National Bank of Ethiopia Annual Report 2014-2015

National Bank of Ethiopia
2014/15 Annual Report 1

National Bank of Ethiopia
2014/15 Annual Report 2

National Bank of Ethiopia
2014/15 Annual Report 3

National Bank of Ethiopia
2014/15 Annual Report 4

National Bank of Ethiopia
2014/15 Annual Report 5
I. The overall Economic Performance
1.1 Economic Growth
The Ethiopian economy continued to register a notable growth. In FY 2014/15, the real GDP grew by 10.2 percent relative to 11.2 percent growth target set in the first GTP for the fiscal year. The growth of the economy has also been remarkable compared to the 4.4 percent growth estimated for Sub - Saharan Africa in 2015 (World Economic Outlook Update, July 2015). This impressive growth was mainly attributed to service sector (10.2 percent), agricultural sector (6.4 percent) and industrial sector (21.6 percent) (Table 1.1). Nominal GDP per capita went up to USD 691 from USD 639.6 and real per capita GDP to USD 418 against the preceding year. Generally, the Ethiopian economy recorded
10.1 percent average growth rate per annum
during the GTP period (2010/11-2014/15). The Ethiopian economy is projected to grow by 11 percent in FY 2015/16 in contrast to
3.8 and 5.1 percent growth by IMF for the
world and SSA respectively (WEO, July 2015).

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2014/15 Annual Report 6
Table 1.1: Sectoral Contributions to GDP and GDP Growth
(In Billions of Birr)
Items 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 Sector Agriculture 170.3 181.2 195.0 212.5 222.9 238.8 251.8 267.9 Industry 35.4 38.8 43.0 49.8 59.6 73.9 86.5 105.2 Services 143.1 163.2 184.7 216.6 237.4 258.8 292.5 322.2 Total 348.8 383.2 422.7 478.9 519.9 571.5 630.8 695.3 Less FISIM 2.4 2.7 2.9 3.2 2.9 3.1 3.7 4.3 Real GDP 346.4 380.5 419.8 475.6 517.0 568.4 627.1 691.0 Growth in Real GDP 11.0 9.8 10.3 11.4 8.7 9.9 10.3 10.2 Real GDP per capita (in thousands of Birr) 4.6 5.0 5.3 5.9 6.3 6.7 7.2 7.8 Mid-year population (in million)
74.9 76.8 78.8 80.7 82.7 84.8 87.0 89.1
Share in GDP
(in %)
Agriculture 48.8 47.3 46.1 44.4 43.1 42.0 40.1 38.8 Industry 10.1 10.1 10.2 10.4 11.5 13.0 13.8 15.2 Services 41.0 42.6 43.7 45.2 45.9 45.5 46.6 46.6 Growth in Real GDP per capita 7.3 7.1 7.5 10.6 6.1 7.2 7.5 7.6 Agriculture Absolute Growth 7.4 6.4 7.6 9.0 4.9 7.1 5.4 6.4 Contribution to GDP growth 3.8 3.1 3.6 4.1 2.2 3.1 2.3 2.5 Contribution in % 33.8 31.7 34.9 31.1 25.3 31.1 22.3 24.5 Industry Absolute Growth 10.3 9.6 10.8 15.8 19.7 24.0 17.1 21.6 Contribution to GDP growth 1.0 1.0 1.1 1.6 2.1 2.8 2.2 3.0 Contribution in % 9.5 9.9 10.6 12.1 24.1 27.9 21.3 29.4 Services Absolute Growth 16.1 14.0 13.2 12.4 9.6 9.0 13.0 10.2 Contribution to GDP growth 6.3 5.8 5.6 7.5 4.4 4.1 5.9 4.7 Contribution in % 56.7 58.4 54.4 56.8 50.6 42 57.1 46.1 Source: Ministry of Finance and Economic Development (MoFED)

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Fig.I.1: Real GDP Growth by Major Sectors Source: MoFED In FY 2014/15, the agricultural sector depicted a moderate growth rate of 6.4 percent mainly due to 7.2 percent increase in crop production (Table 1.3), in general and
7.5 percent expansion in grain crop
production in particular (Table 1.2). The total grain production reached 270.4 million quintals, of which cereal production accounted for 87.3 percent while pulses and oil seeds comprised 12.7 percent. Cereals and oilseeds production went up by 9.4 and
6.9 percent over the preceding year owing to
the 3 and 4.9 percent expansion in cultivated land area respectively. In contrast, the production of pulses declined by 6.5 percent while cultivated land area contracted by
10.6 percent during the same period
(Table1.2).
The total land cultivated for crop production expanded slightly by 1.2 percent to 12.6 million hectares, of which cereals production covered 80.8 percent while pulses and oil seeds covered 12.4 and 6.8 percent, respectively (Table 1.2). The growth in agricultural output was mainly attributed to improved productivity supported by favorable and conducive agricultural development policies and better productive safety net programs. 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Real GDP Agriculture Industry Services

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2014/15 Annual Report 8
The share of agriculture in GDP in F.Y 2014/15 went down to 38.8 percent from
40.1 percent a year earlier. Likewise, the
sector’s contribution to GDP growth rate rose to 24.5 percent compared with 22.3 percent last year (Table 1.1). Industrial sector showed a 21.6 percent growth; over the previous year and accounted for 15.2 percent of GDP. The sector contributed 29.4 percent to the overall economic growth during the fiscal year (Table1.1). This indicates that despite its rapid growth relative to agriculture and service sectors, the share of industrial sector in GDP was very low. Calling for enhanced investment in manufacturing sector taking into account the country’s competitive advantage. Manufacturing sector increased by 15.8 percent and constituted about 31.8 percent of industrial output growth and 4.6 percent of real GDP growth. Construction industry, on the other hand, contributed more than half (56.1 percent) to industrial sector growth and 8.5 percent to GDP growth. This implies that construction sector is currently the leading industry due to expansion in construction of roads, railways, dams and residential houses. Meanwhile, electricity & water and mining & quarrying contributed 6.5 and 5.6 percent to industrial growth, respectively (Table1.3). Service sector has also become relatively a dominant sector in Ethiopia since it overtook the agricultural sector in 2010/11. In 2014/15, its growth rate was 10.2 percent; and its share in GDP rose to about 46.6 percent. Its contribution to GDP growth was about 46.1 percent in the same period (Table 1.1). The significant contribution of the sector to GDP was gripping due to the expansion of whole sale and retail trade services which expanded by 9.9 percent followed by real estate, renting and business activities (4.1 percent), hotels and restaurants (11.3 percent), transport and communication (10.3 percent) and public administration and defense (10.7 percent) (Table 1.3).

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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 2011/12 2012/13 2014/15 2014/15 Cultivated Area Total Production Cultivated Area Total Production Cultivated Area Total Production Cultivated Area Total Production Cereals 9,588 188,099 9,601 196,512 9,848 215,835 10,144 236,077 (Annual % Change) -1.1 5.9 0.1 4.5 2.6 9.8 3.0 9.4 Pulses 1,616.0 23,162 1,863 27,510 1,743 28,589 1,558 26,718 (Annual % Change) 19.1 18.6 15.3 18.8 -6.5 3.9 -10.6 -6.5 Oilseeds 880.0 7,308.0 818.4 7,266.6 816.0 7,112.6 856 7,601 (Annual % Change) 13.7 15.3 -7.0 -0.6 -0.3 -2.1 4.9 6.9 Total 12,084.0 218,569.0 12,282.9 231,288.5 12,406.6 251,536.4 12,558 270,396 (Annual % Change) 2.2 7.4 1.6 5.8 1.0 8.8 1.2 7.5 Source: Central Statistical Agency (CSA)

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Table 1.3: Growth and Percentage Contribution of Major Agricultural, Industrial and Service Sub-sectors
Sub-sectors/Year 2012/13 2013/14 2014/15 Percentage Contribution of Major Agricultural Sub-Sectors Crop 69.8 70.6 71.1 Animal Farming and Hunting 21.3 20.6 20.3 Forestry 8.8 8.7 8.5 Fishing 0.1 0.2 0.2 Growth of Major Agricultural Sub-Sectors (in %) Crop 8.2 6.6 7.2 Animal Farming and Hunting 5.2 2.1 4.7 Forestry 3.3 4.2 3.7 Fishing 19.4 32.5 30.6 Percentage Contribution of Major Industrial Sub-Sectors Mining and Quarrying 11.0 9.1 5.6 Manufacturing 33.6 33.4 31.8 Large and Medium Scale Manufacturing 24.0 24.9 24.6 Small Scale and Cottage Industries 9.5 8.5 7.2 Electricity and Water 8.3 7.6 6.5 Construction 47.1 49.9 56.1 Growth of Major Industrial Sub-sectors (in %) Mining and Quarrying 6.3 -3.2 -25.7 Manufacturing 16.9 16.6 15.8 Large and Medium Scale Manufacturing 24.2 21.6 20.3 Small Scale and Cottage Industries 1.9 4.3 2.9 Electricity and Water 10 6.8 4.5 Construction 38.7 23.9 36.8 Percentage Contribution of Major Service Sub-Sectors Whole Sale and Retail Trade 33.9 35.3 35.2 Hotels and Restaurants 8.6 9.7 11.3 Transport and Communications 10.1 10.1 10.3 Real Estate, Renting and Business Activities 18.4 17.0 16.0 Public Administration and Defense 11.0 10. 9 10.7 Others* 18.0 17.2 16.4 Growth of Major Service Sub-sectors (in %) Whole Sale and Retail Trade 10.1 17.7 9.9 Hotels and Restaurants 19.1 26.6 29.2 Transport and Communications 16.5 12.7 13.3 Real Estate, Renting and Business Activities 3.9 3.9 4.1 Public Administration and Defense 7.6 11.5 8.8 Others* 5.2 8.0 5.1 Source: MoFED

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

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2014/15 Annual Report 11
1.2. GDP by Expenditure Components
Total consumption expenditure (public and private) in percent of GDP went down slightly to 78.2 percent in 2014/15 from 79.5 percent last year and 85 percent GTP target set for the year. The performance in total consumption expenditure was mainly attributed to a 1 percentage point decline in private consumption expenditure to GDP ratio and 1.3 percentage point rise in capital formation. Consequently, gross domestic saving to GDP ratio rose to 21.8 percent from 20.5 percent in the previous year, and 15 percent GTP target for the year. The slowdown of total consumption expenditure to GDP ratio contributed 1.3 percentage points improvement in domestic savings (Table 1.4). While the level of domestic saving increased by 23.6 percent, total consumption expenditure rose by 14.8 percent during FY 2014/15. The trade deficit to GDP ratio remained stable at 17.5 percent against the preceding year and 13.1 percent GTP I target owing to the decline in the value of import and export to GDP ratio, by 1.8 percentage points each. During 2014/15, the level of gross capital formation to GDP ratio reached 39.3 percent; showing 1.3 percentage point improvement over last year and compared to the GTP target of 28.2 percent for the same year. Gross capital formation and private consumption expenditures were the main sources of aggregate demand. Public consumption merely constituted 9 percent of GDP while that of private consumption expenditure was 69.2 percent.

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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
1999/00 110.4 88.2

19.1

69.1

22.2

(12.0)

12.1

24.2 11.8
2000/01 110.5 86.9

15.7

71.2

23.6

(11.8)

12.1

23.9 13.1
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 78.2 9.0

69.2

39.3

(17.5)

9.8

27.3

21.8
Average
2010/11-
2014/15 116.8 80.7 9.2 71.6 36.1 -16.8 12.9 29.7 19.3 Average 1999/00- 2014/15 115.5 86.8 12.0 74.8 28.8 -17.1 13.0 30.1 13.2 Source: MoFED

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1.3: Micro and Small-Scale Enterprises The first five-year Growth and Transformation Plan (GTP I) envisaged to create 3 million employment opportunities through micro and small scale enterprises (MSEs) at the end of the plan period given the perceived role of these enterprises as the major sources of employment and income generation for a wider group of the society, in general, and urban youth in particular. According to the Federal Micro and Small Scale Enterprise Development Agency (FeMESDA), a total 271,519 new MSEs were established in 2014/15 which employed about 2.8 million people. The number of establishments and the employment created during the review period increased by 35.6 and 11.7 percent, respectively. At the same time, MSEs received more than Birr 6.5 billion in loans which was 29.2 percent higher than a year ago. According to the Agency’s report, the remarkable performance of the sector with respect to the number of new enterprises, employment created and credit disbursement was attributed to the commitment of all regions to meet the GTP plan and the commencement of many government projects that began operation during the fiscal year.
Table 1.5: Numbers, Amount of Credit and Jobs Created through MSEs
(Credit in Millions of Birr) Source: FeMSEDA Particulars 2013/14 2014/15 Percentage Change A B B/A No. of MSE's 200,319 271,579 35.6 Amount of credit 5,063.90 6,541.88 29.2 No of Total employment 2,497,181 2,788,667 11.7

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2014/15 Annual Report 14
Table 1.6: Numbers, Amount of Credit and Jobs Created through MSEs by Region
(Credit in Millions of Birr) Source: FeMSEDA In terms of regional distribution of newly established MSE’s, 51.9 percent was in Oromia followed by Amhara (24.1 percent), Tigray (12.4 percent), SNNPR (7.2 percent) and Addis Ababa (2.7 percent). In terms of loans, SME’s in Addis Ababa received 32.2 percent of the credit disbursed followed by Amahara (31.7 percent), Tigray (17.1 percent), Oromia (8.9 percent), and SNNPR (6.7 percent). With regard to employment, Oromia had the highest share (54.9 percent) followed by Amhara (18.8 percent), Addis Ababa (10 percent), SNNPR (6.8 percent) and Tigray (6.4 percent). Addis Ababa Oromia SNNPR Amhara Tigray Dire Dawa Harari Benishan gul Somali Gambela Afar Total No. of MSEs

7,291

140,858

19,521

65,480

33,570

2,725

414

481

471

369

399

271,579
Amount of credit

2,105.27

584.08

436.59

2,071.07

1,118.62

68.66

9.55

0.40

143.60

3.54

0.499

6,541.88
No. of total
Employment created by
MSEs

277,587

1,531,028

190,945

525,391

178,886

26,073

6,505

11,457

18,290

4,185

18,320

2,788,667
Regional Percentage Share
No. of MSEs 2.7 51.9 7.2 24.1 12.4 1.0 0.2 0.1 0.1 100.0 Amount of credit 32.2 8.9 6.7 31.7 17.1 1.0 0.1 0.01 2.2 0.1 0.0 100.0 No. of total Employment created by MSEs 10.0 54.9 6.8 18.8 6.4 0.9 0.2 0.4 0.7 0.2 0.7 100.0

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Fig.I.2: Yearly Distribution of Numbers of MSEs during 2013/14 and 2014/15 0% 20% 40% 60% 80% 100% 2014/15 2013/14 Source: FeMSEDA Fig.I.3: Yearly Distribution of Amount of Credit during 2013/14 and 2014/15 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2014/15 2013/14 Source: FeMSEDA

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Fig.I.4: Yearly Distribution of Employment Created during 2013/14 and 2014/15 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2014/15 2013/14 Source: FeMSEDA
1.4 Access to Water Supply
During 2014/15, the proportion of people having access to potable water supply improved by 7.3 percentage point to 84 percent (91 percent urban and 82 percent rural population); relative to 76.7 percent (84.2 percent urban and 75.5 percent rural people) coverage last year. By the end of GTP I period, it was targeted to reach 98.5 percent. Urban population with access to potable water within a radius of 0.5 km increased to 91 percent in 2014/15 from
84.2 percent in 2013/14, depicting a 6.8
percentage point improvement.
Similarly, rural population with access to potable water within 1.5 km radius reached 82 percent by the end of 2014/15, compared with 75.5 percent coverage a year earlier. During the fiscal year, access to potable water was the lowest in Afar region (63 percent) and the highest in Tigray (93 percent) and Dire Dawa (90.6 percent). In terms of urban population, Tigray and Oromia topped at 95 and 93.3 percent, respectively). The lowest being Somali (76 percent). Addis Ababa’s access to potable water was 87 percent (Table 1.5).

