 43.1 52.2 Amount Sold (Mn.Birr) 69.4 46.0 Banks -100.0 0.0 Non-Banks 110.8 46.0 28-day bill 0.1 0.0 91-day bill 0.0 0.0 182-day bill 0.0 0.1 364-day bill -0.4 -0.5 28-day bill -58.4 -21.8 91-day bill -1.2 -0.4 182-day bill 5.8 -29.3 364-day bill 17.1 22.9 Banks 0.0 Non-Banks 32,286.9 100.0 41,704.8 100.0 57,252.6 100.0 77.3 37.3 Public Servants Social Security Agency 14,590.4 45.2 19,371.6 46.4 30,566.6 53.4 109.5 57.8 Development Bank of Ethiopia 11,416.0 35.4 13,216.0 31.7 13,216.0 23.1 15.8 0.0 Private Organizations‘ Employees Social Security Agency 3,707.5 11.5 6,799.2 16.3 11,182.0 19.5 201.6 64.5 Other Public Non-Bank Institutions 2,573.0 8.0 2,318.0 5.6 2,288.0 4.0 -11.1 -1.3 Share Outstanding bills at the end of period(Mn.Br.) 32,286.9 % -58.4 37.3 Share % 41,704.8 Share % 57,252.6
0.731 1.093 0.773
2.562 2.441 3.000
1.883 1.000 0.783
1.213 1.203 1.198
Average Weighted Yeild for Successful bids (%) 1.597 1.434 1.438 -9.9 0.3
99.591 99.477 99.616
97.453 97.632 97.095
99.856 99.923 99.940
99.699 99.701 99.702
Average Weighted Price for Successful bids (Birr)
99.150 99.183 99.088 -0.1 -0.1
18,727.0 0.0 0.0
76,588.0 110,593.3 161,475.2 9,166.0 8,620.0 13,116.0 95,315.0 110,593.3 161,475.2 51,085.9 78,832.4 125,921.4 9,582.0 12,247.0 7,502.0 91,174.9 100,739.4 147,579.4 21,341.0 1,040.0 1,040.0 8,432.0 14,498.0 6,802.0 10,568.0 8,620.0 13,216.0 25,199.0 1,480.0 1,040.0 69,329.0 111,938.8 140,517.2 415 248 217 113,528.0 136,536.8 161,575.2 Particulars 2013/14 2014/15 2015/16 Percentage Change A B C Source: NBE

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Fig IV.9: Treasury Bills Auction Result Source: NBE
4.5.2 NBE Bill Market
On April 4, 2011, NBE has introduced NBE-Bills aimed at mobilizing resources from commercial banks to finance priority sectors deemed as the driving forces of the economy. Since its introduction the total NBE bills purchased by the banking sector has reached Birr 49.9 billion.
4.5.3. Corporate Bonds
Corporate bonds purchased by CBE during 2015/16 showed an annual decline of 11.0 percent and reached to Birr 43.0 billion. At the same time, corporate bonds redeemed by regional governments, Development Bank of Ethiopia (DBE) and City Administration of 0.00 0.50 1.00 1.50 2.00 2.50 3.00 - 20,000.00 40,000.00 60,000.00 80,000.00 100,000.00 120,000.00 140,000.00 160,000.00 Annual weighted yield Value in Millions of Birr Year Demand Supply Average Weighted Yield

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Addis Ababa stood at Birr 6.96 billion, 43.4 million and Birr 6.5 billion, in total depicting a 248.7 surge over the previous year (Table 4.16). Consequently, total outstanding bond holdings, in the review fiscal year reached Birr 188.7 billion showing a 23.6 percent registered a year-on-year growth. About 75.8 percent of outstanding corporate bonds was held by EEPCO, While the 15.6 percent by City Administration of Addis Ababa, 8.2 percent by the Railway Corporation and 0.4 percent by Regional governments.
Table 4.16: Disbursement, Redemption and Outstanding of Coupon and Corporate Bond
of CBE
(In Millions of Birr)
Annual Annual Percentage
Change
2014/15 2015/16
A B

1. Corporate Bond Purchases by holders 48,350.0 43,023.9 -11.0
   EEPCO 28,000.0 28,000.0 0.0 Regional governments - - - Development Bank of Ethiopia - - - City Government of Addis Ababa 12,650.0 12,575.0 -0.6 Railway Corporation 7,700.0 2,448.9 -68.2 Private Sector - - -
2. Redemption of Bonds by Clients 1,998.7 6,963.4 248.4
   EEPCO 0.0 - -
   Regional governments 315.9 380.6 20.5 Development Bank of Ethiopia - 43.4 100.0 City Government of Addis Ababa 1,682.8 6,539.4 288.6 Railway Corporation - - - Private Sector - - -
3. Outstanding Bonds by Clients 152,689.3 188,749.7 23.6
   EEPCO 115,100.0 143,100.0 24.3 Regional governments 1,081.4 700.8 -35.2 Development Bank of Ethiopia 43.4 - - City Government of Addis Ababa 23,464.4 29,500.0 25.7 Railway Corporation 13,000.0 15,448.9 18.8 Private Sector - - - Particulars B/A Source: Commercial Bank of Ethiopia

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4.5.4. Inter-bank Money Market
Interbank money market has remained dormant. Since its introduction in September 1998, merely twenty three transactions worth Birr 259.2 million were transacted with the interest rates ranging between 7 to 11 percent and with maturity period widely spanning from overnight to 5 years (Table 4.17).
Table 4.17: Interbank Money Market Transactions up to June 30, 2012
Borrower Lender
Amount
Borrowed (In
Thousand Birr)
Interest Rate
%
Date of
Transaction
Maturity
Period
Nib International Bank Awash International Bank 7,000.0 11 16/11/00 Overnight Wegagen Bank Commercial Bank of Ethiopia 10,000.0 8 3/1/2001 5 years Nib International Bank ,, 10,000.0 8 3/31/2001 3 months Wegagen Bank ,, 10,000.0 8 3/22/2001 1 year Nib International Bank ,, 3,600.0 8 5/31/2001 6 months Nib International Bank ,, 3,700.0 8 06/31/01 6 months Nib International Bank ,, 778.0 8 30-11-2001 6 months Nib International Bank Bank of Abyssinia 28,999.8 7 31/12/02 3.5 months Nib International Bank Bank of Abyssinia 19,046.9 7 31/01/03 3.5 months Nib International Bank Bank of Abyssinia 20,310.0 7 28/02/03 3.5 months Nib International Bank Bank of Abyssinia 28,987.0 7 31/03/03 3.5 months Nib International Bank Commercial Bank of Ethiopia 25,000.0 7.5 7/7/2003 5.2 months Nib International Bank Bank of Abyssinia 50.1 7.5 26/03/2005 open Nib International Bank Bank of Abyssinia 50.5 7.5 26/03/2005 open Wegagen Bank Awash International Bank 19,744.6 7.5 December, 2006 21/05/07 Wegagen Bank Awash International Bank 19,870.4 7.5 January, 2007 21/05/07 Wegagen Bank Awash International Bank 10,937.2 7.5 February, 2007 21/05/07 Awash International Bank Nib International Bank 30,000.0 7.5 February, 2007 18/08/07 Wegagen Bank Awash International Bank 10,931.4 7.5 March, 2007 21/05/07 Nib International Bank Awash International Bank 142.0 8.5 January, 2008 25/4/08 Nib International Bank Awash International Bank 7.0 8.5 February, 2008 25/04/08 Nib International Bank Awash International Bank 3.0 8.5 March, 2008 25/04/08 Nib International Bank Awash International Bank 17.0 8.5 April,2008 25/04/08 Total/Average - 259,174.8 7.87 - - Source: NBE

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V. DEVELOPMENTS IN EXTERNAL SECTOR
5.1 Overall Balance of Payments
The overall balance of payments saw USD
830.9 million deficit, about USD 521.4
million higher than a year earlier.
This was a reflection of the widening trade deficit as merchandise import bills over weighed a 5 percent drop in merchandise export earnings. Similarly, net services registered USD
721.5 million deficit which was nearly
double of last year level. At the same time, current account deficit (including official transfers) widened to USD 7.6 billion from USD 7.4 billion a year ago its GDP ratio reached 10.4 percent.

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Table 5.1: Balance of Payments (In Millions of USD)
S/N Particulars
2013/14 2014/15 2015/16 Percentage Change A B C B/A C/B 1 Exports,f.o.b. 3,300.1 3,019.1 2,867.7 -8.5 -5.0 Coffee 714.4 780.5 722.7 9.2 -7.4 Other 2,585.7 2,238.7 2,145.0 -13.4 -4.2 2 Imports 13,712.3 16,458.6 16,725.2 20.0 1.6 Fuel 2,573.1 2,040.9 1,339.0 -20.7 -34.4 Cereals 442.8 601.6 1,032.7 35.9 71.6 Aircraft 35.4 190.6 162.9 438.8 -14.5 Imports excl. fuel, cereals, aircraft 10,661.0 13,625.5 14,190.6 27.8 4.1 O/w Public investment related imports 3 Trade Balance (1-2) -10,412.2 -13,439.5 -13,857.5 29.1 3.1 4 Services, net 559.5 -341.4 -721.5 -161.0 111.3 Non-factor services, net 712.2 -78.9 -466.6 -111.1 491.3 Exports of non-factor services 3,174.2 3,028.4 2,932.8 -4.6 -3.2 Imports of non-factor services 2,461.9 3,107.3 3,399.5 26.2 9.4 Income, net -152.8 -262.5 -254.8 71.9 -2.9 O/w Gross official int. payment 143.5 249.2 255.9 73.6 2.7 Dividend -17.9 -23.7 -12.1 32.1 -48.8 5 Private transfers, net 4,114.8 4,881.6 5,998.5 18.6 22.9 o/w: Private Individuals 3,043.7 3,796.7 3,990.5 24.7 5.1 6 Current account balance (3+4+5) excluding off. Transfers -5,738.0 -8,899.3 -8,580.4 55.1 -3.6 7 Official transfers, net 1,461.0 1,507.9 1,021.6 3.2 -32.2 8 Current account balance including official trasfers(6+7) -4,276.9 -7,391.4 -7,558.8 72.8 2.3 9 Capital account 4,134.6 7,381.2 6,245.4 78.5 -15.4 Off. Long-term Cap., net 2,308.9 2,566.7 1,510.1 11.2 -41.2 Disbursements 2,442.8 2,653.7 1,599.8 8.6 -39.7 Amortization 133.9 87.1 89.7 -35.0 3.0 Other pub. Long-term cap. 331.9 2,228.0 1,146.2 571.3 -48.6 Private sector, long term 350.0 450.8 28.8 Foreign Direct Investment(net) 1,466.96 2,202.17 3,028.18 50.1 37.5 Short-term Capital 26.8 34.3 110.0 28.4 220.4 10 Errors and omissions 45.5 -511.2 482.6 11 Overall balance (8+9+10) -96.9 -521.4 -830.9 12 Financing 96.9 521.4 830.9 13 Reserves [ Increase(-), Decrease (+)] 100.3 521.4 830.9 14 Central Bank (NFA) -42.5 -92.9 975.6 Asset -218.2 -663.1 -152.6 Liabilities 175.7 570.2 1,128.2 15 Commercial banks (NFA) 142.9 614.3 -144.7 16 Debt Relief -3.5 Principal 2.9 Interest 0.6 Source: NBE Staff Compilation

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Table 5.2: Components of Current Account as Percentage of GDP
Particulars
FY
2013/14
FY
2014/15
FY
2015/16 Percentage Change
A B C B/A C/B
Exports 5.9 4.7 4.0 -21.2 -15.3 Imports 24.7 25.5 23.1 3.3 -9.3 Trade Balance -18.7 -20.8 -19.1 11.1 -8.0 Net Services 1.0 -0.5 -1.0 -152.5 88.5 Net Private Transfers 7.4 7.6 8.3 2.2 9.6 Current Account Deficit (excluding official transfers) -10.3 -13.8 -11.9 33.5 -14.0 Current Account Deficit (including official transfers) -7.7 -11.4 -10.4 48.8 -8.8 Source: NBE Staff Compilation Source:NBE Staff Computations -2000 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 In Million of USD Fig. V.1 Trends in Components of Current Account Exports Imports Net Services Private Transfers

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5.2 Developments in Merchandise Trade
5.2.1 Balance of Trade
Merchandise trade deficit in 2015/16 stood at USD 13.9 billion, which widened by 3.1 percent over the preceding fiscal year mainly due to growth in total import bills in the face of falling merchandise export earnings. Yet, merchandise trade deficit as a ratio of GDP decreased by 2.3 percentage points and stood at 19.6 percent.
5.2.2 Merchandise Export
Total merchandise export earnings (including electricity) declined by 5 percent over the same period of last year due to lower export earnings from coffee (7.4 percent), oilseeds (6.4 percent), gold (8.8 percent), chat (3.7 percent), live￾animals (0.5 percent), leather & leather products (12.4 percent) and electricity (26.5 percent). Hence, the ratio of merchandise export to GDP declined to
4.1 percent from 4.9 percent a year ago.
Specifically, export earnings from coffee dropped by 7.4 percent owing to 14.3 percent decline in international price despite 8 percent increase in export volume. As a result, the share of coffee in total merchandise export was to 25.2 percent slightly lowers than 25.8 percent recorded last year same period. Revenue from oilseeds was down 6.4 percent and reached USD 477.2 million because of a 31.5 percent fall in international price despite 36.7 percent growth in export volume. Hence, the share of oilseeds in total merchandise export was down to 16.6 percent. Similarly, gold fetched USD 290.7 million which was 8.8 percent lower than last year as a result of a 5.1 percent decline in volume and 3.9 percent drop in international price. As a result, the share of gold in total merchandise export stood at 10.1 percent. Chat export earnings decreased by 3.7 percent as export volume dropped 4.5 percent despite 0.9 percent rise in international price. Yet, its share in total merchandise export earnings went up to
9.2 percent
Proceeds from export of live-animals declined by 0.5 percent as a result of a

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0.1 percent decrease in export volume
and 0.4 percent in price. Hence, the share of revenue from live-animals in total merchandise export increased to 5.2 from 4.9 percent a year ago. Export of leather & leather products saw
12.4 percent declined in revenue owing
to a 3.1 percent fall in export volume and 9.6 percent international price. Consequently, the share of leather & leather products export in total merchandise export revenue stood at 4 percent Similarly, electricity export earnings decreased by 26.5 percent vis-à-vis last year same period owing to 30.5 percent fall in export volume on account of drought effect. As a result, the share of electricity in total merchandise export earnings marginally declined to 1.1 percent from 1.4 percent last year same period. In contrast, earnings from pulses export increased by 5.7 percent to USD 232.4 million due to 10.2 percent a rise in export volume despite 4.1 percent decline in price. As a result, the share of pulses in total merchandise export earnings increased to 8.1 percent from
7.3 percent a year earlier.
Likewise, export proceeds from flower went up 10.9 percent over last year same period as both export volume and international price tended to improve by
9.3 percent and 1.5 percent respectively.
Hence, the share of flower in total export earnings increased to 7.9 percent from
6.7 percent last year same period.
Receipts from meat & meat products grew by 3.9 percent compared to last year same period solely on account of
4.3 percent increase in price in contrast
to a 0.4 percent decline in volume. As a result, the share of meat & meat products in total merchandise export earnings was
3.4 percent.
Export earnings from fruits and vegetables increased by 12.9 percent vis￾à-vis last year same period owing to 11.3 percent hike in export volume and 1.4 percent rise in price. Thus, the share of fruits and vegetables in total merchandise export earnings reached 1.9 percent during the review period.

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Table 5.3 Values of Major Export Items
(In millions of USD)
Commodities
2013/14 2014/15
2014/15
2015/16
2015/16
Percentage Change
A %shar e
B %share C %share B/A C/B
Coffee 714.4 21.6 780.5 25.8 722.7 25.2 9.3 -7.4 Oilseeds 651.9 19.8 510.1 16.9 477.2 16.6 -21.8 -6.4 Leather & Leather Products 129.8 3.9 131.6 4.4 115.3 4 1.4 -12.4 Pulses 250.7 7.6 219.9 7.3 232.4 8.1 -12.3 5.7 Meat & Meat Products 74.6 2.3 92.8 3.1 96.4 3.4 24.4 3.9 Fruits & Vegetables 45.9 1.4 47.6 1.6 53.7 1.9 3.7 12.9 Live Animals 186.68 5.7 148.51 4.9 147.8 5.2 -20.4 -0.5 Chat 297.35 9 272.42 9 262.45 9.2 -8.4 -3.7 Gold 456.2 13.8 318.7 10.6 290.7 10.1 -30.1 -8.8 Flower 199.7 6.1 203.1 6.7 225.3 7.9 1.7 10.9 Electricity 45.3 1.4 42.8 1.4 31.5 1.1 -5.5 -26.5 Others 247.4 7.5 251.4 8.3 212.3 7.4 1.6 -15.6 Total Export 3300.1 100 3019.3 100 2867.7 100 -8.5 -5.0 Total Export Excluding Electricity 3254.8 2976.5 2836.3 -8.6 -4.7 Source: Ethiopian Revenue and Customs Authority and Ethiopian Electric Power Source: NBE Staff Computation 0 100 200 300 400 500 600 700 800 900 In Mill of USD Fig.V.2. Foreign Exchange Earnings from Selected Export Items Coffee Oilseeds Leather and Leather Products Pulses Chat Gold

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Source: NBE Staff Computation
Table 5.4: Volume of Major Exports
(In millions of kg unless stated otherwise) Particulars 2013/14 2014/15 2015/16 Percentage Change A B C B/A C/B Coffee 189.7 183.9 198.7 -3.1 8.0 Oilseeds 313.5 319.5 436.6 1.9 36.7 Leather and Leather Products 5.57 6.17 5.98 10.8 -3.1 Pulses 353.0 340.7 375.4 -3.5 10.2 Meat & Meat Products 15.0 19.0 19.0 27.1 -0.4 Fruits & Vegetables 145.4 150.1 167.1 3.2 11.3 Live Animals 105.8 77.9 77.8 -26.4 -0.1 Chat 51.7 49.2 47.0 -4.8 -4.5 Gold(in million of grams) 12.35 9.04 8.58 -26.9 -5.1 Flower 44.7 46.3 50.6 3.6 9.3 Electricity (millionof kwh) 782.6 735.3 511.3 -6.0 -30.5 Source: Ethiopian Revenue and Customs Authority and Ethiopian Electric Power Coffee 29% Oilseeds 19% Leather and Leather Products 5% Pulses 9% Chat 10% Gold 11% Flower 9% Others 8% Fig.V.3 Export Share of Selected Commodities