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Table 1.7: Percentages of People with Access to Potable Water by Region
Regions
2013-14 2014/15 Change in Percentage A B C D E F Point Rural Urban Average Rural Urban Average D-A E-B F-C Addis Ababa 87.7 87.7 87.0 87.0 0.0 -0.7 -0.7 Tigray 83.8 75.4 82.2 90.0 95.0 93.0 6.2 19.6 10.8 Amhara 85.5 83.3 85.3 89.1 91.7 89.5 3.6 8.5 4.2 Oromia 79.5 86.1 80.1 87.6 93.3 88.4 8.1 7.3 8.3 SNNPR 56.1 97.0 59.0 68.7 92.9 71.1 12.6 -4.1 12.1 Afar 48.6 82.0 51.7 60.0 83.0 63.0 11.4 1.0 11.3 Somali 78.0 91.4 79.9 69.0 76.0 70.0 -9.0 -15.4 -9.9 Ben-Gumuz 72.2 65.3 71.7 87.5 77.2 85.7 15.3 11.9 14.0 Harari 97.0 96.0 96.5 88.0 89.0 88.5 -9.0 -7.0 -8.0 Gambella 95.7 97.6 96.1 84.0 86.0 85.0 -11.7 -11.6 -11.1 Dire Dawa 88.6 87.5 87.8 95.0 88.0 90.6 6.4 0.5 2.8 National 75.5 84.2 76.7 82.0 91.0 84.0 6.5 6.8 7.3 Source: Ministry of Water, Irrigation and Energy and NBE Staff Computation Note: Water supply access is calculated based on the provision of 20 liters/capita/day for urban and 15 l/c/d for rural at a radius of 0.5 and 1.5 kilo meters, respectively.

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2014/15 Annual Report 18
Fig.I.5: Access to water supply by Region 0 20 40 60 80 100 120 Average values in % Region 2013/14 2014/15 Source: Ministry of Water, Irrigation and Energy; and NBE Staff Computation
1.5 Road Sector Development
1.5.1 Road Network
The development of road transport, which is the dominant mode of transport in Ethiopia, is believed to create a network over a wide array of infrastructural facilities so as to improve the accessibility and mobility of agricultural and industrial products, sustain economic growth, improve product competitiveness and encourage investment. Accordingly, in 2014/15, the total stock of road network reached 110,414 Km, which showed a 10.9 percent annual expansion of the total roads, 27,606 Km was Federal1 , 30,641 Km rural, 5,357 Km Urban and 46,810 Km Woreda roads. The Federal road includes 13,551 Km (49.1 percent) asphalt and 14,055 Km (50.9 percent) gravel road depicting a 7.2 percent annual expansion and 1.1 percent reduction, respectively. The asphalt road network in 2014/15 constituted about 12.3 percent of the total stock of road network in the

1
Federal roads are roads administered by federal government

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2014/15 Annual Report 19 country. It includes 85 Km Addis￾Adama Express Way, the first of its kind in the country, which was completed in 2013/14.
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
Source: Ethiopian Roads Authority

• Includes community 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.

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1.5.2 Road Density
The proper level of road network is assessed by road density as measured by road length per 1,000 persons or by road length per 1,000 km2 . In the five year GTP period, the plan was to increase road density from 44.5 Km to 123.7 km per 1,000 km2 and from
0.64 Km to 1.54 km per 1000
population.
At the end of 2014/15, the road density per 1,000 square Km showed improvement to 100.4 km from 90.5 km a year ago, though lower than GTP target of 123.7 km for the year 2014/15. The road density per 1,000 population in 2014/15 was 1.2 km and up by 9 percent over preceding fiscal year. GTP target was 1.54 km per 1,000 population (Table 1.8).
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

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1.5.3 Road Accessibility
During 2014/15, the annual average distance from all-weather roads declined by 9.1 percent from 5.5 kilometers in 2013/14 to 5 kilometers. Similarly, the proportion of area more than 5 km from all-weather roads went down to 36.6 percent from 40.5 percent during the same period. GTP I target was 29 percent, (Table 1.9). About 70 percent of the total road network was in good condition specifically 73 percent of the asphalt road, 59 percent of the gravel road and 55 percent of the rural road were in good condition in 2014/15 (Figure I.4).
Table 1.10: Road Accessibility
Indicators 2013/14 2014/15
Percentage change
Proportion of area more than 5Km from all-weather road
40.5 36.6 -9.6
Average distance from all-weather roads 5.5 5 -9.1 Source: Ethiopian Roads Authority

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Fig.I.6: Status of Road
Source: Ethiopian Roads Authority
1.5.4 Road Sector Financing
Construction and maintenance of roads remained one of the key investments for the government over the past few years. Hence, large sum of finance has been mobilized for road construction and maintenance both from foreign and domestic sources. In 2014/15, total investment in road construction and expansion (except urban road) contracted by 3.7 percent to Birr 37.2 billion from Birr 38.6 billion a year earlier (Table 1.10 and fig.I.5). Investment in the Federal road construction and expansion, accounted for 73.8 percent of the total road investment capital and stood at Birr 27.4 billion. Regional roads constituted 9.9 percent of the sector-wide investment and registered 22.4 percent annual expansion, followed by Woreda road investment (4.5 percent growth) (Table 1.10) and (Fig.1.7). 0 10 20 30 40 50 60 70 80 Percentage Asphalt Roads in Good Condition Gravel Roads in Goods Condition Rural Roads in Good Condition Total Roads Network in Good Condition

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Table 1.11: Investments in the Road Sector
(In millions of Birr)
Road Type
2013/14 2014/15
Percentage change A
Share
(In %) B
Share
(In %)
Federal roads 29,697.0 76.9 27,445.5 73.8 -7.6 Regional road 2,992.7 7.7 3,663.6 9.9 22.4 Woreda road 5,809.0 15.0 6,067.6 16.3 4.5 Urban road* 118.8 0.3 NA Total 38,617.5 100.0 37,176.7 100.0 -3.7 Source: Ethiopian Roads Authority

• All municipalities’ maintenance.
  Fig.I.7፡ Investment in Road Construction and Expansion Source: Ethiopian Roads Authority 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 In Millions of Birr Federal Road Regional Road woreda Road Urban Road Total Investment

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2014/15 Annual Report 24
1.6 Developments in Education Sector
The education sector has been improving both in terms of qualities and coverage during the previous years. In the sector, there were positive trends to achieve the goals of Growth and Transformation Plan through producing efficient, effective and innovative citizens which can contribute to the realization of the long term vision to become a middle income country. In 2013/14, Primary education (1- 8 grades) enrolment improved from 15.8 million in 2009/10 to 18.3 million in 20013/14; grew by 4.6 percent against the preceding year. In 2013/14, the number of primary schools reached 32, 048 from 30,534 in the preceding year and 26,951 five years ago. Of the total number of primary schools, 27,597 (86 percent) were located in the rural area whereas 4,451 (14 percent) were located in urban. Similarly, secondary education enrolment reached 2.0 million, 17.8 percent and 5.2 percent higher than 2009/10 and 2012/13, respectively. By the end of 2013/14, moreover, the number of secondary schools (9-12 grades) reached 2,329 exhibiting 72.4 and 22 percent growth over 2009/10 and 2012/13. Of the total secondary schools, 1,636 (70 percent) were found in the urban areas while the remaining were located in the rural areas. The Technical and Vocational Education and Training (TVET) enrolment was 238,049; showing 0.1 percent increment vis￾à-vis 2012/13 but declined by 32.6 compared with 2009/10. Parallel to this, the number of TVET institutions remained 437 compared with previous year, but decreased by 13.5 percent from 505 institutions in 2011/12. This was due to the under￾reporting of data from most of the regions and no report at all from Somali, Bunishangul Gumuz and Harari regions for 2013/14. Education share of the annual government expenditure was 25.0 percent which was 0.2 and 0.9 percentage points lower than the preceding year and the year 2009/10, respectively.

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2014/15 Annual Report 25
Table 1.12 Education Sector Data
Indicators 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2000 2001 2002 2003 2004 2005 2006 Number of primary schools (urban, rural) 23,354 25,212 26,951 28,349 29,482 30,534 32,048
i. Urban 3,100 3,206 3,206 3,988 4,241 4,536 4,451
ii. Rural 20,254 21,886 23,745 24,313 25,227 25,998 27,597
Number of secondary schools (urban, rural) 1,087 1,185 1,351 1,392 1,710 1,912 2,329
iii. Urban 904 976 1,053 1,053 1,342 1,451 1,636
iv. Rural
183 209 298 339 368 461 693 Number of TVET centers (public, private, mission) 458 458 448 505 505 437 437 Number of tertiary level institutions by universities (public, private), colleges (public, private) 61 72 70 74 91 99 124 Universities 22 26 32 32 33 Participation of women in higher education institutions (%) 24 22.2 27 27 21.1 29.5 32 Primary enrolment (in millions) 15.3 15.6 15.8 16.7 17 17.5 18.3 Secondary enrolment (in thousands) 1,501 1,588 1,696 1,760 1,766 1,900 1,998 TVET enrolment 229,252 308,501 353,420 371,347 330,409 237,877 238,049 Girls' primary enrolment (%) 46.5 47.3 47.4 47.3 47.8 48 48 Grades (1-4) gross enrolment ratio (%) 127.8 122.6 118.8 124 122.6 124.9 128.9 a. Girls' gross enrolment ratio (%) 122.8 118.4 114.3 119.1 118.1 119.8 123.6 b. Boys' gross enrolment ratio (%) 133.0 126.7 123.2 128.8 127.0 129.7 134 Grades (5-8) gross enrolment ratio (%) 60.2 63.1 65.5 66.1 65.6 62.9 64.4 a. Girls' gross enrolment ratio (%) 55.5 60.5 63.5 64.8 65.3 62.2 63.4 b. Boys' gross enrolment ratio (%) 64.8 65.6 67.4 67.4 65.9 63.5 64.1 Girls’ gross primary enrolment ratio (%) 90.5 90.7 101.6 93.2 92.9 92.4 94.3 Boys' gross primary enrolment ratio (%)
100.5 97.6 108.4 99.5 97.9 98.2 100.1

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2014/15 Annual Report 26
Indicators 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2000 2001 2002 2003 2004 2005 2006 Gross Primary Enrolment ratio (%)
95.6 94.4 93.4 96.4 95.4 95.3 97.2
Tigray 109.0 107.1 103.3 102.1 100.1 98.8 105.3 Afar 26.2 31.2 39.3 40.1 43.7 50.5 53.2 Amhara
112.4 112.5 104.9 104.2 1003 100.7 106.7
Oromia 91.4 89.3 88.4 94.8 92 91.2 89.3 Somali 32.7 35 65.6 61.3 75.1 96.9 84.8 Ben.Gumuz 112.3 112.1 114.6 119.7 115.9 111.9 95.4 SNNPR 102.9 101.0 97.3 102.6 100.7 98.4 100.3 Gambella 121.4 112.5 125.1 132 138.5 126.6 136.4 Harari 108.4 107.9 95.3 91.5 89.3 87.1 98.1 A.A 114.3 109.2 107.3 103.1 102.4 99.2 163.6 Dire Dawa 86.3 92.1 91.3 89.1 87.3 84.9 91.4 Primary net enrolment rate (%) 83.4 83.0 82.1 85.3 85.4 85.9 89 No. of students registered in the first cycle primary schools(1-4) (in millions)
10.7 10.6 10.5 11.3 11.4 12.0 12.7
No. of students registered in the second cycle primary schools(5-8) (in millions)
4.6 5 5.3 5.5 5.7 5.5 5.6
Number of students registered in the first cycle secondary schools(9-10) (in millions)
1.3 1.4 1.5 1.5 1.4 1.5 1.6
Gross enrolment rate in (9-10 grades) in percent
37.1 38.1 39.1 38.4 36.9 38.4 39.3
Preparatory admission(in millions) 0.20 0.21 0.24 0.29 0.32 0.36 0.39 Completion rate of primary school (%) 44.7 43.6 47.8 49.4 52.1 52.8 46.7 Girls/boys ratio in primary schools (%) 87 89.7 91 90.4 92 94 91 Girls/boys ratio in secondary schools (%) 63 67 75 79 84 88 89 Girls/boys ratio in (9-10) (%) 65 72 78 81 86 90 90

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2014/15 Annual Report 27
Indicators 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2000 2001 2002 2003 2004 2005 2006 Girls/boys ratio in (11-12) (%) 48 40 56 83 75 80 82 Girls/boys ratio inTVET(%) 92 86 80 86 91 105 105 Girls/boys ratio in higher education (%) 24 0.28 36 36 39 42 46 Grade 1-8(primary) repetition rates (%) 6.7 6.7 4.9 8.5 8.5 7.9 8.4 Primary school dropout rate (%) 14.6 18.6 13.1 16.3 16.3 15.7 7.9 1 st grade dropout rate (%) 18.3 22.9 28.1 19.9 25 22.5 23.9 Pupil to Teacher Ratio
i. Grade (1-8) 57 54 51 51 50 49.4 47
ii. Grade (9-12) 43 41 36 31 29 28.7 27.8
iii. TEVT 25 34 NA 29 24.7 18.6 16.5
iv. In higher education NA 28.2 26.8 26.7 25 24.4 25.9
Pupil to Section Ratio
i. Grade (1-8) 62 59 57 57 55 53.7 54
ii. Grade (9-12) 74 68 64 58 56.1 59.3 56.9
Number of class rooms in primary schools 236,712 247,759 254,744 279,292 308,905 324,587 321,468 Pupil to Textbook Ratio
i. Grade(1-8) 1.5 1.35 1
ii. Grade(9-12) 1
Pupil to School Ratio
i. Grade(1-8) 657 619 573 590 576 571 571
ii. Grade(9-12) 1,381 1,345 1270 1160 1033 994 857
iii. TEVT 501 673 788 735 654 544 545
Proportion of pupils starting grade 1 who reach grade 5(%) 49.2 39.6 55 47 50.2 55.5 69.5 Percentage of female enrolled in under graduate degree (%) 24.1 29 27 27 22 30 30.3 Percentage of female graduated in under￾graduate degree (%) 20.6 29.7 23.4 27.2 25.3 28.7 25.6 Percentage of female enrolled in post￾graduate degree 9.6 11.3 11.9 13.8 20.2 20.6 19.5

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2014/15 Annual Report 28
Indicators 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2000 2001 2002 2003 2004 2005 2006 Percentage of female graduated in post￾graduate degree 10.7 10.5 13.9 14.4 14.0 14.9 15 Annual education share of the national expenditure{%} 22.8 23.6 25.9 17.5 25.3 25.2 25 Source: Ministry of Education
1.7. Telecommunication
Telecommunication is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Cognizant of this fact, the Ethiopian government has established a new telecom company known as Ethio Telecom, to replace the long serving Ethiopian Telecommunications Corporation, with a view to enhancing the development of the telecom sector and supporting the steady growth of the country. Pursuant to this grand objective, Ethio Telecom has set ambitious targets to enhance customer acquisition, customer satisfaction and provision of quality services to customers. The country’s five-year Growth and Transformation Plan (GTP I) envisaged increasing the number of fixed line subscribers from 1 million in 2009/10 to
3.1 million, the number of mobile￾telephone subscribers from 6.5 million to
40 million and the number of internet users to 3.7 million from 187,000 by the end of the plan period, (2014/15). In 2014/15, the number of mobile subscribers surged by 37.1 percent to
38.8 million from 28.3 million a year
ago. Similarly, the number of fixed line subscribers slightly increased by 3 percent to 837,766 from 813,410. Meanwhile the number of internet subscribers surged by 53.1 percent and reached 9.4 million from 6.2 million recorded in 2013/14 (Table 1.11).