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Source: NBE Staff Computation
Table 5.5: Unit Value of Major Export Items
(In USD/kg unless stated otherwise) Particulars 2013/14 2014/15 2015/16 Percentage Change A B C B/A C/B Coffee 3.8 4.2 3.6 12.7 -14.3 Oilseeds 2.1 1.6 1.1 -23.2 -31.5 Leather and Leather products 23.3 21.3 19.3 -8.5 -9.6 Pulses 0.71 0.65 0.62 -9.1 -4.1 Meat & Meat Products 5.0 4.9 5.1 -2.2 4.3 Fruits & Vegetables 0.3 1.4 Live Animals 1.8 1.9 1.9 8.1 -0.4 Chat 5.8 5.5 5.6 -3.8 0.9 Gold (USD/ gram) 36.9 35.3 33.9 -4.5 -3.9 Flower 4.5 4.4 4.5 -1.9 1.5 Electricity(USD/ KWH) 0.1 0.6 5.7 Source: Ethiopian Revenue and Customs Authority 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 500.0 In Mn of Kg, , unless stated otherwise Fig.V. 4. Export Volume of Selected Commodities Coffee Oilseeds Leather and Leather Products Pulses Chat Gold (mill of gram)

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Source: NBE Staff Computation
5.2.3. Import of Goods
Total merchandise import bills reached USD 16.7 billion showing a 1.6 percent increase over last year same period mainly due to higher import bills of consumer goods and semi-finished goods. While that of capital goods, fuel, raw materials and miscellaneous goods, declined. Hence, import to GDP ratio decreased to 23.6 percent from 26.8 percent a year ago. Import bill of consumer goods at USD
5.3 billion was 16.7 percent higher than
last year due to higher import payments for non-durable consumer goods (27.4 percent) while that of durable consumer goods fell 2.5 percent. Thus, the share of consumer goods in total merchandise import bills went up to 31.5 percent from
27.4 percent in the preceding year.
Similarly, semi-finished goods import bill stood at USD 2.9 billion, showing a 12.3 percent annual growth. Fertilizer import, however, dropped by 14.5 percent. As a result, the share of semi-finished goods in total merchandise import bills increased to 17.3 percentfrom15.7 percent last year. Total import bills of capital goods declined 0.8 percent as imports of transport capital goods slowdown by 9.6 percent despite 16.4 percent rise in agricultural capital goods and 1.9 percent in industrial capital goods import. Thus, 0.0 10.0 20.0 30.0 40.0 50.0 60.0 USD/kg, for God in USD/gm Fig.V. 5. Unit Value of Selected Export Commodities Coffee Oilseeds Leather and Leather Products Pulses Chat Gold

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79 the share of capital goods in total merchandise import bills stood at 40.8 percent. Fuel import bills decreased by 34.4 percent in 2015/16 and amounted to USD
1.3 billion. This was attributed to 41.3
percent decline in international price of crude oil despite 13.7 percent increase in volume. Hence, the share of fuel in total merchandise import dropped to 8 percent from 12.4 percent last year same period. Import of raw materials went down by
12.5 percent relative to the preceding year
and accounted for 0.9 percent of total merchandise import of the review fiscal year.
Table 5.6: Value of Imports by End Use
(In Millions of USD)
2013/14 2014/15 2015/16 Percentage change A % share B % share C % share B/A C/B Raw Materials 166.6 1.2 170.5 1.0 149.3 0.9 2.4 -12.5 Semi-finished Goods 2,231.7 16.3 2,578.4 15.7 2,895.5 17.3 15.5 12.3 Fertilizers 398.9 2.9 502.9 3.1 430.0 2.6 26.1 -14.5 Fuel 2,573.1 18.8 2,040.9 12.4 1,339.0 8.0 -20.7 -34.4 Petroleum Products 2,494.9 18.2 1,985.1 12.1 1,280.1 7.7 -20.4 -35.5 Others 78.2 0.6 55.9 0.3 58.9 0.4 -28.6 5.4 Capital Goods 4,845.5 35.3 6,882.3 41.8 6,829.4 40.8 42.0 -0.8 Transport 1,089.4 7.9 1,699.1 10.3 1,535.6 9.2 56.0 -9.6 Agricultural 169.0 1.2 71.6 0.4 83.4 0.5 -57.6 16.4 Industrial 3,587.0 26.2 5,111.6 31.1 5,210.4 31.2 42.5 1.9 Consumer Goods 3,694.6 26.9 4,510.9 27.4 5,264.3 31.5 22.1 16.7 Durables 1,176.2 8.6 1,608.0 9.8 1,567.3 9.4 36.7 -2.5 Non-durables 2,518.3 18.4 2,902.9 17.6 3,697.0 22.1 15.3 27.4 Miscellaneous 200.9 1.5 275.6 1.7 247.8 1.5 37.2 -10.1 Total Imports 13,712.3 100.0 16,458.6 100.0 16,725.2 100.0 20.0 1.6 Source: Ethiopian Revenue and Customs Authority and Ethiopian petroleum Enterprise

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5.2.4 Direction of Trade
Asia, Europe, Africa and America have confined to become the main destinations for Ethiopian exports. Asia accounted for
37.2 percent of Ethiopia‘s exports, of which,
32.2 percent was to China, 17.6 percent to
Saudi Arabia, 8.4 percent to United Arab Emirates, 6.7 percent to Israel, 6.6 percent to India, 5.6 percent to Japan and 5.3 percent to Pakistan. Altogether, these countries accounted for 82.4 percent of Ethiopia‘s total exports to Asia. The major exports to China constituted of oilseeds, leather & leather products, mineral products, coffee, textile materials and natural gums. Saudi Arabia largely imported coffee, meat & meat products, live-animals, flower, oilseeds, spices and cereals. While exports to United Arab Emirates were meat & meat products, pulses, oilseeds, flower, food, live￾animals and coffee. Oilseeds, cereals, coffee, beverage and spices went to Israel. The main exports to India were pulses, mineral products, oilseeds, leather & leather products, spices and chat. Japan imported mainly coffee, oilseeds, flower, leather & leather products, bees wax and textile & garment. While Pakistan imported pulses, tea, spices and vegetables. Europe accounted for 34.1 percent of Ethiopia‘s total exports. Within Europe, Switzerland constituted 29 percent, the Netherlands 19.4 percent, Germany 17.5 percent, Belgium 6.3 percent, Italy 5.1 percent, United Kingdom 4.4 percent and France 3.9 percent. These countries together accounted for 85.6 percent of Ethiopian export to Europe. The main exports to Switzerland were gold, oilseeds and coffee.While the Netherlands imported mainly flower, coffee, oilseeds, vegetables and pulses. Likewise, Germany mainly imported coffee, textile & garment and flower. While coffee, flower, oilseeds, vegetables and textile & garment were exported to Belgium. Italy imported mainly coffee, leather & leather products, textile & garment, flower, pulses and oilseeds. while the major Exports to UK constituted coffee, flower, leather & leather products, oilseeds, vegetables and pulses. Ethiopian exports to France were coffee, flower, Textile & garment, pulses and leather & leather products. About 20.8 percent of Ethiopia‘s exports went to Africa, mainly Somalia (55.8 percent), Djibouti (21.5 percent), Sudan (12

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81 percent), Kenya (4.9 percent) and Egypt (3.6 percent), which altogether accounted for
97.8 percent of the total exports to Africa.
The major exports to Somalia were chat, live-animals, fruits and vegetables while chat, live–animals, electricity, vegetables and fruits to Djibouti. Sudan imported largely pulses, coffee, spices, electricity and live-animals. The main exports to Kenya included pulses, leather & leather products, textile & garment and tea while live￾animals, oilseeds, pulses, spices, coffee and fruits were exported to Egypt. America accounted for 7 percent of Ethiopia‘s total exports, of which 88 percent was destined to the United States and 6.5 percent to Canada. Coffee, oilseeds, leather & leather products, food, textile & garments and flower were the major exports to the United States and coffee, oilseeds, leather & leather and flower to Canada. Source: NBE Staff Compilation In terms of merchandise exports, about 62.7 percent originated from Asia 25.1 percent from Europe, 8.3 percent America and 3.9 percent Africa. 20.8% 34.1% 7% 37.2% 0.9% Fig.V.6. Export by Destination Africa Europe America Asia Oceania

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The major import origins in Asia were China (53.0 percent), India (12.0 percent), Japan (6.7 percent), Kuwait (5.3 percent) United Arab Emirates (4.4 percent), Saudi Arabia (3.6 percent), Indonesia (3.4 percent), Malaysia (2.4 percent) and South Korea (2.1 percent) whose combined share was 92.9 percent. Major imports from China included metal & metal products, machines including aircraft parts, electrical materials, road motor vehicles, cloths and textiles. Likewise, metal & metal products, machines including aircraft parts, grain and fertilizer were the major imports from India. Imports from Japan constituted road motor vehicles, aircraft parts, metal & metal products and electrical materials. Petroleum products and road motor vehicles were the major import items from Kuwait. Similarly, imports from United Arab Emirates were petroleum products, chemicals, metal & metal products and rubber products. Petroleum products were the major Ethiopian imports from Saudi Arabia. Imports from Indonesia included soap & polish, paper & paper products, textile, chemicals and electric materials. Machines including aircraft parts, soap & polish and electric materials were the major imports from Malaysia, and aircraft parts, petroleum products and telecom apparatus from South Korea. Imports from Europe accounted for 25.1 percent of Ethiopia‘s total imports with the major countries being Turkey (15.2 percent), Italy (15.0 percent), Sweden (12.1 percent), Germany (8.8 percent), Belgium (6.9 percent), Ukraine (5.7 percent), United Kingdom (4.8 percent), France (4.7 percent), the Netherlands (4.6 percent), Russia (4.5 percent) and Romania (4.2 percent). These countries jointly constituted 86.5 percent of Ethiopia‘s imports from Europe. Major imports from Turkey were metal & metal products, aircraft parts, electrical materials, petroleum products and rubber products. Imports from Italy included aircraft parts, road motor vehicles, food & live-animals, metal & metal products, electric materials and fertilizer. Aircraft parts, road motor vehicles, telecom apparatus, food & live-animals were the imports from Sweden. Imports from Germany were aircraft parts, food & live￾animals, road motor vehicles and electrical materials. While Belgium exported largely aircraft parts and medical & pharmaceuticals products. Metal & metal products and

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83 aircraft parts were the main imports from Ukraine. Imports from United Kingdom included aircraft parts, electric materials and road motor vehicles. The major imports from France were aircraft parts, electric materials and road motor vehicles. Fertilizer, aircraft parts and food & live-animals and electric materials were imported from the Netherlands. Imports from Russia were food & live-animals, metal & metal products and tobacco. Food & live-animals, machines including aircraft parts, metal & metal products were the main items imported from Romania. Imports from America accounted for 8.3 percent of the total Ethiopian import bills, of which the United States accounted for 91.1 percent Canada 3. 4 percent and Brazil 3.2 percent. Food & live-animals, fertilizer, electric materials and road motor vehicles were the major imports from the United States. Machines including aircraft parts and electrical materials were imported from Canada. Aircraft parts, road motor vehicles and food & live-animals constituted the main imports from Brazil. Africa accounted for about 3.9 percent of Ethiopia‘s total imports. The major countries of origin were Egypt (28.5 percent), South Africa (27.6 percent), Morocco (26.7 percent), Sudan (6.5 percent) and Kenya (5.2 percent) which jointly accounted for
94.5 percent of Ethiopia‘s imports for the
continent. Metal & metal products, machines including aircraft parts, rubber production and food & live-animals were the major imports from Egypt. Road motor vehicles, petroleum products, soap & polish, machines including aircraft parts, paper & paper products originated from South Africa. The major Morocco exported mainly petroleum products while Sudan exported petroleum products and food & live-animals. Metal & metal products, machines including aircraft parts, rubber products were the main imports from Kenya.

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Source: NBE Staff Compilation
3.88 %
62.65%
25.08%
8.28%
0.11%
Fig: V.7. Import by Origin Africa Asia Europe America Oceania

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5.3 Services and Transfers
5.3.1 Services
In 2015/16, net services account recorded USD 721.5 million deficit, which was significantly higher than USD 341.4 million deficit recorded a year ago. This was largely attributed to wider deficit in net travel (178.5 percent) net other services (42.3 percent) and net government services (21.9 percent).

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Table 5.7 Services Accounts (In Millions of USD)
S/N Particulars
2013/14 2014/15 2015/16 Percentage Change A B C B/A C/B 1 Investment Income (2+5) -152.8 -262.5 -254.8 71.9 -2.9 2 Interest, net (3-4) -134.8 -238.9 -242.7 77.1 1.6 3 Credit 8.7 10.3 13.1 19.1 27.4 4 Debit 143.5 249.2 255.9 73.6 2.7 5 Dividend, net -17.9 -23.7 -12.1 32.1 -48.8 6 NON-FACTOR SERVICES, net (7-8) 712.2 -78.9 -466.6 -111.1 491.3 7 Exports of non-factor services

3,174.2

3,028.4

2,932.8 -4.6 -3.2
Travel 538.8 409.8 376.8 -23.9 -8.1 Transport

2,144.9

2,186.9

2,228.6 2.0 1.9
Government 297.3 184.0 158.2 -38.1 -14.0 Other 193.1 247.7 169.2 28.3 -31.7 8 Imports of non-factor services

2,461.9

3,107.3

3,399.5 26.2 9.4
Travel 223.5 326.1 442.5 45.9 35.7 Transport 1542.8 1776.7 1697.5 15.2 -4.5 Government 6.3 1.7 15.8 -72.4 802.3 Other 689.2 1002.7 1243.6 45.5 24.0 9 Net Services (10+11+12+13+14) 559.5 -341.4 -721.5 -161.0 111.3 10 Travel 315.3 83.7 -65.7 -73.5 -178.5 11 Transport 602.1 410.2 531.1 -31.9 29.5 12 Government 291.0 182.2 142.4 -37.4 -21.9 13 Other -496.1 -755.0 -1074.4 52.2 42.3 14 Investment Income -152.8 -262.5 -254.8 71.9 -2.9 Source: MoFEC, Transport and Telecommunication Companies, NBE- FEMEMD and Staff Compilation.

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5.3.2 Unrequited Transfers
Net transfers improved by 9.9 percent due to 22.9 percent increase in private transfers despite a 32.2 percent decline in official transfers. The decline in net official transfers was attributted to lower grants from both international financial institutions and bilateral donors.
Table 5.8 Unrequited Transfers
(In Millions of USD)
No. Particulars
2013/14 2014/15 2015/16 Percentage A B C % Share Change %Share %Share B/A C/B 1 Private Transfers 4,114.8 73.8 4,881.6 76.4 5,998.5 85.4 18.6 22.9
1.1 Receipts 4,140.1 74.3 4,901.2 76.7 6,029.6 85.9 18.4 23.0
NGOs 1,096.4 19.7 1,104.5 17.3 2,039.1 29.0 0.7 84.6 Cash 982.3 17.6 1,017.0 15.9 1,207.7 17.2 3.5 18.8 Food 114.1 2.0 87.5 1.4 831.4 11.8 -23.3 850.2 Other Private individuals 3,043.7 54.6 3,796.7 59.4 3,990.5 56.8 24.7 5.1
1.2 Payments 25.3 0.5 19.6 0.3 31.0 0.4 -22.5 58.4
2 Official Transfers 1,461.0 26.2 1,507.9 23.6 1,021.6 14.6 3.2 -32.2
2.1 Receipts 1,548.4 27.8 1,524.7 23.9 1,045.5 14.9 -1.5 -31.4
Cash 1,548.4 27.8 1,524.7 23.9 1,045.5 14.9 -1.5 -31.4 Food Other
2.2 Payments 87.4 1.6 16.9 0.3 23.9 0.3 -80.7 42.0
Total Net Transfers 5,575.8 100.0 6,389.5 100.0 7,020.1 100.0 14.6 9.9 Source: Disaster Prevention and Preparedness Agency, MoFEC and NBE

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5.4. Current Account
The deficit in the current account balance widened to USD 7.6 billion in 2015/16 from USD 7.4 billion last year, as both trade balance and net services recorded deficits.
5.5 Capital Account
In contrast, capital account showed USD
6.2 billion surplus although it was 15.4
percent lower than that of last year in official net long term capital 41.2 percent and other public long term net capital by
48.6 percent. Foreign direct investment
however surged by 37.5 percent compared to last year.
5.6 Changes in Reserve Position
Net foreign assets of the banking system at recorded a reserve drawdown of USD
830.9 million, due to the decline in net
foreign assets of NBE of commercial banks tended to improve. Thus, the gross international reserves were was adequate to cover 2.6 months of imports of goods and non-factor services.
5.7 External Debt
Ethiopia‘s external debt stock of reached USD 21.7 billion in 2015/16, depicting a 14 percent annual growth largely due to higher debt owed to multilateral, bilateral, and commercial creditors. Hence, the country‘s external debt stock to GDP ratio stood at 30.7 percent. Plummeted by stock ratio to total receipts from export of goods and non-factor services rose to 3.7 percent from 3.2 percent a year ago. Similarly, commercial debt stock, reached USD 6.9 billion showing a 2.8 percent annual increase and accounting for 31.1 percent of the total debt stock. Of the total debt stock, 35.6 percent was owed to multilateral and 32.7 percent to bilateral creditors. The country‘s external debt burden as measured by debt services to export of goods and services ratio increased slightly to 16.7 percent from
16.1 percent year earlier.

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Table 5.9: External Public Debt (In Million of USD)
Particulars
2013/14 2014/15 2015/16 Percentage Change A B C B/A C/B Annual Debt 3,153.45 6,419.05 3,399.60 103.6 -47.0 Debt Stock 14,005.06 19,092.05 21,740.36 36.3 13.9 Multilateral 6,154.55 6,484.85 7,742.01 5.4 19.4 Bilateral 4,505.10 5,904.91 7,109.03 31.1 20.4 Commercial 3,345.46 6,702.30 6,889.32 100.3 2.8 Debt Service 663.75 975.17 968.23 46.9 -0.7 Principal repayments 505.56 719.97 677.18 42.4 -5.9 Interest payments 158.19 255.20 291.05 61.3 14.1 Debt stock to GDP ratio (In percent ) 25.5 31.0 30.7 21.7 -1.0 Debt stock to export of goods and non-factor services 2.2 3.2 3.7 45.9 18.8 Receipts from goods and non-factor services 6,474.20 6,047.50 5,797.70 -6.6 -4.1 Debt service ratio (In percent )1/ 10.3 16.1 16.7 57.3 3.6 Arrears Principal Interest Relief 3.5 Principal 2.9 Interest 0.6 Source:MoFEC 1/ Ratio of debt service to receipts from export of goods and non-factor services
5.8. Developments in Foreign Exchange Markets
5.8.1. Developments in Nominal Exchange Rate
In 2015/16, weighted average exchange rate of Birr in the inter-bank foreign exchange market was Birr 21.1059/USD, which showed a 5.0 percent annual depreciation (Table 5.10).