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2014/15 Annual Report 29
Table 1.13: Number of Subscribers
Service Type 2013/14 2014/15 Percentage Change
I. Fixed line 813,410 837,766 3.0
II. ALL MOBIL 28,307,662 38,803,786 37.1
Total mobile pre-paid 28,050,182 38,629,151 37.7 Total Mobile post-paid 257,480 174,635 (32.2)
III. Total data and Internet 6,168,046 9,440,289 53.1
Broadband (EVDO,
WCDMA, ADSL) 61,913 64,794 4.7 Narrowband (1X, dialup, ADSL*< 256K) 186,038 142,757 (23.3) GPRS 5,920,095 7,398,234 25.0 WCDMA 1,834,504 Grand Total 29,369,023 39,849,103 35.7 Source: Ethio-Telecom *CDMA (Code Division Multiple Access), GSM (Global System for Mobiles),GPRS (General Packet Radio Service)and ADSL (Asymmetric Digital Subscriber Line) At the same time, the country’s telecommunication penetration rate (telecom density) increased from 34.35 in 2013/14 to 44; mobile density rose to 43; and internet and data density improved to 10 from 7.3 a year ago. While fixed line density remained at 1.0 during 2014/15. (Table 1.12)

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2014/15 Annual Report 30
Table 1.14: Telecom Density
Tele density/100
Subscribers* 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 Fixed line 1.4 1 1 0.9 1 1 Mobile 8.7 12.9 20.4 27.6 33.3 43 Total 10.1 13.9 21.4 28.5 34.3 44 Internet and data 0.3 0.2 0.3 5.2 7.3 10 Source: Ethio-Telecom *Tele-density is mobile plus fixed telephone subscribers per 100 inhabitants International outgoing minutes in mobile telephone and internet traffic has increased by 2.4 percent from 69.4 million in 2013/14 to 71 million in 2014/15. International incoming minutes, however, dropped by 13.2 percent to
582.2 million compared to 670.9 million
a year ago (Table 1.13).

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2014/15 Annual Report 31
Table 1.15: Annual Traffic for Local and International Calls
Annual Traffic 2012/13 2013/14 Percentage Change Mobile local traffic (In millions) 17,379.8 21,132.2 21.6 International Traffic International outgoing calls (In number) 44,570,184 24,453,237* -45.1 International outgoing minutes 69,366,192 71,046,274 2.4 International incoming calls (In number) 176,849,300 92213852* -47.9 International incoming minutes 670,853,817 582,249,947 -13.2 Source: Ethio-Telecom Income of Ethio-telecom rose by 23.9 percent to Birr 21.5 billion in 2014/15 vis-à￾vis Birr 17.4 billion in 2013/14. Similarly, its total expenses reached Birr 6.9 billion showing a 25 percent annual increase. Hence, Ethio – telecom earned a gross profit of Birr 14.6 billion in 2014/15 which was
23.3 percent higher than the previous year
(Table 1.14).

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2014/15 Annual Report 32
Table 1.16: Financial Performance and Asset of Ethio -Telecom
(In Millions of Birr)
Finance and
Asset
2012/13 2013/14 2014/15 Percentage Change A B C C/B C/A Income 16,644 17,358 21,500 23.9 29.2 Expense 4,270 5,554 6,945 25.0 62.6 Gross Profit 12,227 11,804 14,555 23.3 19.0 Assets 37,244 34,323 52,750 53.7 41.6 Fixed Gross 15,834 24,209 24,129 -0.3 52.4 Depreciation 4,622 1,673 2,118 26.6 -54.2 Source:Ethio – Telecom Note: The financial figures in the above table are not audited

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2014/15 Annual Report 33
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. During 2014/15, Adama II wind farm became 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 Aysha 300 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

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2014/15 Annual Report 34
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 2014/15 (Table 2.1). The total amount of electric power generated in 2014/15 was about 9.5 billion KWH, showing a 9.4 percent annual growth. During the review period, 94.7 percent of the electric power was generated through hydropower while the remaining 5.2 and 0.1 percent came from wind and thermal sources, respectively (Table 2.1).

2 Generates power by connecting to other systems 3 Generates power independently In 2014/15, the production of wind energy got momentum as the total electric energy generated from wind sources increased to
497.7 million KWH from 355.8 million
KWH last year (Table 2.1).
It is worth mentioning that as per the government’s five-year Growth and Transformation Plan, the electricity coverage was planned to scale up to 75 percent in 2014/15 from 41 percent in 2009/10. Similarly, energy production capacity was projected to grow to 32,656 GWH from 7,653 GWH in the base year. At the end of GTP I (2014/15), the actual performance was 9,519 GWH was below GTP plan.

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2014/15 Annual Report 35
Table 2.1: Electric Power Generation in ICS and SCS
(I n ‘000 KWH)
Source: Ethiopian Electric Power
2.2. Volume and Value of Petroleum Imports
In 2014/15, about 2.8 million metric tons of petroleum products worth Birr 38 billion were imported by the Ethiopian Petroleum Enterprise. As compared to previous year, total value of petroleum imports decreased by 20.2 percent mainly due to a significant drop in international oil price despite a 7.6 percent increase in volume of petroleum imports associated with higher imports of gasoline (12.4 percent), fuel oil (10.7 percent), gas oil (9.3 percent) and jet fuel (1.6 percent) (Table 2.2), (Fig.II.1 & Fig.II.2). Source 2012/13 2013/14 2014/15 Percentage Change [A] Share (In %) [B] Share (In %) [C] Share (In %) [C/A] [C/B] ICS Hydro Power

7,384,011.4

97.3

8,335,745.7

95.8

9,014,010.6

94.7 22.1 8.1
Thermal Power

37.8

0.0 -

3,360.3

0.0
Geothermal

-

Wind

191,784.7

2.5

355,757.9

4.1

497,690.8

5.2 159.5 39.9
Sub Total

7,575,833.9

99.8

8,691,503.5

99.9

9,515,061.7

100.0 25.6 9.5
SCS
Hydro Power

1,648.2

0.0

676.9

0.0

• • -100.0 -100.0
    Thermal Power

10,865.8

0.1

8,837.0

0.1

4,285.5

0.0 -60.6 -51.5
Sub Total

12,514.0

0.2

9,513.9

0.1

4,285.5

0.0 -65.8 -55.0
Total
Hydro Power

7,385,659.6

97.3

8,336,422.6

95.8

9,014,010.6

94.7 22.0 8.1
Thermal Power

10,903.6

0.1

8,837.0

0.1

7,645.8

0.1 -29.9 -13.5
Geothermal

-

-

Wind

191,784.7

2.5

355,757.9

4.1

497,690.8

5.2 159.5 39.9
Grand Total

7,588,347.9

100.0

8,701,017.5

100.0

9,519,347.1

100.0 25.4 9.4

National Bank of Ethiopia
2014/15 Annual Report 36
Table 2.2፡ Volume and Value of Petroleum Imports
(Volume in MT and Value in '000 Birr) Petroleum Products 2013/14 2014/15 Volume Value Volume Value Percentage Change A B C D C/A D/B Regular Gasoline (MGR)

211,597.2

4,042,535.8

237,744.0

3,393,238.3 12.4 -16.1
Jet Fuel

701,418.9

13,416,935.9

712,748.0

10,381,064.6 1.6 -22.6
Fuel Oil

152,093.7

1,979,727.1

168,305.6

1,702,150.3 10.7 -14.0
Gas Oil (ADO)

1,558,341.1

28,180,671.4

1,703,260.8

22,507,794.1 9.3 -20.1
Total

2,623,450.8

47,619,870.2

2,822,058.4

37,984,247.3 7.6 -20.2
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 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 Volume in MT Year MGR Jet Fuel Fuel Oil Gas Oil Source: Ethiopian Petroleum Enterprise

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2014/15 Annual Report 37
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 Value in Birr Year MGR Jet Fuel Fuel Oil Gas Oil Source: Ethiopian Petroleum Enterprise As international oil prices declined domestic retail prices were also adjusted down wards. Thus, retail prices of Jet fuel declined by
13.2 percent, Regular Gasoline (4.4
percent), Fuel Oil (4 percent) and Gas Oil (2.1 percent), while that of Kerosene showed a 1.1 percent marginal increment (Table 2.3).

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2014/15 Annual Report 38
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 2012/13 Qtr.1 18.78 14.59 16.91 13.85 20.06 Qtr.2 18.78 14.59 16.91 13.85 20.01 Qtr.3 18.78 14.59 16.91 13.85 20.01 Qtr.4 18.78 14.59 16.91 13.85 20.01 Average 18.78 14.59 16.91 13.85 20.01 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 Annual percentage change -4.4 -4.0 -2.1 1.1 -13.2 Source: Ethiopian Petroleum Enterprise

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2014/15 Annual Report 39
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 Birr/Litre Year MGR Fuel Oil Gas Oil Kerosene Source: Ethiopian Petroleum Enterprise.

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2014/15 Annual Report 40
III. Price Developments
3.1. Developments in Consumer Price at National Level
Annual average national headline inflation at the end of the fiscal year 2014/15 was
7.6 percent, 0.5 percentage points lower
than the previous year level. This was due to the slowdown in non-food inflation by
2.7 percentage points which outweighed a
1.5 percentage point increase in food &
non-alcoholic beverages (Table 4.1).
Annualized food & non-alcoholic beverages inflation scaled up to 7.4 percent from 5.9 percent in 2013/14 showing a 1.5 percentage points increase due to a significant growth in the prices of food products such as oils and fats. Meanwhile, annual average non-food inflation dropped by 2.7 percentage points to 7.9 percent in 2014/15 due to lower inflation registered in all non-food items except alcoholic beverages & tobacco and communication (Table 4.1 and Fig.IV.1). At the same time, year-on-year headline inflation surged to 10.4 percent from 8.5 percent a year ago as food & non￾alcoholic beverages inflation rose by 6.3 percentage points to 12.5 percent counterbalancing the 2.8 percent slowdown in non-food inflation to 8.2 percent (Table 4.2 and Fig.IV.2). Yet, annual average headline inflation of
7.6 percent was within the single digit
target set by the NBE. Tight monetary policy, prudent fiscal policy and various administrative measures taken by the government have contributed to this effect.

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2014/15 Annual Report 41
Table 3.1: Annual Average Inflation Rates (in percent)
Items
2013/14 2014/15
Change
(Percentage Points)
Contribution to change in headline inflation A B B-A C General 8.1 7.6 -0.5 -0.5 Food &Non￾alcoholic beverages
5.9 7.4 1.5 0.7
Non-Food 10.6 7.9 -2.7 -1.2 Source: CSA and NBE Staff Computation Fig.III.1፡ Development in Annualized National Headline, Food & non -alcoholic beverages and Non￾food Inflation 0.0 5.0 10.0 15.0 20.0 25.0 30.0 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 2013 2014 2015 General Food&Non-alcoholic bevarages Non Food CPI growth in % Source: CSA and NBE Staff Computation

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2014/15 Annual Report 42
Table 3.2: Annual Inflation Rates (in percent)

Items
2013/14 2014/15 Change (Percentage Points) A B B-A General 8.5 10.4 1.9 Food &Non-alcoholic beverages
6.2 12.5 6.3
Non-Food 11.0 8.2 -2.8
Source: CSA and NBE Staff Computation Fig.III.2.Development in Annual National, Headline, Food & Non-alcoholic beverages and Non-food Inflation 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 2013 2014 2015 General Food&Non-alcoholic bevarages Non Food CPI growth in % Source: CSA and NBE Staff Computation
3.2 Consumer Price Developments in Regional States
At the close of 2014/15, regional simple average general inflation declined to 6.3 percent from 9.9 percent a year earlier. Oromia, Dire Dawa, Somali, Harari and Addis Ababa regional states registered headline inflation rates greater than the regional simple average (Table 4.3). Oromia regional state experienced the highest headline inflation of 12.0 percent; while the lowest -0.1 percent was

National Bank of Ethiopia
2014/15 Annual Report 43 recorded in Benishangu gumuz, revealing a 12.1 percentage point margin in the rates of inflation between the regions with the highest and lowest annual average headline inflation.
Table 3.3: Regional Average Annual Inflation (2014/15 FY)
Regions
2013/14 2014/15 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 8.8 6.7 11.6 4.4 5.7 3.2 -4.4 -1.0 -8.4 Harari 10.6 10.5 10.8 8.0 10.7 5.1 -2.6 0.3 -5.7 Oromia 7.9 6.7 9.3 12.0 13.2 10.6 4.1 6.5 1.3 Tigray 8.5 7.3 9.6 4.8 -0.5 9.9 -3.7 -7.8 0.2 Gambela 9.2 8.2 10.7 3.8 4.5 2.5 -5.4 -3.7 -8.1 Addis Ababa 8.5 4.6 11.4 7.6 12.2 4.4 -1.0 7.6 -6.9 Dire Dawa 16.9 7.1 24.7 11.0 7.9 13.1 -5.9 0.7 -11.6 Ben. Gum 9.1 7.0 11.9 -0.1 -0.8 0.9 -9.1 -7.8 -11.0 Somali 11.1 6.5 16.8 9.9 6.0 14.2 -1.3 -0.5 -2.6 Afar 10.8 7.2 15.6 2.7 5.7 -1.0 -8.2 -1.5 -16.6 Amhara 7.7 4.7 11.0 5.2 2.4 8.1 -2.5 -2.3 -2.9 Regions Average 9.9 7.0 13.0 6.3 6.1 6.5 Standard deviation 2.6 1.6 4.5 3.7 4.7 5.0 Coefficient of variation 0.3 0.2 0.3 0.6 0.8 0.8 Sources: CSA and NBE’s staff computation

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2014/15 Annual Report 44
Fig.III.3: Variation in Regional Annual Average Headline Inflation
8.8 10.6 7.9 8.5 9.2 8.5
16.9
9.1 11.1 10.8 7.7
4.4
8.0 12.0
4.8 3.8 7.6
11.0
-0.1
9.9
2.7 5.2
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2014/15
2013/14
Source: CSA and NBE Staff Computation The regional simple average food & non￾alcoholic beverages inflation was 6.1 percent in 2014/15. Food & non-alcoholic beverage inflation in regional states like Oromia, Addis Ababa, Harari and Dire Dawa was higher than the regional simple average. The highest (13.2 percent) food & non￾alcoholic beverages inflation was registered in Oromia; and the lowest (-0.8 percent) in Benishangu Gumuz. Hence, there was a 14 percentage point margin in the rate of food and non-alcoholic beverages inflation among the regions (Table 4.3).

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2014/15 Annual Report 45
Fig.III.4: Variation in Regional Annual Average Food & non-alcoholic beverages Inflation -5.0 0.0 5.0 10.0 15.0 20.0 25.0 6.7 10.5
6.7 7.3 8.2
4.6
7.1 7.0 6.5 7.2
4.7
5.7
10.7
13.2
-0.5
4.5 12.2 7.9
-0.8
6.0 5.7
2.4
2014/15
2013/14
Source: CSA and NBE Staff Computation During 2014/15, simple average regional non-food inflation was 6.5 percent significantly lower than 13 percent in the previous year. Somali, Dire Dawa, Oromia, Tigray and Amhara regional states recorded non-food inflation higher than the regional simple average (Table 4.3).

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2014/15 Annual Report 46
Fig.III.5: Variation in Regional Annual Average Non-food Inflation
11.6 10.8
9.3 9.6 10.7 11.4
24.7
11.9
16.8 15.6
11.0
3.2
5.1
10.6 9.9
2.5
4.4
13.1
0.9
14.2
-1.0
8.1
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2013/14
2014/15
Source: CSA and NBE Staff Computation The highest (14.2 percentage) rise in non￾food inflation was recorded in Somali, and the lowest (-1 percentage) in Afar. Yet, regarding convergence indicator, there is no significant change observed due to the growing domestic market integration as transportation and communication facilities improved.

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2014/15 Annual Report 47
IV. Monetary and Financial Developments
4.1 Monetary Developments and Policy
Ethiopia’s monetary policy continued to be geared towards keeping inflation rate at single digit. Accordingly, the National Bank of Ethiopia has been closely monitoring monetary development throughout the fiscal year so as to sustain the single digit inflation and manage inflation expectations. By end June 2015, annual headline inflation reached 10.4 percent slightly above the single digit target.
4.1.1 Developments in Monetary
Aggregates
At the end of 2014/15, domestic liquidity, as measured by broad money supply (M2), reached Birr 371.2 billion reflecting a 24.7 percent annual growth mainly due to a 31.3 percent surge in domestic credit. The high growth of domestic credit was attributed to a 32.8 percent increase in credit to the non￾central government and 14.1 percent growth in credit to central government. (Table 5.2) Component-wise, narrow money expanded by 15.3 percent due to the rise in demand deposits and currency outside banks reflecting the growth in economic activities and improvements in money demand for transaction purposes. Similarly, quasi￾money, that comprises savings and time deposits, went up by 32.3 percent and reached Birr 216.6 billion in line with the increased capacity of banks in deposit mobilization with the opening of 485 new branches and stability of domestic prices (Table 4.1).

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2014/15 Annual Report 48
Table 4.1: Components of Broad Money
(In Millions of Birr, where applicable) 2010/11 2011/12 2012/13 2013/14 2014/15 2011/12 2012/13 2013/14 2014/15 Narrow Money Supply 76,171.0 94,849.9 114,745.7 134,063.8 154,584.8 24.5 21.0 16.8 15.3 . Currency Outside Banks 32,574.9 38,537.1 45,671.0 53,176.0 60,496.3 18.3 18.5 16.4 13.8 . Demand Deposits (net) 43,596.1 56,312.7 69,074.7 80,887.8 94,088.5 29.2 22.7 17.1 16.3 Quasi-Money 69,206.0 94,548.9 120,567.9 163,682.8 216,567.6 36.6 27.5 35.8 32.3 . Savings Deposits 64,539.6 82,487.8 106,276.2 136,334.0 174,699.1 27.8 28.8 28.3 28.1 . Time Deposits 4,666.4 12,061.1 14,291.7 27,348.8 41,868.5 158.5 18.5 91.4 53.1 Broad Money Supply 145,377.0 189,398.8 235,313.6 297,746.6 371,152.4 30.3 24.2 26.5 24.7 Annual Percentage Change Particulars Year Ended June 30 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 06/07 08/09 10/11 12/13 14/15 (In Millions of Birr) Fig.V.1: Major Components of Broad Money (2004/05 - 2014/15) Currency Outside Banks Net Demand Deposit Quasi- Money Broad Money Year

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2014/15 Annual Report 49
Table 4.2: Factors Influencing Broad Money
(In Millions of Birr, where applicable) 2010/11 2011/12 2012/13 2013/14 2014/15 2011/12 2012/13 2013/14 2014/15 External Assets (net) 55,534.7 39,787.7 45,648.5 45,972.3 37,532.4 -28.4 14.7 0.7 -18.4 Domestic Credit 135,553.9 189,080.8 233,404.3 300,026.6 393,451.9 39.5 23.4 28.5 31.1 . Claims on Central Gov't (net) 28,651.7 21,557.4 21,965.5 26,929.7 30,735.3 -24.8 1.9 22.6 14.1 . Claims on Non-Central Gov't 106,902.2 167,523.4 211,438.8 273,096.8 362,716.6 56.7 26.2 29.2 32.8 Other Items (net) 45,711.6 39,469.7 43,739.3 48,252.3 59,831.9 -13.7 10.8 10.3 24.0 Broad Money (M2) 145,377.0 189,398.8 235,313.6 297,746.6 371,152.4 30.3 24.2 26.5 24.7 Annual Percentage Change Particulars Year Ended June 30 Source: NBE Source: NBE

-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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2014/15 Annual Report 50
4.1.2. Developments in Reserve Money and Monetary Ratios
Reserve money or base money reached Birr 102.5 billion in 2014/15 reflecting a
14.7 percent annual expansion but
showing a 3.3 percentage points slowdown compared with the annual target of 18.0 percent. The growth in reserve money was attributed to 16.9 percent rise in currency in circulation and 9.1 percent in deposits of banks at NBE Excess reserves of commercial banks reached Birr 9.3 billion at the end of June 2014/15 lower than Birr 10.0 billion a year ago. The ratio of M2 to GDP, an indicator of financial deepening, went up to 0.29 points from 0.28 points in 2013/14 partly indicating the prudent monetary policy measures undertaken to mitigate the inflationary pressures. Compared to last year same period, the money multiplier defined as narrow money to reserve money, showed no change at 1.5 whereas the ratio of broad money to reserve money slightly increased to 3.6 from 3.3 last year the same period, reflecting improvements in deposit mobilization by commercial banks (Table 4.3).

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Table 4.3: Reserve Money and Monetary Ratios
(In Millions of Birr, where applicable) 2010/11 2011/12 2012/13 2013/14 2014/15 2011/12 2012/13 2013/14 2014/15 Reserve Requirement (CB's) 20,495.2 18,080.6 11,708.8 14,479.4 18,240.5 -11.8 -35.2 23.7 26.0 Actual Reserve (CB's) 27,757.3 21,791.8 21,160.9 24,493.3 27,513.5 -21.5 -2.9 15.7 12.3 Excess Reserve (CB's) 7,262.1 3,711.3 9,452.1 10,013.9 9,273.1 -48.9 154.7 5.9 -7.4 Reserve Money 69,043.1 65,972.6 74,942.3 89,322.5 102,467.8 -4.4 13.6 19.2 14.7 . Currency in Circulation 39,100.6 45,785.2 54,917.7 64,355.0 75,240.7 17.1 19.9 17.2 16.9 . Bank Deposits 29,942.5 20,187.4 20,024.6 24,967.5 27,227.1 -32.6 -0.8 24.7 9.1 Money Multiplier (Ratio):
. Narrow Money to Reserve Money 1.1 1.4 1.5 30.3 6.5 -2.0 0.5 . Broad Money to Reserve Money 2.1 2.9 3.1 3.3 3.6 36.3 9.4 6.2 8.7 Other Monetary Ratios (% ):
. Currency to Narrow Money 42.8 40.6 39.8 39.7 39.1 -5.0 -2.0 -0.3 -1.3 . Currency to Broad Money 22.4 20.3 19.4 17.9 16.3 -9.2 -4.6 -8.0 -8.7 . Narrow Money to Broad Money 52.4 50.1 48.8 45.0 41.6 -4.4 -2.6 -7.7 -7.5 . Quasi Money to Broad Money 47.6 49.9 51.2 55.0 58.4 4.9 2.6 7.3 6.1 M2/GDP Ratio* 0.28 0.26 0.28 0.28 0.29 -9.8 7.6 3.0 2.9 Annual Percentage Change Particulars Year Ended June 30 Source: NBE

• M2/GDP ratio was calculated on the basis of new GDP series and the value of GDP in
  2014/ 15 is an estimate (to be updated). Source: NBE 0 20000 40000 60000 80000 100000 120000 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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2014/15 Annual Report 52
4.2. Developments in Interest Rate
In 2014/15, both minimum and maximum deposit interest rates remained unchanged at
5.0 and 5.75 percent, respectively. With
average interest rate on savings deposit staying at 5.38 percent while weighted annual average interest rates on time deposit rose to 5.77 percent from 5.66 percent a year earlier. Interest rate on demand deposits also tended to rise. Similarly, average lending rate stood at 11.88 percent. Yet, real rate of interest, except the lending rate, were negative given a surge in the inflation rate from 8.5 to 10.4 percent in 2014/15 (Table 4.4).
Table 4.4: Interest Rate Structure of Commercial Banks
(In % per annum)
Rates 2007/08 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

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
   Up to 1 year 4.67 4.56 5.37 5.48 5.57 5.55 5.71 1 -2 years 5.23 4.80 5.51 5.57 5.68 5.68 5.78 Over 2 years 5.59 5.01 5.60 5.61 5.74 5.74 5.81
   1.3 Demand Deposit (Weighted Average) 0.04 0.06 0.06 0.02 0.03 0.03 0.04
2. Lending Rate (Average) 11.50 12.25 11.88
   Minimum 8.00 8.00 7.50
   Maximum 15.00 16.50 16.25
3. T-bills (Nominal) 0.67 0.89 1.31 1.25 1.86 1.59 1.43
4. Headline Inflation (Year-onYear) 7.8 7.9 8.8 9.1 8.7 8.5 10.4
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
   5.2 Time Deposit (1.2 - 4) -2.65 -3.07 -3.27 -3.57 -3.04 -2.81 -4.68
   5.3 Lending (2 - 4) 3.69 4.38 3.11 2.75 3.17 3.41 1.43
   Source: NBE

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2014/15 Annual Report 53
Source: NBE
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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2014/15 Annual Report 54
4.3 Developments in Financial Sector
Banks, insurance companies and micro￾finance institutions are the major financial institutions operating in Ethiopia. The number of banks stood at 19 of which 16 were private and the remaining three state-owned. Banks opened 485 new branches in 2014/15 (of which 359 were private) raising the total branch network in the country to reach 2693 from 2208 last year. As a result, bank branch to population ratio declined from 1:39,833.84 people to 1:33,448.25 in 2014/15. The significant branch expansion was undertaken by Commercial Bank of Ethiopia (CBE) with 127 branches, followed by Awash International Bank (55 branches), Oromia International Bank (43 branches), Cooperative Bank of Oromiya (36 branches), United Bank (29 branches), Bank of Abyssinia (27 branches), and Loin International Bank (26 branches). Despite aggressive branch expansion by public banks, their share in total branches slightly went down to 41.9 percent from 45.4 percent last year (Table 4.5).

4 Taking total population 87,952,991 (CSA 2013/14) 5 Taking total population 90,076,014(CSA 2014/15) About 35.5 percent of bank branches were in Addis Ababa, during the review fiscal year. The total capital of the banking industry increased by 19.0 percent and reached Birr
31.5 billion by the end of June 2015 as a
number of banks injected more capital. As a result, the share of private banks in total capital marginally increased to 56.5 percent from 55.4 percent last year, while that of CBE remained at 34.0 percent (Table 4.5). In the meantime, the number of insurance companies remained at 17 with their branches rising to 377 following the opening of 45 additional branches. About 52.8 percent of insurance branches were located in Addis Ababa. Ownership wise, 82.5 percent of the total branches were private which slightly increased from 81.3 percent a year ago. Mean while, the total capital of insurance companies increased by 40.8 percent to Birr
2.8 billion from Birr 2.0 billion last year.
Private insurance companies accounted for
77.6 percent of the total capital while the share
of the lone public insurance company was 22.4 percent (Table 4.6).