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Table 5.10 Inter-Bank Exchange Ratesof Birr per USD
Period
Average
Weighted
Rate
Amount Traded in millions of USD Number of Trades Total o/w Among CBs Total o/w Among CBs 2013/14 19.0748 18.70 6.20 254.00 7.00 Qtr. I 18.7384 3.20 0.00 63.00 0.00 Qtr. II 18.9390 8.20 5.00 65.00 4.00 Qtr. III 19.1819 4.30 1.20 65.00 3.00 Qtr. IV 19.4400 3.05 0.00 61.00 0.00 2014/15 20.0956 14.50 2.00 258.00 5.00 Qtr. I 19.7288 4.15 1.00 66.00 2.00 Qtr. II 19.9925 4.25 1.00 69.00 3.00 Qtr. III 20.2145 3.05 0.00 61.00 0.00 Qtr. IV 20.4466 3.05 0.00 62.00 0.00 2015/16 21.1059 12.65 0.00 253.00 0.00 Qtr. I 20.6965 3.15 0.00 63.00 0.00 Qtr. II 20.9497 3.25 0.00 65.00 0.00 Qtr. III 21.2059 3.10 0.00 62.00 0.00 Qtr. IV 21.5713 3.15 0.00 63.00 0.00 Source:NBE, Foreign Exchange Monitoring & Reserve Management Directorate and staff compilation In the retail foreign exchange market, the average buying and selling rates of birr at forex bureaus depreciated by 4.9 percent and 5.0 percent with spread margin of 1.9 percent.

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Table 5.11: End Period Mid-Market Rates (USD per Unit of Foreign Currency)
Currency
2013/14 2014/15 2015/16 Percentage change A B C B/A C/B Pound Sterling 1.7023 1.5697 1.3433 -7.79 -14.42 Swedish Kroner 0.1481 0.1202 0.1175 -18.86 -2.19 Djibouti Frank 0.0056 0.22 -0.05 Swiss Frank 1.1194 1.0708 1.0198 -4.34 -4.76 Saudi Riyal 0.2666 0.01 0.00 UAE Dirhams 0.2723 -0.01 0.00 Canadian Dollar 0.9349 0.8094 0.7696 -13.43 -4.92 Japanese Yen 0.0099 0.0081 0.0097 -17.82 19.78 Euro 1.3616 1.1112 1.1083 -18.39 -0.26 SDR 1.5438 1.4067 1.3954 -8.88 -0.80 Source: Staff Compilation In 2015/16, the end period mid market exchange rate of the US dollar appreciated against almost all major international currencies. Specifically USD appreciated against Pound Sterling (14.4 percent), Canadian Dollar (4.9 percent), Swiss Franc (4.8 percent), Swedish Kroner (2.2 percent), SDR (0.8 percent), Euro (0.3 percent), while it depreciated against Japanese Yen by 19.8 percent due to safe haven effects resulting from global financial market volatility, narrowing of interest rate differentials with the U.S., market perceptions of limits to BoJ‘s stimulus, and current account surplus (2016 IMF Article IV consultation). At the same time, US dollar remained unchanged against Saudi Riyal and UAE Dirham (Table 5.11).

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Table 5.12: End Period Mid-Market Rates (Birr per Unit of Foreign Currency)
Currency
2013/14 2014/15 2015/16 Percentage change A B C B/A C/B USD 19.6750 20.6688 21.9094 5.05 6.00 Pound 33.4928 32.4437 29.4309 -3.13 -9.29 Swedish Kroner 2.9131 2.4838 2.5751 -14.74 3.68 Djibouti Frank 0.1104 0.1160 0.1229 5.07 5.95 Swiss Frank 22.0251 22.1316 22.3429 0.48 0.95 Saudi Riyal 5.2460 5.5108 5.8416 5.05 6.00 UAE Dirhams 5.3567 5.6274 5.9650 5.05 6.00 Canadian Dollar 18.3947 16.7291 16.8612 -9.06 0.79 Japanese Yen 0.1941 0.1682 0.2135 -13.35 26.97 Euro 26.7895 22.9671 24.2822 -14.27 5.73 SDR 19.6750 20.6688 21.9094 -4.28 5.15 Source: Staff Compilation The Birr also lost ground against most international currencies. Particularly Japanese Yen (27.0 percent), Saudi Riyal (6.0 percent) against, Euro (5.7 percent) SDR (5.2 percent) Swedish Kroner (3.7 percent) Swiss Franc (1.0 percent) Canadian Dollar (0.8 percent). In contrast, it appreciated against British Pound by 9.3 percent presumably due Brexit from the European Union (Table 5. 12).
5.8.2. Movements in Real Effective Exchange Rate
Meanwhile, the real effective exchange rate (REER) of the Birr has been appreciating since 2010/11 due to higher domestic inflation relative to that of its major trading partners. Yet, 2015/16, the REER appreciation was merely 1.1 percent compared to 11.9 percent in 2014/15 due to slowdown in domestic inflation. (Table 5.13) On the other hand, the nominal effective exchange rate (NEER) of the Birr depreciated by 2.7 percent year-on-year

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Table 5.13: Trends in Real and Nominal Effective Exchange Rates
Fiscal Year REERI NEERI
Percentage Change
REERI NEERI
2007/08 150.5 74.0 27.86 -12.4 2008/09 140.7 67.5 -6.54 -8.7 2009/10 121.2 56.1 -13.84 -17.0 2010/11 122.8 42.9 1.33 -23.5 2011/12 139.4 43.2 13.49 0.7 2012/13 140.2 42.0 0.59 -2.7 2013/14 140.8 40.7 0.44 -3.3 2014/15 157.6 42.3 11.93 4.0 2015/16 159.3 41.2 1.1 -2.7 Source:NBE Staff Compilation An increase in REERI and NEERI indicates appreciation and vice versa. Where: REERI = Real Effective Exchange Rate Index NEERI = Nominal Effective Exchange Rate Index
5.8.3. Foreign Exchange Transactions
In 2015/16, USD 12.7 million was traded in the inter-bank foreign exchange market which was 13 percent lower than last year. All the foreign exchange traded in the inter-bank foreign exchange market was supplied by National Bank of Ethiopia (Table 5.10). Meanwhile, forex bureaux of commercial banks purchased foreign exchange to the tune of USD 339.9 million showing a 6.8 percent decline over the preceding year. Likewise, their foreign exchange sales dropped by 7.4 percent to USD 194.6 million (Table 5.14).

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Table 5.14: Foreign Exchange Transactions by Forex Bureaus of Commercial Banks
(In Millions of USD)
Name of Forex Bureau
2013/14 2014/15 2015/16 Percentage Change A B C D E F E/C F/D Purchases Sales Purchases Sales Purchases Sales Purchases Sales Commercial Bank of Ethiopia 412.21 70.77 292.96 100.82 262.02 93.50 -10.56 -7.26 Bank of Abyssinia 4.41 5.13 5.32 10.02 5.06 9.64 -4.78 -3.74 Dashen Bank 33.55 37.30 22.80 28.51 16.87 30.34 -26.02 6.39 Awash International Bank 9.13 12.53 6.68 19.51 6.28 10.71 -6.07 -45.11 Construction & Business Bank 4.27 1.40 4.36 3.03 3.09 1.72 -29.11 -43.21 Wegagen Bank 5.02 6.73 4.62 5.71 3.77 5.99 -18.46 4.95 United Bank 16.25 10.09 11.22 13.41 9.96 14.50 -11.25 8.10 Development Bank 3.72 0.73 0.43 0.65 0.03 0.37 -92.70 -43.35 Nib International Bank 4.47 6.40 2.66 8.39 1.40 5.27 -47.32 -37.14 Lion International Bank 2.59 1.73 2.21 2.62 19.04 4.77 759.72 81.76 Oromia International Bank 2.81 2.11 6.18 4.62 9.01 5.09 45.96 10.22 Zemen Bank 0.90 4.07 0.67 3.97 0.65 6.19 -2.34 55.98 Cooperative Bank of Oromia 0.41 0.41 0.93 3.07 0.67 1.67 -27.83 -45.51 Buna International Bank 0.38 0.29 0.67 1.37 0.54 1.17 -20.32 -14.87 Birhan International Bank 0.01 0.03 0.33 0.45 0.14 0.47 -55.78 4.23 Abay Bank 0.54 1.36 0.88 2.09 0.07 1.00 -92.43 -51.90 Addis International Bank 1.61 0.47 0.95 0.96 0.78 1.55 -17.37 61.62 Debub Global Bank 1.28 0.25 0.29 0.27 0.16 0.36 -43.82 34.31 Enat Bank 0.62 0.26 0.52 0.54 0.32 0.25 -39.33 -53.11 Total 504.18 162.07 364.67 210.00 339.86 194.57 -6.8 -7.4 Average Exchange Rate 19.0997 19.4255 20.1003 20.4798 21.0910 21.5044 4.9 5.0 Source: Staff Compilation