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2014/15 Annual Report 55

Fig.IV.5: Capital and Branch Network of the Banking system (2010/11-2014/15) 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Percentage Total Public Banks Total Private Banks Source: Commercial Banks

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2014/15 Annual Report 56

1. Public Banks
   Commercial Bank of Ethiopia 700 156 856 38.8 785 192 977 36.3 9,045.0 34.1 10,716.4 34.0 Construction & Business Bank 68 47 115 5.2 69 51 120 4.5 642.1 2.4 731.2 2.3 Development Bank of Ethiopia 31 1 32 1.4 31 1 32 1.2 2,134.8 8.1 2,269.2 7.2 Total Public Banks 799 204 1003 45.4 885 244 1129 41.9 11,821.9 44.6 13,716.7 43.5
2. Private Banks
   Awash International Bank 62 90 152 6.9 95 112 207 7.7 1,979.3 7.5 2,540.3 8.1 Dashen Bank 69 73 142 6.4 76 88 164 6.1 1,994.1 7.5 2,377.2 7.5 Abyssinia Bank 55 54 109 4.9 64 72 136 5.1 1,326.0 5.0 1,594.3 5.1 Wegagen Bank 51 49 100 4.5 63 56 119 4.4 1,825.8 6.9 2,061.9 6.5 United Bank 44 55 99 4.5 62 66 128 4.8 1,334.4 5.0 1,475.0 4.7 Nib International Bank 39 55 94 4.3 50 65 115 4.3 1,731.3 6.5 1,925.3 6.1 Cooperative Bank of Oromiya 84 21 105 4.8 106 35 141 5.2 739.9 2.8 1,058.7 3.4 Lion International Bank 35 27 62 2.8 50 38 88 3.3 514.3 1.9 601.6 1.9 Oromia International Bank 80 29 109 4.9 103 49 152 5.6 594.3 2.2 771.7 2.4 Zemen Bank 3 6 9 0.4 5 2 7 0.3 529.1 2.0 650.0 2.1 Buna International Bank 41 22 63 2.9 47 35 82 3.0 446.6 1.7 559.3 1.8 Berhan International Bank 22 26 48 2.2 32 39 71 2.6 560.1 2.1 622.3 2.0 Abay Bank 54 16 70 3.2 70 19 89 3.3 395.0 1.5 591.0 1.9 Addis International Bank 5 16 21 1.0 10 22 32 1.2 277.9 1.0 399.6 1.3 Debub Global Bank 12 7 19 0.9 13 9 22 0.8 177.3 0.7 202.6 0.6 Enat Bank 0 3 3 0.1 5 6 11 0.4 261.6 1.0 392.1 1.2 Total Private Banks 656.0 549.0 1,205.0 54.6 851.0 713.0 1,564.0 58.1 14,686.8 55.4 17,822.8 56.5 3.Grand Total Banks 1455 753 2208 100 1,736.0 957 2693 100.0 26,508.7 100.0 31,539.5 100.0 % Share % Share Total Capital % Share Total Capital Total % Share Regions Source: Commercial Banks Capital 2013/14 2014/15
   Table.4.5: Capital and Branch Network of the Banking System at the Close of June 30, 2015
   (Branch in Number and Capital in Millions of Birr) 2013/14 2014/15 Banks Branch Network Regio ns Addis Ababa Total Addis Ababa

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2014/15 Annual Report 57

2013/14 2014/15 %
Change
A.A Regio Total A.A Regio Total A B B/A 1 Ethiopian Ins. Cor. 18.0 44.0 62 18 48 66 434.4 643.2 48.1 2 Awash Ins.Com.S.C. 21.0 12.0 33 22 14 36 182.9 219.0 19.7 3 Africa Ins.Com S.C. 8.0 7.0 15 9 9 18 134.9 211.5 56.8 4 National Ins. Co. of Eth. 9.0 12.0 21 9 13 22 72.6 80.8 11.3 5 United Ins.Com. S.C 18.0 10.0 28 18 10 28 203.1 258.4 27.3 6 Global Ins. Com.S.C 6.0 5.0 11 6 6 12 67.1 95.8 42.7 7 Nile Ins.Com.S.C 14.0 14.0 28 14 17 31 182.0 232.6 27.8 8 Nyala Ins.Com.S.C 12.0 9.0 21 13 10 23 206.3 286.3 38.8 9 Nib Ins. Com.S.C 17.0 8.0 25 19 9 28 207.3 263.6 27.1 10 Lion Ins. Com.S.C 14 6 20 15 10 25 83.4 96.6 15.8 11 Ethio-Life Ins.Com.S.c 6.0 1.0 7 8 4 12 20.3 31.8 56.8 12 Oromia Ins.Com.S.c 14 11 25 17 12 29 119.2 138.1 15.9 13 Abay Insurance 7 7 14 8 9 17 48.5 108.3 123.2 14 Berhan insurance S.C 6 1 7 6 1 7 22.4 46.9 108.9 15 Tsehay Insurance S.C 6 2 8 6 2 8 24.3 48.7 100.3 16 Lucy 2 1 3 3 2 5 16.8 64.7 285.9 17 Bunna Insurance S.C. 4 0 4 8 2 10 8.6 38.8 352.5 Total 182 150 332 199 178 377 2,034 2,865 40.8 Note: A.A=Addis Ababa
Table.4.6: Branch Network & Capital of Insurance Companies as at June 30, 2015
No.
Branch
Source: Insurance Companies Capital 2014/15 Insurance Companies 2013/14 (Branch in Number and Capital in Millions of Birr) Fig.IV.6: Capital and Branch Network of Insurance Companies (2010/11-2014/15) 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 Percentage Total Public Insurances Total Private Insurances Source: Insurance Companies

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2014/15 Annual Report 58

By end 2014/15, the number of micro￾finance institutions (MFIs) reached 35 from 31 a year ago. Their total capital and total asset also increased significantly by 27.2 and 24.6 percent and reached Birr 7.2 billion and Birr 30.5 billion, respectively. These micro-finance institutions mobilized deposits which went up by 25.9 percent and reached Birr 14.8 billion. Their outstanding credit also expanded by
29.5 percent as they increased their
outreach. (Table 4.7)
The five largest MFIs, namely Amhara, Dedebit, Oromiya, Omo and Addis Credit and Savings institutions, accounted for 84.2 percent of the total capital, 93.4 percent of the savings, 89.3 percent of the credit and
89.7 percent of the total assets of MFIs at
the end of 2014/15.

Table 4.7: Microfinance Institutions Performance as of June 30, 2015
Particulars 2013/14 2014/15 % Change A B B/A Total Capital 5,652,005.7 7,187,259.5 27.2 Saving 11,784,059.6 14,832,747.4 25.9 Credit 16,855,556.8 21,827,337.3 29.5 Total Assets 24,535,850.0 30,562,012.2 24.6 Source: MFIs (In Thousands of Birr)
4.3.1 Resource Mobilization
Total resources mobilized by the banking system in the form of deposit, loan collection and borrowing increased by
24.5 percent and reached Birr 138.7
billion at the end of 2014/15 (Table 4.8). Spurred by remarkable branch expansion, deposit liabilities of the banking system reached Birr 367.4 billion reflecting annual growth rate of 25.5 percent over last year. Component wise, time deposits registered significant increase (131.6 percent) followed by saving deposits (19.8 percent), and demand deposits (16.8 percent). Saving deposits accounted for 47.6 percent of the total deposits followed by demand deposits (41.0 percent) and time deposit (11.5

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2014/15 Annual Report 59

percent) (Table 4.9). The rise in saving deposits indicates the steady growth in financial intermediation of banks. The share of private banks in deposit mobilization increased only marginally to 32.2 percent from 31.5 percent last year despite their opening of 359 new branches. CBE alone mobilized 66.1 percent of the total deposits due to its large branch network. Raising funds through borrowing by the banking industry was not an important source of resource mobilization in Ethiopia as most of the banks were sufficiently liquid due to increased deposit mobilization and collection of loans. As a result, total outstanding borrowing at the end of the fiscal year was only Birr
31.5 billion up from Birr 27.3 billion a
year earlier (Table 4.8). Of the total borrowing, domestic sources accounted for 87.2 percent, while foreign sources took the remaining balance. Loan collection by the banking system was Birr 60.0 billion up by 16.0 percent (Table 4.8). Of this, 53.4 percent was collected by private banks.

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2014/15 Annual Report 60

Public Banks Private Banks Total (A) Public Banks Private Banks Total (B) Public Banks Private Banks Total (C) B/A C/B

1. Deposits (net change) 32,949.9 16,960.8 49,910.7 40,053.9 15,592.7 55,646.6 48,523.8 26,023.7 74,547.5 11.5 34.0
   Demand 18,781.8 5,106.9 23,888.7 9,350.1 3,294.4 12,644.6 14,573.5 7,089.8 21,663.3 (47.1) 71.3 Savings 12,937.5 10,856.5 23,794.0 29,850.8 9,685.0 39,535.8 13,582.3 15,305.6 28,888.0 66.2 (26.9) Time 1,230.6 997.4 2,228.0 853.0 2,613.2 3,466.2 20,368.0 3,628.3 23,996.2 55.6 592.3
2. Borrowing (net change) 6,343.0 - 6,343.0 4,034.1 - 4,034.1 4,193.3 - 4,193.3 (36.4) 3.9
   Local 5,075.9 - 5,075.9 2,925.9 - 2,925.9 3,571.7 - 3,571.7 (42.4) 22.1 Foreign 1,267.1 - 1,267.1 1,108.2 - 1,108.2 621.6 - 621.6 (12.5) (43.9)
3. Collection of Loans 22,935.5 18,884.7 41,820.2 26,127.5 25,617.2 51,744.7 27,982.1 32,032.2 60,014.2 23.7 16.0
4. Total Resources Mobilized (1+2+3) 62,228.4 35,845.5 98,073.9 70,215.4 41,209.9 111,425.3 80,699.1 58,055.9 138,755.0 13.6 24.5
5. Disbursement 33,249.7 21,001.8 54,251.5 38,937.9 21,027.5 59,965.4 41,913.2 33,567.8 75,481.0 10.5 25.9
6. Change in Liquidity (4-5) 28,978.7 14,843.7 43,822.4 31,277.5 20,182.4 51,459.9 38,785.9 24,488.1 63,274.0 17.4 23.0
   Memorandum It em:
7. Outstanding Credit* 103,580.0 47,618.9 151,198.9 127,629.3 53,693.1 181,322.3 156,134.5 75,635.0 231,769.5 19.9 27.8
   *Includes government borrow ing in the form of bonds and treasury bills from commercial banks and other sectors other than NBE (In M illions of Birr)
   Table 4.8: Annual Resource Mobilization & Disbursing Activities of Commercial Banks and DBE (Specialized Bank) as at June 30, 2015
   Percent Change
   Source: Commercial Banks &Staff Computation Particulars 2012/13 2013/14 2014/15

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2014/15 Annual Report 61

2012/13 2013/14 2014/15 S/R T/S R S T A. Deposits -Demand 116,143.6 128,788.1 150,451.5 10.9 16.8 -Savings 106,288.6 145,824.3 174,712.3 37.2 19.8 -Time 14,769.2 18,235.4 42,231.7 23.5 131.6 T o t a l 237,201.3 292,847.9 367,395.4 23.5 25.5 B. Borrowings 0.0 -Local 20,974.8 23,900.8 27,472.4 13.9 14.9 -Foreign 2,301.2 3,409.4 4,031.0 48.2 18.2 T o t a l 23,276.1 27,310.1 31,503.4 17.3 15.4 (In Millions of Birr)
Table 4.9: Deposits and Borrowings of Commercial Banks and Specialized Bank as at June 30, 2015
Source: Commercial Banks
4.3.2 New Lending Activities
Commercial Banks and the Development Bank of Ethiopia (DBE) disbursed Birr
75.5 billion in new loans to various
economic sectors during the review fiscal year witnessing a 25.9 percent annual increase in line with higher deposit mobilization and collection of loans. Of the total new loans, about 44.5 percent was by private banks, and the rest by public banks (Table 4.10). Regarding disbursement by sector, 31.1 percent of the loans went to industry followed by domestic trade (20.7 percent), agriculture (17.3 percent), international trade (11.1 percent) and housing and construction (8.9 percent) while the remaining balance went to other sectors (Table 4.12).

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Fig.IV.7: Development in Deposit Mobilization, Lending and Loan Collection Activities of the Banking System (2004/05- 2014/15) 0 10000 20000 30000 40000 50000 60000 Value in Millions of Birr Year & Bank Ownership Net Deposit Lending Loan collection Source: Commercial Banks and DBE

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Table 4.10: Loans and Advances by Lenders 1/ (In Millions of 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 32184.1 22025.5 89,665.2 33715.5 22474.1 111,435.3 4.8 2.0 24.3
3. Construction & Business Bank of Ethiopia 1288.0 1088.5 2,332.0 1354.8 1421.5 2,735.5 5.2 30.6 17.3
2.Development Bank of Ethiopia 5465.8 3013.4 22,666.8 6842.9 4086.4 27,580.4 25.2 35.6 21.7 Sub-Total 38,937.9 26,127.5 114,664.0 41,913.2 27,982.1 141,751.2 7.6 7.1 23.6 B. Private Banks 4 Awash International Bank 1944.6 2912.5 9176.4 3723.6 3967.0 12482.0 91.5 36.2 36.0
5. Dashen Bank 3757.5 4943.6 9569.7 5179.8 5903.7 11479.1 37.9 19.4 20.0
6. Bank of Abyssinia 1534.2 2228.4 5153.5 1818.7 2436.4 5992.2 18.5 9.3 16.3
7. Wegagen Bank 2070.9 2944.4 4604.4 3089.5 3287.0 6169.5 49.2 11.6 34.0
8. United Bank 2085.4 3303.6 5069.6 3188.8 4145.3 6860.1 52.9 25.5 35.3
9. Nib International Bank 3382.8 3128.5 5521.6 4629.1 3489.4 7000.1 36.8 11.5 26.8
10. Cooperative Bank of Oromia 803.9 991.6 3718.4 1736.4 918.5 6738.3 116.0 -7.4 81.2
11. Lion Interenational Bank 567.0 718.0 1562.0 1612.2 1127.7 2878.3 184.3 57.1 84.3
12. Oromia International Bank 787.3 1075.1 1430.0 1266.2 1241.3 2275.5 60.8 15.5 59.1
13. Zemen Bank 1149.9 950.6 2551.6 2393.0 1668.5 4767.2 108.1 75.5 86.8
14.Berhan International Bank 484.0 708.9 1184.4 809.1 790.7 1908.6 67.2 11.5 61.1 15.Bunna International Bank 679.3 557.0 1339.4 1447.3 795.0 2433.9 113.1 42.7 81.7 16.Abay Bank 806.8 652.4 1516.7 1353.4 1228.9 2376.5 67.7 88.4 56.7
17. Addis International Bank 222.9 197.3 511.0 343.0 322.3 771.6 53.9 63.3 51.0
18. Debub Global Bank 271.5 169.5 270.4 242.7 241.4 338.9 0.0
19. Enat Bank 479.4 135.8 511.9 735.1 469.0 1145.3 0.0
Sub-Total 21,027.5 25,617.2 53,691.1 33,567.8 32,032.2 75,617.0 59.6 25.0 40.8 Grand Total 59,965.4 51,744.7 168,355.1 75,481.0 60,014.2 217,368.2 25.9 16.0 29.1 Source: Commercial Banks

1. O/S Credit excludes centeral government borrowing
   D*=Disbursement, C*=Collection, O/S*= Outstanding Credit Lenders 2013/14 Percentage Change 2014/15

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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 53.671 42.6 53.3 44.7 37.4 51.3 -16.8 -12.0 -3.7 2.Development Bank of Ethiopia 9.115 5.8 13.5 1.8 2.4 1.3 -80.3 -59.3 -90.7
3. Construction & Business Bank of Ethiopia 2.148 2.1 1.4 9.1 6.8 12.7 322.1 223.7 816.0
Sub-Total 64.934 50.5 68.1 55.5 46.6 65.2 -14.5 -7.7 -4.3 B.Private Banks 4 Awash International Bank 3.2 5.6 5.5 4.9 6.6 5.7 52.1 17.4 5.4
5. Dashen Bank 6.3 9.6 5.7 6.9 9.8 5.3 9.5 3.0 -7.1
6. Bank of Abyssinia 2.6 4.3 3.1 2.4 4.1 2.8 -5.8 -5.7 -9.9
7. Wegagen Bank 3.5 5.7 2.7 4.1 5.5 2.8 18.5 -3.7 3.8
8. United Bank 3.5 6.4 3.0 4.2 6.9 3.2 21.5 8.2 4.8
9. Nib International Bank 5.6 6.0 3.3 6.1 5.8 3.2 8.7 -3.8 -1.8
10. Cooperative Bank of Oromia 1.3 1.9 2.2 2.3 1.5 3.1 71.6 -20.1 40.4
11. Lion Interenational Bank 0.9 1.4 0.9 2.1 1.9 1.3 125.9 35.4 42.7
12. Oromia International Bank 1.3 2.1 0.8 1.7 2.1 1.0 27.8 -0.5 23.2
13. Zemen Bank 1.9 1.8 1.5 3.2 2.8 2.2 65.3 51.3 44.7
14.Berhan International Bank 0.8 1.4 0.7 1.1 1.3 0.9 32.8 -3.8 24.8 15.Bunna International Bank 1.1 1.1 0.8 1.9 1.3 1.1 69.3 23.0 40.7
16. Abay Bank 1.3 1.3 0.9 1.8 2.0 1.1 33.3 62.4 21.4
17. Addis International Bank 0.4 0.4 0.3 0.5 0.5 0.4 22.3 40.8 16.9
18. Debub Global Bank 0.5 0.3 0.2 0.3 0.4 0.2 0.0
19. Enat Bank 0.8 0.3 0.3 1.0 0.8 0.5 0.0
Sub-Total 35.1 49.5 31.9 44.5 53.4 34.8 26.8 7.8 9.1 Grand Total 100.0 0.0 D*=Disbursement, C*=Collection, O/S*= Outstanding Credit Lenders 2013/14 Percentage change 2014/15
4.3.3 Outstanding Loans
Total outstanding credit of the banking system including to the central government increased by 27.8 percent and reached Birr 231.7 billion at the end of June 2015. Specifically, outstanding claims on private sector rose by 31.1 percent, public enterprises (30.0 percent) and the central government (11.1 percent). (Table 4.13) Sectoral distribution of outstanding loans (excluding central government) indicated that credit to industry accounted for 39.7 percent followed by international trade (19.9 percent), domestic trade (11.7

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percent), housing and construction (10.4 percent) and agriculture (8.5 percent) (Table 4.12). The share private sector including cooperatives in outstanding credit stood at Birr 147.4 billion or 67.9 percent reflecting a 28.7 percent growth over last year (Table 4.13).

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 2,969.5 0 0 14,401.3 - - 385.0 Agriculture 10,867.5 11,535.1 15,815.0 13,077.1 11,456.2 18,579.8 20.3 (0.7) 17.5 Industry 20,391.1 9,400.9 67,219.4 23,437.4 11,782.9 86,212.3 14.9 25.3 28.3 Domestic Trade 9,104.1 9,506.2 16,399.2 15,589.0 12,183.2 25,336.4 71.2 28.2 54.5 International Trade 7,280.7 11,008.1 32,579.6 8,415.0 11,790.8 43,266.3 15.6 7.1 32.8 Export 2,973.3 4,625.4 13,312.0 3,780.4 5,587.3 17,581.3 27.1 20.8 32.1 Import 4,307.3 6,382.7 19,267.6 4,634.6 6,203.5 25,722.6 7.6 (2.8) 33.5 Hotels and Tourism 1,190.6 1,117.8 3,562.8 1,620.3 1,510.9 3,590.6 36.1 35.2 0.8 Transport and Communication 1,555.5 1,903.0 5,278.8 3,625.5 2,340.6 7,289.0 133.1 23.0 38.1 Housing and Construction 6,695.8 5,553.2 19,802.0 6,720.1 7,040.4 22,529.1 0.4 26.8 13.8 Mines, Power and Water resource 265.6 77.0 546.7 165.2 83.4 844.7 (37.8) 8.3 54.5 Others 1,899.8 1,384.3 6,033.5 2,163.8 1,449.8 7,827.7 13.9 4.7 29.7 Personal 268.4 221.2 1,052.0 667.5 363.4 1,796.9 148.7 64.3 70.8 Interbank Lending 446.38 37.96 65.9 - 12.66 57.8 - (66.6) (12.3) Total 59,965.4 51,744.7 171,324.6 75,481.0 60,014.3 231,769.5 25.9 16.0 35.3 D*=Disbursement, C*=Collection, O/S*= Outstanding Credit Source: Commercial Banks &Staff Computation 2013/14 2014/15 Percentage Change Economic Sectors

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Fig.IV.8: Sectoral Breakdown of Bank Credit (1999/00-2014/15) - 50,000.00 100,000.00 150,000.00 200,000.00 250,000.00 300,000.00 350,000.00 400,000.00 450,000.00 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 In Millions of Birr Fiscal Year Total Others Housing & Construction International Trade Domestic Trade & Services Industry Agriculture Source: Commercial Banks including DBE & Staff Computation

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Table 4.13: Loans and Advances by Borrowers (In Millions of Birr)
2012/13 2013/14
O/S* O/S* D* C* O/S*
B C E F G C/B G/C
Central Government 15,369.0 12,967.3 - - 14,401.3 -15.6 11.1 Public Enterprises 40,888.6 53,703.7 13,856.3 5,366.8 69,841.6 31.3 30.0 Cooperatives 12,219.7 12,664.7 10,496.8 10,555.2 13,850.7 3.6 9.4 Private & Individuals 82,558.2 101,920.7 51,127.8 44,079.6 133,618.1 23.5 31.1 Inter-bank Lending 163.3 65.9 0.0 12.7 57.8 -59.6 -12.3 Total 151,198.9 181,322.4 75,481.0 60,014.2 231,769.5 19.9 27.8 Total less Inter-bank Lending 151,035.6 181,256.4 75,481.0 60,001.6 231,711.7 20.0 27.8 D*=Disbursement, C*=Collection, O/S*= Outstanding Credit 2014/15 Borrowing Sector Percentage change Source: Commercial Banks &Staff Computation

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4.4. Financial Activities of NBE
Outstanding claims of NBE on the central government reached Birr 92.1 billion by the end of 2014/15, due to a 29.6 percent increase in direct advance. Direct advances to the government stood at Birr
83.2 billion or 90.3 percent of the total
claims, while bond holdings constituted the remaining 9.7 percent. At the same time, outstanding claims of NBE on DBE also reached Birr 23.3 billion about 15.3 percent higher than a year ago. Regarding liabilities of NBE, total deposits at the NBE increased by 25.1 percent to Birr 43.0 billion, due to a 71.7 percent surge in deposits of central government (Table 4.14).
Table 4.14: Financial Activities of National Bank of Ethiopia at the Close of June 30, 2015
2012/13 2013/14 2014/15
A B C B/A C/B
Loans and Advances (1+2) 81,017.4 93,561.4 115,532.3 15.5 23.5 1.Claims on Central Gov’t 64,510.4 73,304.4 92,175.3 13.6 25.7
1.1 Direct Advance 55,264.9 64,264.9 83,264.9 16.3 29.6
1.2 Bonds 9,245.4 9,039.4 8,910.4 -2.2 -1.4
2. Claims on DBE 16,507.0 20,257.0 23,357.0 22.7 15.3
3. Deposit Liabilities 29,464.2 34,432.1 43,077.7 16.9 25.1
3.1 Government 9,133.0 8,793.5 15,098.5 -3.7 71.7
3.2 Financial Institutions 20,331.1 25,638.6 27,979.2 26.1 9.1
Particulars % Change
Source: NBE and Staff Computation ( In Millions of Birr)

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4.5 Developments in Financial Markets
Although there is no secondary market in Ethiopia, government bonds are occasionally issued to finance government expenditures and/or to absorb excess liquidity in the banking system.
4.5.1 Treasury Bills Market
The transaction in the Treasury-bills market on weekly basis constituted throughout the fiscal year. Accordingly, the amount of Treasury-bills offered was Birr 100.7 billion, about 10.5 percent higher than last year, while a total demand for registered 20.3 percent growth to reach Birr 136.5 billion. The amount of T-bills sold during the year stood at Birr 110.6 billion indicating a Birr
25.6 billion (23.6 percent) oversubscription.
At the end of 2014/15, the total outstanding T-bills stood at Birr 41.7 billion, 29.0 percent up from a year ago. Although banks’ participation in the T-bill market showed a marked improvement, the dominance of non￾bank institutions continued in the review year. Accordingly, the non￾bank institutions account for the entire amounted of the total outstanding T-bills (Table 4.15). The average weighted yield of the four types of bills decreased slightly to 1.434 from 1.597 percent a mere
10.2 percent decrease from last year
(Table 4.15).

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2014/15 Annual Report 70
Table 4.15: Results of Treasury Bills Auction
C/A C/B
Number of Bidders -58.9 -40.2 Amount Demanded (Mn.Birr) 25.1 20.3 28-day bill -97.3 -94.1 91-day bill 187.7 61.5 182-day bill 51.0 71.9 364-day bill 35.4 -18.4 Amount Supplied (Mn.Birr) -6.3 10.5 28-day bill -97.9 -95.1 91-day bill 121.9 54.3 182-day bill -0.9 27.8 364-day bill -3.3 -6.0 Amount Sold (Mn.Birr) 1.3 16.0 Banks -100.0 -100.0 Non-Banks 91.7 44.4 28-day bill 0.1 0.1 91-day bill 0.0 0.0 182-day bill 0.0 -0.1 364-day bill -0.1 0.2 28-day bill -65.5 -46.9 91-day bill -14.3 -0.8 182-day bill 16.3 49.5 364-day bill 5.3 -4.7 Banks 3,436.0 13.2 0.0 -100.0 0.0 Non-Banks 22,608.9 86.8 32,286.9 100.0 41,704.8 100.0 84.5 29.2 Public Servants Social Security Agency 8,494.4 32.6 14,590.4 45.2 19,371.6 46.4 128.1 32.8 Development Bank of Ethiopia 9,716.0 37.3 11,416.0 35.4 13,216.0 31.7 36.0 15.8 Private Org. Employees Social Security Agency 1,725.5 6.6 3,707.5 11.5 6,799.2 16.3 294.0 83.4 Other Public Non-Bank Institutions 2,673.0 10.3 2,573.0 8.0 2,318.0 5.6 -13.3 -9.9 Shar e % 41,704.8 Share % 60.1 29.2 Outstanding bills at the end of period(Mn.Br.) 26,044.9 Shar e % 32,286.9
0.940 0.731 1.093
2.317 2.562 2.441
-10.2
2.897 1.883 1.000
1.403 1.213 1.203
Average Weighted Yeild for Successful bids(%) 1.889 1.597 1.434 -24.1
99.472 99.591 99.477
97.721 97.453 97.632
0.0
99.778 99.856 99.923
99.652 99.699 99.701
Average Weighted Price for Successful bids(Birr) 99.156 99.150 99.183 0.0 51,493.5 18,727.0 0.0 57,691.1 76,588.0 110,593.3 8,916.0 9,166.0 8,620.0 109,184.6 95,315.0 110,593.3 35,532.6 51,085.9 78,832.4 12,358.0 9,582.0 12,247.0 107,484.6 91,174.9 100,739.4 50,678.0 21,341.0 1,040.0 9,600.0 8,432.0 14,498.0 6,366.0 10,568.0 8,620.0 54,313.5 25,199.0 1,480.0 38,905.1 69,329.0 111,938.8 604 415 248 109,184.6 113,528.0 136,536.8 Particulars 2012/13 2013/14 2014/15 Percentage Change A B C Source: NBE

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4.5.2 NBE Bill Market
NBE-Bill was introduced in April 4, 2011 so as to mobilize resources from commercial banks to finance priority sectors identified by the government as key for long-term growth of the economy. Since their introduction until end June 2015, NBE bills to the tune of Birr 37.4 billion were sold to the banking sector. Fig.IV.9: Treasury Bills Auction Result Source: NBE
4.5.3. Bonds Market
In recent years, following the strong growth in economic activities and real income, there has been strong demand for corporate bonds. As a result, corporate bond purchase of CBE during 2014/15 F.Y showed an annual growth of 50.2 percent and reached to Birr
48.3 billion.
During the year under review, corporate bond redeemed by regional government and City Government of Addis Ababa reached Birr 315.9 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 Value in Millions of Birr Annual weighted yield Year Demand Supply Average Weighted Yield

National Bank of Ethiopia
2014/15 Annual Report 72 million and Birr 1.7 billion, reflecting an annual contraction of 73.0 percent and 2.4 percent, respectively (Table 4.16). As a result of the above development, total outstanding bond holdings, during the period under review, registered an annual growth of
38.6 percent and reached to Birr 152.7 billion.
The share of EEPCO from the outstanding corporate bond reached to 75.4. While the holdings by City Government of Addis Ababa, Railway Corporation and Regional States accounted for 15.4,
8.5 and 0.7 percent of the
outstanding corporate bond, respectively.

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Table 4.16: Disbursement, Redemption and Outstanding of Coupon and
Corporate Bond of CBE
(In Millions of Birr)
Percentage
Change
2013/14 2014/15
Actual B

1. Corporate Bond Purchases by holders 32,200.0 48,350.0 50.2
   EEPCO 21,200.0 28,000.0 32.1 Regional governments 0.0 Development Bank of Ethiopia 0.0 City Government of Addis Ababa 7,000.0 12,650.0 80.7 Railway Corporation 4,000.0 7,700.0 92.5 Private Sector 0.0
2. Redemption of Bonds by Clients 7,633.5 1,998.7 -73.8
   EEPCO 4,092.0 0.0 -100.0
   Regional governments 1,171.6 315.9 -73.0 Development Bank of Ethiopia 645.3 0.0 -100.0 City Government of Addis Ababa 1,724.6 1,682.8 -2.4 Railway Corporation 0.0 Private Sector 0.0
3. Outstanding Bonds by Clients 110,138.0 152,689.3 38.6
   EEPCO 87,100.0 115,100.0 32.1 Regional governments 1,397.4 1,081.4 -22.6 Development Bank of Ethiopia 43.4 43.4 0.0 City Government of Addis Ababa 16,297.2 23,464.4 44.0 Railway Corporation 5,300.0 13,000.0 145.3 Private Sector 0.0 Particulars Annual B/A Source: Commercial Bank of Ethiopia
   4.5.4. Inter-bank Money Market
   The interbank money market remained inactive in Ethiopia due to the existence of excess reserves in the banking system. Accordingly, no inter-bank money since its introduction in September 1998; merely twenty three transactions worth Birr 259.2 million were transacted with interest rates ranging between 7 to 11 percent per year. The maturity period of these loans widely spanned from overnight to 5 years (Table 4.17).