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VI.GENERAL GOVERNMENT FINANCE
6.1. General
The overall fiscal operations of the general government resulted in Birr 29.2 billion deficit, which was slightly lower than Birr 30.8 billion (including grants) recorded in 2014/15. Total revenue (including grants) showed a 22.1 percent annual growth. Accordingly, revenue to GDP ratio stood at 15.1 percent which was similar to that of the preceding year. Meanwhile, general government expenditure went up by 18.4 percent to Birr 272.9 Billion as both current and capital expenditures expanded. Hence, the ratio of expenditure to GDP reached
17.9 percent compared with 18.6 percent
a year earlier (Table 6.1).
6.1 Measuring Fiscal Sustainability (In percent)
Fiscal
Year PD/GDP IP/RR Debt/GDP R(Debt) R(GDP) Exp/GDP Rev/GDP R(OR) 2002/03 -6.6 10.9 38.8 2.4 10.3 28.2 15.3 7.1 2003/04 -3.0 7.8 36.3 10.4 18.0 23.9 16.2 24.8 2004/05 -4.5 6.5 38.2 29.4 22.9 23.5 14.7 11.1 2005/06 -4.7 5.4 37.8 22.3 23.6 22.5 15.0 26.3 2006/07 -3.7 5.5 36.3 25.5 30.6 20.9 12.8 11.6 2007/08 -2.9 3.8 32.5 29.3 44.4 19.1 12.1 36.7 2008/09 -0.9 3.2 26.9 11.5 35.1 17.4 12.1 34.8 2009/10 -1.3 2.9 27.5 17.1 14.2 18.8 14.2 34.1 2010/11 -1.6 2.8 26.8 29.8 33.4 18.6 13.7 28.3 2011/12 -1.2 2.2 25.6 39.5 46.1 16.8 13.9 48.8 2012/13 -2.0 2.4 27.4 23.4 15.5 18.1 14.6 20.6 2013/14 -2.6 2.6 28.6 28.4 21.1 17.5 13.8 17.8 2014/15 -2.5 2.9 31.8 31.1 16.6 18.6 15.1 27.7 2015/16 -1.9 3.1 32.1 24.6 23.6 17.9 15.1 23.6 Source: Staff Computation PD = Primary Deficit IP/RR = Share of interest payments in Recurrent revenue Debt/GDP = Ratio of Domestic Debt to GDP R(Debt) = Growth rate of Domestic Debt R(GDP) = Growth rate of GDP at current market price Exp/GDP = Ratio of General Government Expenditure to GD Rev/GDP = Ratio of General Government Revenue to GDP R(OR) = Growth rate of ordinary Revenue

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6.2 Revenue and Grants
General government revenue, including grants reached Birr 243.6 billion in 2015/16 and its GDP ratio remained at
15.1 percent. About 82.3 percent of the
total domestic revenue came from tax sources which recorded 14.8 percent annual growth. Owing to improved collection of direct taxes (18.2 percent) and indirect taxes (12.8 percent). Direct taxes contributed 37.5 percent to total tax revenue while that of in direct taxes was 62.5 percent. At the same time, Birr 40.9 billion was collected from non-tax sources which exhibited a 92.2 percent surge largely due to remarkable increase in collection from government investment income and sales of goods and services. Grants at Birr 13 Billion remained at the previous year level. All in all, total revenue including grants accounted for 96.7 percent of the annual target. 0 50000 100000 150000 200000 250000 300000 In million Birr Fiscal Year Fig. VI.1 Trend of General Government Revenue by Component Total Revenue and Grants Tax Revenue Direct tax revenue Indirect tax revenue

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Table 6. 2: Summary of General Government Revenue by Component (In Millions of Birr)
Particulars
2014/15 2015/16
Percentag e Change Perform- [A] [B] [C] ance Rate Pre. Act [C/A] Revised Budget Pre. Act [C/B] Total Revenue and Grants 199,639.1 251,919.8 243,671.6 22.1 96.7 Total Revenue 1/ 186,618.7 237,862.1 230,657.3 23.6 97.0 Tax Revenue 165,312.5 195,035.8 189,717.2 14.8 97.3

1. Direct Tax Revenue 60,154.4 78,039.7 71,126.8 18.2 91.1
   1.1 Income and Profit
   Taxes 58,288.1 75,286.5 69,520.2 19.3 92.3 Personal 20,432.8 25,787.0 25,171.2 23.2 97.6 Business 30,444.1 41,366.3 36,445.7 19.7 88.1 Others 2/ 7,411.2 8,133.2 7,903.3 6.6 97.2
   1.2 Rural Land Use Fee 239.7 377.3 330.0 37.7 87.5
   1.3 Urban Land Use Fee 1,626.6 2,375.9 1,276.7 -21.5 53.7
2. Indirect Taxes 105,158.0 116,996.1 118,590.4 12.8 101.4
   2.1 Domestic Taxes 52,367.9 57,688.5 55,867.4 6.7 96.8
   2.2 Foreign Trade Taxes 52,790.1 59,307.6 62,722.9 18.8 105.8
   Import 52,790.1 59,307.6 62,722.9 18.8 105.8 Export
3. Non-Tax Revenue 21,306.2 42,826.3 40,940.1 92.2 95.6
   3.1 Charges and Fees 2,384.2 2,242.2 2,399.8 0.7 107.0
   3.2 Govt. Invt. Income 3/ 4,997.2 14,834.5 15,431.8 208.8 104.0
   3.3 Reimb. And Property
   Sales 199.9 197.3 117.7 -41.1 59.7
   3.4 Sales of Goods &
   Services 3,017.3 5,194.8 4,097.7 35.8 78.9
   3.5 Others 4/ 10,707.6 20,357.6 18,893.2 76.4 92.8
4. Grants 13,020.4 14,057.7 13,014.3 92.6
   Source: Ministry of Finance and Economic Development 1/ It does not include privatization proceeds 2/ Others include rental income tax, withholding income tax on imports, interest income tax, capital gains tax, agricultural income and other income 3/ Government investment income includes: residual surplus, capital charge, interest payments and state dividend. 4/Other extraordinary, miscellaneous and pension contribution

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6.1 Expenditure
Total expenditure reached Birr 272.9 billion about 18.4 percent higher than last year due to increases both in recurrent and capital expenditures. Recurrent expenditure stood at Birr
131.9 billion, a showing 16.3 percent
annual growth and its share in total expenditure was 48.3 percent and the its annual performance was 87.4 percent Meanwhile, capital expenditure depicted
20.4 percent rice to Birr 141 billion
having a 51.7 percent share in total expenditure. Capital expenditure showed a 94.3 percent performance. In summary, the performance of general government expenditure became 90.8 percent of the annual budget.

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Table 6.3: Summary of General Government Expenditure (In Millions of Birr)
Particulars
2014/15 2015/16
Percentage
Change
[A] [B] [C] Performance Rate Pre. Act [C/A] Revised Budget Pre. Act [C/B] Total Expenditure

230,521.2

300,462.0

272,930.1 18.4 90.8

1. Current Expenditure

113,375.5

150,926.0

131,902.8 16.3 87.4
General Services

38,915.7

37,136.9

41,444.5 6.5 111.6
Economic Services

14,840.5

19,609.3

22,342.3 50.5 113.9
Social Services

51,688.6

60,532.3

57,682.0 11.6 95.3
Interest and Charges

5,337.7

8,443.7

7,231.8 35.5 85.6
External Assistance1/
Social Safety Net
Others (miscellaneous)

2,593.0

25,203.7

3,202.2 23.5 12.7
2. Capital Expenditure

117,145.7

149,536.0

141,027.3 20.4 94.3
Economic Development

76,398.8

95,046.6

89,934.9 17.7 94.6
Social Development

28,639.5

39,058.2

38,214.0 33.4 97.8
General Development

12,107.4

15,431.2

12,878.3 6.4 83.5
3. Special programs - - - - -
Source: Ministry of Finance and Economic Cooperation Note: 1/ Includes mapping, science and technology, public buildings, etc

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0
50000
100000
150000
200000
250000
300000
1998/992002/032003/042004/052005/062006/072007/082008/092009/102010/112011/122012/132013/142014/152015/16 Fig. VI.2: Trends in General Government Expenditure by Component Total Expenditure Current Expenditure Capital Expenditure 0.0 5.0 10.0 15.0 20.0 25.0 30.0 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Fig.VI.3 Trends in General Government Expenditure and Revenue (% of GDP) Expenditure/GDP Revenue/GDP

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6.4. Deficit Financing
In 2015/16 government budgetary operations, (including) grants resulted in a fiscal deficit of Birr 29.2 billion about
5.3 percent lower than a year earlier.
Fiscal deficit as percentage of GDP was
1.9 percent and it was financed by net
external borrowing, net domestic borrowing and privatization receipts.