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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. Developments in Merchandise
Trade
The deficit in merchandise trade during 2014/15 stood at USD 13.4 billion, widened by 29.1 percent relative to the preceding fiscal year mainly due to the significant growth in total import bills coupled with low performance in the growth of total export proceeds. In the review period, export to GDP ratio went down and import to GDP ratios went up by 4.6 and 26.5 percentage points, respectively from 6 and 25 percent of last year.
5.1.1 Exports
Total export proceeds, including electricity, amounted to USD 3 billion down by 8.5 percent vis-à-vis the previous fiscal year. The poor performance in exports was due to slowdown in export earnings from oilseeds (21.8 percent), gold (30.2 percent), chat (8.4 percent), pulses (12.3 percent), live-animals (20.4 percent) and electricity (5.5 percent) owing to lower global commodity prices and/or volume of exports. Export earnings from oilseeds reached USD 510.1 million, depicting a 21.8 percent fall over the preceding year on account of 23.2 percent drop in international price albeit 1.9 percent increase in volume. Oilseeds export accounted for 16.9 percent of the total merchandise export proceeds, compared with 19.8 percent last year. Similarly, earnings from export of gold decreased by 30.2 percent to USD 318.7 million, driven by 4.5 percent decline in international price and 26.9 percent in volume. Gold accounted for 10.6 percent of total export proceeds, down from 13.8 percent in the preceding year. Export proceeds from chat also fell 8.4 percent and reached USD 272.4 million due to a 4.8 percent decline in volume and
3.8 percent in international price. Earnings
from chat accounted for 9 percent of the total export earnings in the review period Export revenue from pulses at USD 219.9 million was down by 12.3 percent due to declines both in volume and price.

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As a result, its share in total exports slightly declined from 7.6 percent last year to 7.3 percent in the review period. Earning from export of live-animals was USD 148.5 million, which showed a 20.4 percent drop due to 26.4 percent fall in volume though international price rose by
8.1 percent. Hence, the share of live
animals in export proceeds went down from 5.7 percent to 4.9 percent during the same period. Similarly, export earnings from electricity declined by 5.5 percent due to a 6 percent fall in volume though unit price increased by 0.6 percent. Export of coffee increased by 9.2 percent and reached USD 780.5 million. As a result of a 12.7 percent rise in international price despite 3.1 percent slow down in export volume. Thus, the share of coffee in total export earnings accounted for 25.8 percent which was higher than 21.6 percent share last year. Export proceeds from flower increased by
1.7 percent and stood at USD 203.1
million driven by a 3.6 percent growth in volume although international price went down by 1.9 percent. As a result, the share of flower export in total merchandize export increased to 6.7 percent. Likewise, earnings from export of leather and leather products reached USD 131.6 million, showing a 1.4 percent annual increase solely due to a 10.8 percent growth in volume of export though international price declined by 8.5 percent. Its share in total export proceeds slightly improved from 3.9 percent last year to 4.4 percent in the review period. Earnings from export of meat & meat products also improved by 24.4 percent and reached USD 92.8 million owing to
27.1 percent increase in export volume
despite 2.2 percent decline in international price. Hence, the share of meat & meat products in total export proceeds increased from 2.3 percent to 3.1 percent. The country earned USD 47.6 million from export of fruits and vegetables, 3.6 percent higher than the previous year. The rise in the value of export was due to a 3.2 percent increase in volume 0.3 percent in and international price. Their share in total exports was merely 1.6 percent.

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Table 5.1: Values of Major Export Items*
(In Millions of USD)
Particulars
2012/13 2013/14 2014/15 Percentage change A %share B %share C %share C/A C/B Coffee 746.6 24.0 714.4 21.6 780.5 25.8 4.5 9.2 Oilseeds 443.5 14.2 651.9 19.8 510.1 16.9 15.0 -21.8 Leather and Leather products 121.1 3.9 129.8 3.9 131.6 4.4 8.7 1.4 Pulses 233.3 7.5 250.7 7.6 219.9 7.3 -5.8 -12.3 Meat & Meat Products 74.3 2.4 74.6 2.3 92.8 3.1 25.0 24.4 Fruits & Vegetables 43.9 1.4 45.9 1.4 47.6 1.6 8.5 3.6 Live Animals 166.40 5.3 186.68 5.7 148.51 4.9 -10.7 -20.4 Chat 271.27 8.7 297.35 9.0 272.42 9.0 0.4 -8.4 Gold 578.8 18.6 456.2 13.8 318.7 10.6 -44.9 -30.2 Flower 186.7 6.0 199.7 6.1 203.1 6.7 8.8 1.7 Electricity 34.6 1.1 45.3 1.4 42.8 1.4 23.9 -5.5 Others 215.4 6.9 247.4 7.5 251.4 8.3 16.7 1.6 Total Export 3115.8 100.0 3300.1 100.0 3019.3 100.0 -3.1 -8.5 Total Export excluding electricity 3081.2 3254.8 2976.5 -3.4 -8.5 *Data for electricity export of 2014/15 is an estimate Source: Ethiopian Revenue and Customs Authority Source: Ethiopian Revenue and Customs Authority 0 100 200 300 400 500 600 700 800 900 In Million USD Fig.VI.1 Foreign Exchange Earning From Selected Export Items Coffee Oilseeds Leather and Leather Products Pulses Chat Gold

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Source: NBE Staff Compilation
Table 5.2: Volume of Major Exports
(In mill of kg)
Particulars
2012/13 2013/14 2014/15 Percentage Change A B C C/A100- 100 C/B100- 100 Coffee 199.1 189.7 183.9 -7.7 -3.1 Oilseeds 283.9 313.5 319.5 12.5 1.9 Leather and Leather products 4.61 5.57 6.17 33.8 10.8 Pulses 357.5 353.0 340.7 -4.7 -3.5 Meat & Meat Products 15.5 15.0 19.0 23.1 27.1 Fruits & Vegetables 135.2 145.4 150.1 11.1 3.2 Live Animals 100.9 105.8 77.9 -22.8 -26.4 Chat 47.2 51.7 49.2 4.3 -4.8 Gold(in mill of grams) 12.31 12.35 9.04 -26.6 -26.9 Flower 42.4 44.7 46.3 9.2 3.6 Electricity 562.6 782.6 735.3 30.7 -6.0

Source: Ethiopian Revenue and Customs Authority Coffee 25.8% Oilseeds 16.9% Leather and Leather Products 4.4% Pulses 7.3% Chat 9% Gold 10.6% Flower 6.7% Others 19.3% Fig.VI 2. Export Share of Selected Commodities in 2014/15

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Source: Ethiopian Revenue and Customs Authority
Table 5.3: Unit Value of Major Exports
(In USD per K.G except gold in USD/gr.) Particulars 2012/13 2013/14 2014/15 Percentage Change A B C C/A100-100 C/B100-100 Coffee 3.7 3.8 4.2 13.2 12.7 Oilseeds 1.6 2.1 1.6 2.2 -23.2 Leather and Leather products 26.2 23.3 21.3 -18.8 -8.5 Pulses 0.65 0.71 0.65 -1.1 -9.1 Meat & Meat Products 4.8 5.0 4.9 1.6 -2.2 Fruits & Vegetables 0.3 -2.4 0.3 Live Animals 1.6 1.8 1.9 15.6 8.1 Chat 5.8 5.8 5.5 -3.7 -3.8 Gold 47.0 36.9 35.3 -25.0 -4.5 Flower 4.4 4.5 4.4 -0.3 -1.9 Electricity 0.1 -5.2 0.6 Source: Calculated from Tables 5.3 and 5.4 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 In Million K.G. Fig.VI.3 Export Volume of Selected Commodities Coffee Oilseeds Leather and Leather Products Pulses Chat Gold (mill of gram)

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Source: NBE Staff Compilation
5.1.2. Imports
Total merchandise imports in 2014/15 increased by 20 percent over last year and reached USD 16.5 billion as a result of a rise in imports of capital goods, consumer goods, semi-finished goods and raw materials. Import of fuel, however, declined by 20.7 percent in association with slump in global price. Hence, import GDP ratio is estimated to have increased to 26.3 percent from 24.9 percent in 2013/14.

Import of capital goods rose considerably by 42 percent and amounted to USD 6.9 billion mainly due to increased import of industrial and transport capital goods which surged by 42.5 percent and 56 percent, respectively while agricultural capital imports however plummeted by
57.6 percent. Consequently, the share of
capital goods in total import bills increased to 41.8 percent from 35.3 percent last year. Similarly, import of consumer goods rose by 22.1 percent due to higher imports of non durable and durable goods by 15.3 and 36.7 percent, respectively. Thus, the share of consumer goods in total import bills went up to 27.4 percent from 26.9 percent the preceding year. 0.0 10.0 20.0 30.0 40.0 50.0 60.0 mill of USD/kg,gold mill USD/gr Fig. VI.4 Unit Value of Exports of Selected Commodities Coffee Oilseeds Leather and Leather Products Pulses Chat Gold

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Similarly, semi-finished goods import stood at USD 2.6 billion, which was higher than USD 2.2 billion a year earlier. Meanwhile, fertilizer import went up by
26.1 percent to USD 502.9 million.
Import of raw materials rose by 2.4 percent relative to the preceding year and accounted for only 1 percent of the total imports of the review period. Fuel import declined by 20.7 percent in 2014/15 and amounted to USD 2 billion as the international price of crude oil dropped by 32.76 percent. The volume of fuel import, however, increased by 6.2 percent. As a result, the share of fuel in total imports went down to 12.4 percent from 18.8 percent last year same period.

6 Mundi Index

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Table 5.4: Value of Imports by End Use
(In Millions of USD)
Categories
2012/13 2013/14 2014/15 Percentage change A % share B % share C % share C/A C/B Raw Materials 146.0 1.3 166.6 1.2 170.5 1.0 16.8 2.4 Semi-finished Goods 1,898.0 16.6 2,231.7 16.3 2,578.4 15.7 35.8 15.5 Fertilizers 291.8 2.5 398.9 2.9 502.9 3.1 72.4 26.1 Fuel 2,174.9 19.0 2,573.1 18.8 2,040.9 12.4 -6.2 -20.7 Petroleum Products 2,128.2 18.6 2,494.9 18.2 1,966.7 11.9 -7.6 -21.2 Others 46.7 0.4 61.4 0.4 55.9 0.3 19.5 -9.0 Capital Goods 3,825.1 33.4 4,845.5 35.3 6,882.3 41.8 79.9 42.0 Transport 916.5 8.0 1,089.4 7.9 1,699.1 10.3 85.4 56.0 Agricultural 132.5 1.2 169.0 1.2 71.6 0.4 -46.0 -57.6 Industrial 2,776.0 24.2 3,587.0 26.2 5,111.6 31.1 84.1 42.5 Consumer Goods 3,206.0 28.0 3,694.6 26.9 4,510.9 27.4 40.7 22.1 Durables 804.2 7.0 1,176.2 8.6 1,608.0 9.8 100.0 36.7 Non-durables 2,401.8 21.0 2,518.3 18.4 2,902.9 17.6 20.9 15.3 Miscellaneous 210.7 1.8 200.9 1.5 275.6 1.7 30.8 37.2 Total Imports 11,460.6 100.0 13,712.3 100.0 16,458.6 100.0 43.6 20.0 Source: Ethiopian Revenue and Customs Authority
5.1.3. Direction of Trade
About 38.4 percent of Ethiopia’s total merchandise export proceeds were derived from Asian markets. Within the Asian countries, the shares of China, Saudi Arabia, United Arab Emirates, Japan and Israel were 12.1 percent, 6.6 percent, 3.2 percent 3.2 percent and 3.1 percent, respectively The major exports to China include oilseed, leather & leather products, natural gums, textile materials, coffee and mineral products. Coffee, meat & meat products, live￾animals, flower, oilseeds and cereals were exported to Saudi Arabia. Meat & meat products, live-animals, pulses, flower, food and coffee constituted the major export products to United Arab Emirates. Coffee, oilseeds, flower and bees wax were sent to Japan. Similarly, Israel imported mainly oilseeds, coffee, cereals, chat and spices.

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Approximately 33.6 percent of the Ethiopian exports went to European countries of which Switzerland was the largest market accounting for 10.6 percent of the total export. Switzerland largely imported gold and coffee. Germany, constituted 6.9 percent of Ethiopia’s export and it was the second major export destination market primarily for coffee, textile & garment and flower. The Netherlands was the third important market in Europe having 5.9 percent of Ethiopia’s exports mainly flower, coffee, vegetables and oilseeds. About 20.2 percent of Ethiopia’s total export proceeds were to African countries of which Somalia, Djibouti, Sudan and Egypt accounted for 82.7 percent of the total export proceeds to the continent. Exports to Somalia included mainly chat, vegetables, live- animals and fruits while chat, vegetables, live-animals, fruits and pulses were exported to Djibouti. In the review period, Sudan imported coffee, pulses, spice and cereals. Export earnings from the America comprised 7 percent of the country’s total export proceeds during 2014/15 of which the United States and Canada took 81.9 percent and 4.8 percent share, respectively. The United States imported mainly coffee, leather & leather products, oilseeds, textile & garment, mineral products, food and flower while coffee was the primary export to Canada.

Africa
20.2%
Europe
33.6%
America
7%
Asia
38.4%
Oceania
0.8%
Fig.VI.5: Export by Destinations Source: NBE staff compilation

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Concerning Ethiopia’s merchandize imports by continents of origin, about
70.3 percent were from Asia, 19.5 percent
from Europe, 5.4 percent from America and 4.7 percent from Africa. Among Asian countries, the major import origin was China (38.3 percent), India (6.7 percent), Saudi Arabia (5.1 percent) and Kuwait (4.5 percent). The prime imports from China included electric materials, metal & metal manufacturing, machinery & air craft materials, road & motor vehicles, clothing, textiles and rubber products. Imports from India constituted metal & metal manufacturing, grains, machine & aircraft materials. Petroleum products were the major imports from Saudi Arabia which accounted for 40.4 percent of the total petroleum imports in 2014/15. The share of Europe in total imports to Ethiopia was 19.5 percent, of which Italy (3.1 percent), Turkey (2.5 percent), Germany (2.1 percent), the Netherlands (1.6 percent) and United Kingdom (1.3 percent). Machinery & aircraft materials, road & motor vehicles, fertilizer, electrical materials and metals & metal manufacturing were imported from Italy while metal & metal manufacturing, machinery & aircraft materials and electrical materials originated from Turkey. The principal imports from Germany were machinery & aircraft materials, road & motor vehicles, food & live-animals, electrical materials and metal & metal manufacturing. At the same time, fertilizer, machine & air craft materials, food & live-animals and electric materials were imported from the Netherlands. Imports from United Kingdom included machinery and aircraft materials, electric materials, road & motor vehicles and metal & metal manufacturing. America took 5.4 percent of Ethiopia’s import bill of which USA, Brazil and Canada alone constitute over 95.9 percent of the total imports. Machinery & aircraft materials, food and electrical materials were the major imports items from USA and machinery & aircraft materials and road & motor vehicles from Brazil. Machinery & aircraft materials and food were the major items imported from Canada. Merely 4.7 percent of Ethiopia’s imports originated from Africa. With in African countries, the major imports were from

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Morocco (30.2 percent), Egypt (22.8 percent), South Africa (19.4 percent) and Sudan (17.4 percent). These four countries constituted 89.8 percent of Ethiopia’s total imports. The major import items from Morocco were petroleum products, electrical materials and road & motor vehicles while petroleum products, metal & metal manufacturing & paper manufacturing were imported from Egypt.