National Bank of Ethiopia 102 2015/16 Annual Report
Table 6.4 Summary of General Government Finance(In Millions of Birr)
Particulars
2014/15 2015/16
Percentag e Change
Perform￾ance
[A] [B] [C] Rate
Pre. Act [C/A]
Revised
Budget Pre. Act [C/B]
Revenue and Grants 199,639.1 251,919.8 243,671.6 22.1 96.7 Revenue 186,618.7 237,862.1 230,657.3 23.6 97.0 Grants 13,020.4 14,057.7 13,014.3 0.0 92.6 Total Expenditure 230,521.2 300,462.0 272,930.1 18.4 90.8 Current Expenditure 113,375.5 150,926.0 131,902.8 16.3 87.4 Capital Expenditure 117,145.7 149,536.0 141,027.3 20.4 94.3 Overall Surplus/ Deficit (Including Grants) -30,882.1 -48,542.2 -29,258.5 -5.3 60.3 (Excluding Grants) -43,902.5 -62,599.9 -42,272.8 -3.7 67.5 Total Financing 30,882.1 48,542.2 29,258.5 -5.3 60.3 Net External Borrowings 18,733.6 21,331.2 26,033.5 39.0 122.0 Gross Borrowing 20,683.3 23,859.1 28,223.1 36.5 118.3 o/w Special Programs Amortization Paid 1,949.7 2,527.9 2,189.6 12.3 86.6 HIPC Relief Net Domestic Borrowings 18,466.2 26,710.9 24,704.0 33.8 92.5 Banking System 10,738.6 9,208.3 -14.3 Non-Banking Systems 7,727.6 15,495.7 100.5 Privatization Receipts 485.0 500.0 500.0 3.1 Others and Residuals -6,802.7 -21,979.0 223.1 Source: Ministry of Finance and Economic Cooperation

National Bank of Ethiopia 103 2015/16 Annual Report
VII. Investment
In 2015/16, 407 projects were licensed by the Ethiopian Investment Agency (EIA) and Regional Investment Offices which were
149.7 percent higher than a year earlier. All
of which were private and at operational stage. These projects command Birr 4.1 billion investment capital showing 173.5 percent annual growth. Of the total investment projects, 362 (or 89 percent) were domestic with a capital of Birr
1.5 billion; and 45 projects were foreign
having Birr 2.6 billion as capital.
The average capital per project for domestic investors was Birr 4.2 million and that of foreign investor Birr 57.9 million, signifying that foreign investment projects were more of capital intensive nature than domestic ones. It is estimated that these investment projects have created job opportunities for about 11,227 permanent and 10,505 casual workers (Table 7.1).

National Bank of Ethiopia 104 2015/16 Annual Report
Table 7.1: Number of Projects, Capital and Jobs Created by Operational Investment
(Capital in millions of Birr) 2012/13 2013/14 2014/15 Percentage change A B C C/A C/B

1. Total
   Investment Number 55 163 407

640.0

149.7
Capital 1,512 5,636.2 4,135.0

173.5

(26.6)
Permanent
Workers 1,861 3,936 11,227

503.3

185.2
Temporary
Workers 1,221 6,425 10,505

678.7

63.5
1.1. Total
Private Number 55 162 407

760.4

151.2
Capital 1,511.7 3,136.2 4,135.0

173.5

31.8
Permanent
Workers 1,861 3,911 11,227

503.3

187.1
Temporary
Workers 1,221 6,425 10,505

760.4

63.5
1.1.1. Domestic
Number 3 128 362

11,966.7

182.8
Capital 4.4 628.0 1,530.3

34,351.0

143.7
Permanent
Workers 11 2,022 3,467

31,418.2

71.5
Temporary
Workers 12 5,942 9,278

77,216.7

56.1
1.1.2. Foreign
Number 52 34 45

(13.5)

32.4
Capital 1,507.2 2,508.2 2,604.7

72.8

3.8
Permanent
Workers 1,850 1,889 7,760

319.5

310.8
Temporary
Workers 1,209 483 1,227

1.5

154.0
1.2.Public
Number 0 1 0
Capital 0 2,500 0
Permanent
Workers 0 25 0
Temporary
Workers 0
Source: Ethiopian Investment Agency

National Bank of Ethiopia 105 2015/16 Annual Report Fig.VII.1: Number of Operational Investment Projects by Source Source: Ethiopian Investment Agency. Fig.VII.2: Capital of Operational Investment Projects by Source Source: Ethiopian Investment Agency 3 128 362 52 34 45 0 1 0 0 50 100 150 200 250 300 350 400 2012/13 2013/14 2014/15 Domestic Foreign Public 0 500 1,000 1,500 2,000 2,500 3,000 2012/13 2013/14 2014/15 In million Birr Domestic Foreign Public

National Bank of Ethiopia 106 2015/16 Annual Report 7.1: Investment by Sector Of the total investment projects, about 48.4 percent were in real estate, renting & business activities, 26.3 percent in agriculture, hunting& forestry, 12.3 percent in construction, 9.6 percent in manufacturing, 1.2 percent in hotel and restaurants and the other sectors constituted
2.2 percent.
As for, investment capital, manufacturing sector constituted 65.5 percent followed by real estate renting & business activities (13.6 percent), agriculture hunting & forestry (12.6 percent), construction (3.2 percent) and the remaining sectors 5.1 percent (Table 7.2). Fig.VII.3: Distribution of Operational Investment Projects by Sector in 2014/15 Source: Ethiopian Investment Agency. Manufacturing 9.6% Agriculture, hunting and forestry 26.3% Real estate, renting and Business activities 48.4% Hotel and restaurants 1.2% Construction 12.3% Others 2.2% Manufacturing Agriculture, hunting and forestry Real estate, renting and Business activities Hotel and restaurants Construction Others

National Bank of Ethiopia 107 2015/16 Annual Report
Table: 7.2: Numbers and Capital of Operational Investment Projects by Sector
(Capital in millions of Birr) Sectors 2012/13 2013/14 2014/15 Percentage share No. of Projects Investment Capital No. of Projects Investment Capital No. of Projects Investment Capital No. of Projects Investment Capital Manufacturing 24 1,370.5 38 516.8 39 2,707.2 9.6 65.5 Agriculture, hunting and forestry 0 13 70.1 107 521.7 26.3 12.6 Real estate, renting and Business activities 17 89.0 36 2,135.3 197 563.4 48.4 13.6 Hotel and restaurants 2 3.1 6 44.1 5 105.8 1.2 2.6 Education 2 4.8 2 25.4 1 79.8 0.2 1.9 Health and social work 2 3.7 1 0.2 1 4.0 0.2 0.1 Construction 3 21.6 58 2,811.2 50 132.8 12.3 3.2 Tour operation, transport and communication 3 5.2 4 12.1 3 5.8 0.7 0.1 Whole sale, retail trade and repair service 0 0.0 1 10.9 0 0.0 Mining and quarrying 0 0.0 1 1.1 0 0.0 Electricity, gas, steam and water supply 0 0.0.0.0 0.0 0.0 Others and other community, social and personal service activities 2 13.8 3 9.1 4 14.5 1.0 0.4 Grand Total

55.0

1,511.7

163

5,636.2

407.0 4,135.0 100.0 100.0
Source: Ethiopian Investment Agency.
7.2. Distribution by Region
Of the total 407 investment projects that went in to operation in 2014/15, about 304 projects (74.7 percent) with Birr 1.4 billion capital were located in Oromia, followed by49 projects (12.0 percent) with Birr 207.3 million capital were in Tigray. Similarly these were 31 projects (7.6 percent) with investment capital of Birr 2.4 billion in Addis Ababa; 15 projects (3.7 percent) with Birr 97.5 million capital in Afar, and 4 projects with investment capital of Birr 10 million in Amhara regional state (Table 7.3).

National Bank of Ethiopia 108 2015/16 Annual Report
Table 7.3: Number and Capital of Operational Projects by Region
(Capital in millions of Birr) Regions 2012/13 2013/14 2014/15 Percentage share No. of projects Investment Capital No. of projects Investment Capital No. of projects Investment Capital No. of projects Investment Capital Tigray 1 1.4 11 90.2 49 207.3 12.0 5.0 Afar 1 1.0 12 21.1 15 97.5 3.7 2.4 Amhara 0 0.0 31 112.7 4 10.0 1.0 0.2 Oromia 16 1,308.4 7 139.3 304 1,398.4 74.7 33.8 Somali 0 0.0.0.0 0.0 0.0 Benishangu l-Gumuz 0 0.0.0.0 0.0 0.0 SNNPR 0 0.0 1 10.9 1 13.8 0.2 0.3 Gambella 0 0.0.0.0 0.0 0.0 Harari 0 0.0.0 3 26.5 0.7 0.6 Addis Ababa 37 200.8 101 5,262.0 31

2,381.5 7.6 57.6
Dire Dawa 0 0.0.0.0 0.0 0.0 Multiregion al Projects 0 0.0.0.0 0.0 0.0 Grand Total 55.0 1,511.7 163 5,636.2 407 4,135.0 100.0 100.0 Source: Ethiopian Investment Agency.

National Bank of Ethiopia 109 2015/16 Annual Report
VIII. International Developments
8.1. International Economic Developments
8.1.1. Overview of the World Economy
Global growth is projected to remain modest in 2016, at 3.1 percent, before picking up to
3.4 percent in 2017.Growth in most
advanced economies remained lackluster, with low potential growth and a gradual closing of output gaps. Prospects remained diverse across emerging market and developing economies, with some improvement for a few large emerging markets. Growth is projected to continue in the United States at a moderate pace, supported by strengthening balance sheets, no further fiscal drag in 2016, and an improving housing market. These forces are expected to offset the drag to net exports coming from the strengthening of the dollar and slower growth in trading partners, the additional decline in energy investment, weaker manufacturing, and tighter domestic financial conditions for some sectors of the economy (for example, oil and gas and related industries). As a result, growth is projected to level off at 2.2 percent in 2016, with a modest uptick in 2017. The impact of Brexit is projected to be muted for the United States, as lower long-term interest rates and a more gradual path of monetary policy normalization are expected to broadly offset larger corporate spreads, a stronger U.S. dollar, and some decline in confidence. In the Euro area, growth is forecasted to fall slightly to 1.6 percent in 2016 from 1.7 percent in 2015. This is due to the fallout from the U.K. referendum. In light of the potential impact of increased uncertainty on consumer and business confidence (and potential bank stresses), 2017 growth is forecasted down by 0.2 percentage points relative to 2016 estimate. InJapan,the underlying momentum in domestic demand remains weak and inflation has dropped. As a result, its economy is forecasted to grow by 0.3 percent in 2016. The further appreciation of the yen in recent months is expected to take a toll on growth in both2016 and 2017:

National Bank of Ethiopia 110 2015/16 Annual Report Consequently, the growth for 2017 forecasted to be 0.1 percent. Emerging markets and developing countries would register a growth rate of 4.1 percent in 2016, and increase to 4.6 percent in 2017. Growth continues to run above six percent in emerging and developing Asia despite a slight decline of the momentum due to marginal contraction in China and India. Consumer and business confidence appears to have bottomed out in Brazil, and the GDP contraction in the first quarter was milder than anticipated. Consequently, the 2016 recession is now projected to be slightly less severe, with a return to positive growth in
2017. Political and policy uncertainties
remain, however, and cloud the outlook. Higher oil prices are providing some relief to the Russian economy, where the decline in GDP this year is now projected to be milder, but prospects of a strong recovery are subdued given long- standing structural bottlenecks and the impact of sanctions on productivity and investment. The outlook for other emerging market and developing economies remains diverse. Aggregate growth in sub-Saharan Africa is expected to slow down to 1.6 percent in 2016 from 3.3 percent in 2015, reflecting challenging macroeconomic conditions in its largest economies, which are adjusting to lower commodity revenues. In Nigeria, economic activity is projected to contract in 2016, as the economy adjusts to foreign currency shortages as a result of lower oil receipts, low power generation, and weak investor confidence. In South Africa, GDP is projected to grow at lower rate of 0.1 percent in 2016, with only a modest recovery next year. In the Middle East, oil exporters are benefiting from the recent modest recovery in oil prices while continuing fiscal consolidation in response to structurally lower oil revenues, but many countries in the region are still plagued by strife and conflict.

National Bank of Ethiopia 111 2015/16 Annual Report
Table 8.1: Overview of World Economic Outlook and Projection
(Annual Percentage Change) Particulars 2014 2015 Projection 2016 2017 World Output 3.4 3.1 3.1 3.4 Advanced Economies 1.9 1.9 1.8 1.8 United States 2.4 2.4 2.2 2.5 Euro Area 0.9 1.7 1.6 1.4 Japan 0.0 0.5 0.3 0.1 Emerging Market & Developing Economies 4.6 4.0 4.1 4.4 World Trade Volume (goods & services)* 3.5 2.8 3.1 3.8 Imports Advanced Economies 3.5 4.3 3.4 4.1 Emerging Market and Developing Economies 3.7 0.5 3.0 3.7 Exports Advanced Economies 3.5 3.4 2.5 3.5 Emerging Market and Developing Economies 3.1 1.7 3.8 3.9 Commodity Prices (U.S. dollars) Oil -7.5 -47.2 -15.5 16.4 Non- oil -4.0 -17.5 -3.8 -0.6 Consumer Prices Advanced Economies 1.4 0.3 0.7 1.6 Emerging Market & Developing Economies 4.7 4.7 4.6 4.4 Source: IMF, World Economic Outlook, July, 2016 *IMF, World Economic Outlook, April, 2016
8.1. 2 World Trade
Global volume of world trade growth in goods and services is projected to remain moderate but to pick up gradually from 2016 onward. It is estimated to expand by 3.1

National Bank of Ethiopia 112 2015/16 Annual Report percent in 2016 and is further projected to increase by 3.8 percent in 2017. Imports of goods and services by advanced economies rose by 3.4 percent in 2016. Similarly, imports by emerging market and developing economies forecasted to grow by
3.0 percent and 3.7 percent in 2016 and
2017, respectively. On the other hand, export of goods and services from advanced economies and emerging and developing economies is forecasted to expand by 2.5 percent and 3.8 percent in 2016, respectively. The United States‘ current account deficit slightly expanded to 2.9 percent of GDP in 2016 from 2.7 percent 2015. On the other hand, the current account of euro area is estimated to be flat at 0.7 percent of the region GDP in 2016, while current account deficit emerging market and developing economies is forecasted to expand from 0.2 percent to 0.6 percent.
8.1.3 Inflation and Commodity Prices
With the December 2015 declines in oil prices mostly expected to persist this year, consumer price inflation is projected to remain below central bank targets in 2016. Excluding Venezuela (where average inflation is projected to rise to close to 500 percent this year and even further next year), inflation in emerging market and developing economies is projected to fall to 4.5 percent in 2016, from 4.7 percent in 2015, reflecting the decline in commodity prices and the dissipating effects of last year‘s currency depreciations. In the United States, inflation in 2016 is projected to rise to 0.8 percent from 0.1 percent in 2015 amid a tightening labor market, even though dollar appreciation and pass-through from lower oil prices are exerting downward pressure on prices. Consumer price index inflation is projected to rise over the medium term to about 2.25 percent, with inflation measured with the personal consumption expenditure deflator—the Federal Reserve‘s preferred inflation measure—reaching 2 percent. In the euro area, headline inflation is projected to reach 0.4 percent in 2016 (from about zero in 2015) and to increase further to 1.1 percent in 2017 with support from monetary policy easing by the ECB. Inflation is thereafter expected to rise only very gradually over the medium term.

National Bank of Ethiopia 113 2015/16 Annual Report Average inflation in other advanced economies will also remain below central bank targets, mostly as a result of the decline in oil prices. Inflation is projected to return to target next year in Korea (partly because the Bank of Korea recently reduced its inflation target), but only over the medium term in Singapore and Sweden. Consumer prices in Switzerland are projected to decline in 2016 and 2017 given the appreciation of the currency last year. In emerging market economies, the downward pressure from lower oil prices is offset to varying degrees by the pass￾through of nominal exchange rate depreciations to domestic prices, especially in countries with strong depreciations, such as Brazil, Colombia, Russia, and more recently, Kazakhstan. In subsequent years, inflation is expected to ease gradually toward official targets. In China, inflation is forecast to remain low at about 1.8 percent in 2016, reflecting lower commodity prices, the real appreciation of the Renminbi, and somewhat weaker domestic demand. In India, monetary conditions remain consistent with achieving the inflation target of 5 percent in the first half of 2017, although an unfavorable monsoon and an expected public sector wage increase pose upside risks. In Brazil, average inflation is expected to fall slightly to 8.7 percent this year from
9.0 percent last year, as the effects of the
large administered price adjustments and currency depreciation in 2015 diminish. In Russia, inflation is projected to decline from
15.5 percent in 2015 to 8.4 percent in 2016.
In Turkey, inflation for 2016 is projected at
9.8 percent, almost 5 percentage points
above target.
In 2016, oil prices have decreased further, by 32 percent, on account of strong supply from members of the Organization of the Petroleum Exporting Countries (OPEC) and risk-off behavior in financial markets, with investors moving away from what they perceive to be riskier assets, including commodities and stocks. The further collapse in oil prices has proceeded in spite of geopolitical tensions in the Middle East, suggesting that market expectations are firmly anchored in ―low for long‖ oil prices. Metal prices have declined 9 percent since August 2015. Prices have been gradually declining because of a slowdown and a shift away from commodity intensive investment in China, which consumes roughly half of global metals. Metal prices are projected to

National Bank of Ethiopia 114 2015/16 Annual Report decline by 14 percent in 2016 and 1 percent in 2017. Futures prices point to continued low prices, but with rising uncertainty on account of both demand (especially from China) and stronger supply. Prices of agricultural commodities have declined by 4 percent overall relative to August 2015. Food prices have decreased by 4 percent, with declines in most food items, except sugar and a few oilseeds. Sugar and palm oil prices have increased because of a drought in India and Malaysia, likely caused by El Niño. El Niño has also taken a toll on East Africa. International prices do not fully reflect the adverse weather shock, however, because of high prior inventory levels. For example, Ethiopia is suffering from its worst drought in 30 years. Unusually dry weather in North Africa is also likely to reduce harvests significantly, including those for cereals. The beverage price index has stagnated as a cocoa price increase has offset a decline in coffee prices.
8.1.4. Exchange Rate
Between August 2015 and February 2016, the currencies of advanced economies tended to strengthen, and those of commodity exporters with floating exchange rates—especially oil-exporting countries— tended to weaken further. Across advanced economies, the Japanese yen‘s appreciation (about 10 percent in real effective terms)was particularly sharp, while the U.S. dollar and the euro strengthened by about 3 percent and 2 percent, respectively. In contrast, the British pound depreciated by 7 percent, driven by expectations of a later normalization of monetary policy in the United Kingdom due to uncertainties on its exit from the European Union.
8.2 Implications of International Economic Developments on the Ethiopia Economy
During the 2015/16 global recovery continues, but at an ever slowing and fragile pace. In addition to some non economic origin threatening the global economy; global asset market volatility, loss of growth momentum in the advanced economies, and continuing headwinds for emerging market economies and lower-income countries are some of the contributions to this slowdown. This has negatively affected the performance of Ethiopia‘s major export items. Global headline inflation, meanwhile, has remained at low levels mainly reflecting past energy price declines. The relatively higher domestic prices affected the county‘s

National Bank of Ethiopia 115 2015/16 Annual Report competitiveness by making the REER appreciate. On the other hand, the fall in international prices helped to reduce the country‘s import bills. The outcome of U.K. vote to exit from E.U created financial market volatility and increased uncertainty about the global outlook. This implies the downside risk of the world economy in the future. The weak investor confidence in the global economy, if persists for long, might affect the external sector of the Ethiopian economy through trade and FDI flows.