Source: NBE staff compilation
5.2 Services and Transfers
5.2.1. Services
In 2014/15, net services account recorded USD 341.4 million outflows; compared to USD 559.5 million surplus in the preceding year. This was attributed to lower net travel (73.5 percent), transport (31.9 percent) and net government services (37.4 percent) coupled with a rise in payments to other services (52.2 percent Africa 4.7% Europe 19.5% America 5.4% Asia 70.3% Oceania 0.1% Fig.VI.6: Import by Origin

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5.2.2. Unrequited Transfers
Net transfers improved by 20.8 percent, owing to 27.9 percent surge in private individual transfers, mainly cash component (24.3 percent) and underground private transfers (43.1 percent). Net official transfers receipts, however, declined by 39.3 percent
Table 5.5: Services Accounts (In Millions of USD)
S/N Particulars
2012/13 2013/14 2014/15 Percentage Change A B C B/A C/B 1 Investment Income (2+5) -112.6 -152.8 -262.5 35.6 71.9 2 Interest, net (3-4) -110.9 -134.8 -238.9 21.5 77.1 3 Credit 9.8 8.7 10.3 -11.6 19.1 4 Debit 120.7 143.5 249.2 18.9 73.6 5 Dividend, net -1.7 -17.9 -23.7 954.0 32.1 6 OTHER SERVICES, net (7-8) 571.7 712.2 -78.9 24.6 -111.1 7 Exports of non-factor serves 2852.9 3174.2 3,028.4 11.3 -4.6 Travel 514.1 538.8 409.8 4.8 -23.9 Transport 1889.7 2144.9 2,186.9 13.5 2.0 Gov't 201.0 297.3 184.0 47.9 -38.1 Other 248.1 193.1 247.7 -22.2 28.3 8 Imports of non-factor serves 2281.2 2461.9 3,107.3 7.9 26.2 Travel 192.9 223.5 326.1 15.9 45.9 Transport 1322.4 1542.8 1,776.7 16.7 15.2 Gov't 0.7 6.3 1.7 805.5 -72.4 Other 765.2 689.2 1,002.7 -9.9 45.5 9 Net Services (10+11+12+13+14) 459.1 559.5 -341.4 21.9 -161.0 10 Travel 321.2 315.3 83.7 -1.8 -73.5 11 Transport 567.3 602.1 410.2 6.1 -31.9 12 Gov't 200.3 291.0 182.2 45.3 -37.4 13 Other -517.1 -496.1 -755.0 -4.1 52.2 14 Investment Income -112.6 -152.8 -262.5 35.6 71.9 Source: MOFED, Transport and Telecommunication Companies, NBE- FEMEMD and Staff Compilation.

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Table 5.6 Unrequited Transfers
(In Millions of USD)
No. Particulars
2012/13 2013/14 2014/15
Percentage
Change
A %Share B %Share C % Share B/A C/B 1 Private Transfers 3,575.5 70.0 4,039.4 73.4 4,881.6 84.6 36.5 20.8
1.1 Receipts 3,653.4 70.4 4,064.7 72.4 4,901.2 84.4 34.2 20.6
NGOs 1,164.2 22.4 1,096.4 19.5 1,104.5 19.0 -5.1 0.7 Cash 1,028.0 19.8 982.3 17.5 1,017.0 17.5 -1.1 3.5 Food 136.2 2.6 114.1 2.0 87.5 1.5 -35.7 -23.3 Other - - Private individuals 2,489.3 48.0 2,968.4 52.9 3,796.7 65.4 52.5 27.9 Cash 1,821.9 35.1 2,182.9 38.9 2,712.6 46.7 48.9 24.3 In kind 30.9 0.6 29.9 0.5 2.7 0.0 -91.1 -90.8 Underground Transfers 636.4 12.3 755.6 13.5 1,081.4 18.6 69.9 43.1
1.2 Payments 77.9 93.1 25.3 22.4 19.6 53.8 -74.9 -22.5
2. Official Transfers 1,529.9 30.0 1,461.0 26.6 886.5 15.4 -42.1 -39.3
2.1 Receipts 1,535.7 29.6 1,548.4 27.6 903.3 15.6 -41.2 -41.7
Cash 1,535.7 29.6 1,548.4 27.6 903.3 15.6 -41.2 -41.7 Food - - - Other - - -
2.2 Payments 5.8 6.9 87.4 77.6 16.8 46.2 189.8 -80.8
Total Net Transfers 5,105.4 100.0 5,500.5 100.0 5,768.2 100.0 13.0 4.9 Source: Disaster Prevention and Preparedness Agency, MoFED and NBE The decline in net official transfers was due to lower grants from both international financial institutions and bilateral donors. Cash component of official transfers declined by 41.7 percent to USD 903.3 million compared with USD 1.5 billion in the previous year.
5.3. Current Account
Due to the widening of trade deficit and net service outflow coupled with the decline in public transfers, the current account deficit deteriorated to USD 8 billion from USD 4.4 billion deficit last year.

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5.4. Capital Account
The balance in capital account showed a USD 7 billion surplus, about 70 percent higher than that of last year owing to 11.1 percent growth in official long term loans, other public long term (571.3 percent) net capital inflows and 50.1 percent expansion in FDI.
5.5 Changes in Reserve Position
Net foreign assets of the banking system recorded a reserve drawdown of USD
521.4 million, due to decreases in the net
foreign assets of commercial banks by USD 614.3 million while that of NBE rose by USD 92.9 million. Hence, gross international reserves of NBE were adequate to cover 2.5 months of imports of goods and non-factor services of next fiscal year.
5.6. External Debt
External debt stock of the country at the end of 2014/15 amounted to USD 18.2 billion, depicting a 29.9 percent increase over the preceding year. This was attributed largely to higher debt owed to commercial (9.2 billion), multilateral (USD 6.2 billion) and bilateral creditors (USD 2.7 billion). Hence, the country’s external debt stock to GDP ratio rose to 29.1 percent from 25.5 percent in 2014/15. At the same time, debt stock to total receipts from export of goods and non-factor services ratio slightly rose to 3 percent from 2.2 percent a year ago. Similarly, commercial debt stock reached USD 9.2 billion in 2014/15 accounting for
50.7 percent of the total debt stock and
showing a 175.4 percent annual growth.
Of the total debt stock, 34.2 percent was owed to multilateral and 15.1 percent to bilateral creditors. Thus, the country’s external debt burden as measured by debt service to export of goods and services ratio increased to 10.8 percent from 7.5 percent in the same period of last year.

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Table 5.7: External Public Debt
(In Million of USD)
Particulars
2012/13 2013/14 2014/15
Percentage
Change
A B C B/A C/B
Annual Debt

2,679.2

3,150.0

5,423.1 17.6 72.2
Debt Stock

11,222.7

14,008.1

18,194.1 24.8 29.9
Multilateral

5,028.5

6,154.5

6,228.6 22.4 1.2
Bilateral

3,192.3

4,505.3

2,743.2 41.1 -39.1
Commercial

3,001.9

3,348.3

9,222.4 11.5 175.4
Debt Service

648.6

652.7

878.2 0.6 34.6
Principal repayments

527.9

509.2

629.0 -3.5 23.5
Interest payments

120.7

143.5

249.2 18.9 73.6
Debt stock to GDP ratio (In percent )

23.7

25.5

29.1 7.5 14.1
Debt stock to export of goods and non-factor services

1.9

2.2

3.0 15.1 39.0
Receipts from goods and non-factor services

5,968.7

6,474.2

6,047.7 8.5 -6.6
Debt service ratio (In percent )1/

6.6

7.5

10.8 15.1 42.6
Arrears2/
Principal
Interest
Relief

9.0

3.5

-
Principal

7.1

2.9
Interest

2.0

0.6
Source: MoFED
1/ Ratio of debt service to receipts from export of goods and non-factor services

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5.7 Overall Balance of Payments
As a result of the external developments, the overall balance of payments exhibited a USD 521.4 million deficit compared with USD 96.9 million deficit last year. The trade deficit widened by 29.1 percent owing to a 20 percent growth in merchandise imports in contrast with a
8.5 percent drop in merchandise exports.
Net private transfers also surged by 20.8 percent in the same period. Yet, the current account deficit (including official transfers) widened to USD 8 billion from USD 4.4 billion resulting in current account deficit to GDP ratio rising to 12.8 percent from 7.9 percent a year ago.

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Table 5.8: Balance of Payments
(In Millions of USD)
S/N
2012/`13 2013/14 2014/15 Percentage Change A B C B/A C/B 1 Exports, f.o.b. 3,115.8 3,300.1 3,019.3 5.9 -8.5 Coffee 746.6 714.4 780.5 -4.3 9.2 Other 2,369.2 2,369.2 2,585.7 2,585.7 2,238.8 9.1 -13.4 2 Imports 11,460.6 13,712.3 16,458.6 19.6 20.0 Fuel 2,174.9 2573.1 2,040.9 18.3 -20.7 Cereals 560.8 442.8 601.6 -21.0 35.9 Aircraft 18.1 35.4 190.6 95.7 438.8 Imports excl. fuel, cereals, aircraft 8,706.9 10,661.0 13,625.5 22.4 27.8 3 Trade Balance (1-2) -8,344.8 -10,412.2 -13,439.3 24.8 29.1 4 Services ,net 459.1 559.5 -341.4 21.9 -161.0 Non-factor services, net 571.7 712.2 -78.9 24.6 -111.1 Exports of non-factor services 2,852.9 3,174.2 3,028.4 11.3 -4.6 Imports of non-factor services 2,281.2 2,461.9 3,107.3 7.9 26.2 Income, net -112.645 -152.8 -262.5 35.6 71.9 O/w Gross official int. payment
120.7 143.5 249.2 18.9 73.6
Dividend -1.7 -17.9 -23.7 954.0 32.1 5 Private transfers, net 3,575.5 4,039.4 4,881.6 13.0 20.8 o/w: Private Individuals 2,489.3 2,968.4 3,796.7 19.2 27.9 6 Current account balance excluding off. Transfers (3+4+5) -4,310.2 -5,813.3 -8,899.1 34.9 53.1 7 Official transfers, net 1,529.9 1,461.0 886.5 -4.5 -39.3 8 Current account balance including official trasfers(6+7) -2,780.3 -4,352.3 -8,012.6 56.5 84.1 9 Capital account 3,291.2 4,134.6 7,030.6 25.6 70.0 Off. Long-term Cap., net 1,269.6 2,308.9 2,566.0 81.9 11.1 Disbursements 1,438.5 2,442.8 2,653.7 69.8 8.6 Amortization 168.9 133.9 87.7 -20.7 -34.5 Other pub. long-term cap. 881.7 331.9 2,228.0 -62.4 571.3 Foreign Direct Investment(net) 1,231.6 1,467.0 2,202.2 19.1 50.1 Sht-trm Capital -91.6 26.8 34.3 -129.2 28.4 10 Errors and omissions -517.5 120.8 460.6 11 Overall balance (8+9+10) -6.5 -96.9 -521.4 12 Financing 6.5 96.9 521.4 13 Reserves [ Increase(-), Decrease (+)] 15.5 100.3 521.4 14 Central Bank (NFA) -57.2 -42.5 -92.9 Asset -127.2 -218.2 -663.1 Liabilities 70.0 175.7 570.2 15 Commercial banks (NFA) 72.7 142.9 614.3 16 Debt Relief -9.0 -3.5 Principal 7.1 2.9 Interest 2.0 0.6 Source: NBE Staff Compilation

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Table 5.9: Components of External Trade as Percentage of GDP7
Particulars
FY
2012/13
FY
2013/14
FY
2014/15 Percentage Change
A B C B/A C/B
Exports 6.6 6.0 4.8 -8.8 -19.6 Imports 24.2 25.0 26.3 3.1 5.5 Trade Balance -17.6 -19.0 -21.5 7.5 13.4 Net Services 1.0 1.0 -0.5 5.0 -153.6 Net Private Transfers 7.6 7.4 7.8 -2.7 6.2 Current Account Deficit (excluding official transfers) -9.1 -10.6 -14.2 16.2 34.5 Current Account Deficit (including official transfers) -5.9 -7.9 -12.8 34.9 61.8 Source: NBE Staff Compilation Source: NBE Staff Computations

7 CA to GDP ratios for FY2013/14 are based on GDP estimate -2000 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 In Million of USD Fig.VI.7: Trends in Components of Current Account Exports Imports Net Services Private Transfers

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5.8. Developments in Foreign Exchange Markets
5.8.1. Developments in Nominal Exchange Rate
The weighted average exchange rate of the Birr in the inter-bank foreign exchange market was Birr 20.0956/USD in 2014/15, depicting 5.4 percent year-on-year depreciation (Table 5.10). Similarly, the Birr in the parallel foreign exchange market depreciated on average by 12.2 percent annually to reach Birr 22.2932/USD. As a result of relatively higher rate of depreciation of the Birr in the parallel market than in the official market, the average spread between the two markets widened to 10.9 percent in 2014/15 from
4.2 percent last year.
Table 5.10: Inter-Bank and Parallel Forex Market Exchange Rates
Period
Average
Weighted Rate
Amount Traded in Millions of USD Average Rates in parallel Market Number of Trades Total o/w Among CBs Total o/w Among CBs 2012/13 18.1947 15.60 3.00 253.00 2.00 19.3025 Qtr. I 17.8705 6.20 3.00 65.00 2.00 18.4400 Qtr. II 18.0782 3.30 0.00 65.00 0.00 18.7333 Qtr. III 18.2971 3.10 0.00 61.00 0.00 19.8367 Qtr. IV 18.5331 3.10 0.00 62.00 0.00 20.2000 2013/14 19.0748 18.70 6.20 254.00 7.00 19.8666 Qtr. I 18.7384 3.20 0.00 63.00 0.00 19.7621 Qtr. II 18.9390 8.20 5.00 65.00 4.00 19.5372 Qtr. III 19.1819 4.30 1.20 65.00 3.00 19.8222 Qtr. IV 19.4400 3.05 0.00 61.00 0.00 20.3448 2014/15 20.0956 14.50 2.00 258.00 5.00 22.2932 Qtr. I 19.7288 4.15 1.00 66.00 2.00 21.0731 Qtr. II 19.9925 4.25 1.00 69.00 3.00 22.3220 Qtr. III 20.2145 3.05 0.00 61.00 0.00 22.8861 Qtr. IV 20.4466 3.05 0.00 62.00 0.00 22.8914 Source: NBE, Foreign Exchange Monitoring & Reserve Management Directorate and staff compilation

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In the retail foreign exchange market, the average buying and selling rates of forex bureaus depreciated by 5.2 percent and
5.4 percent and stood at Birr
20.1003/USD and Birr 20.4798/USD, respectively. Therefore, the average spread between forex bureaus buying and selling rates slightly went up to 1.9 percent in 2014/15 from 1.7 percent a year ago (Table 5.14).
Table 5.11: End Period Mid-Market Rates
(USD per Unit of Foreign Currency) Currency 2012/13 2013/14 2014/15 Percentage change A B C C/B C/A Pound Sterling 1.5280 1.7023 1.5697 -7.79 2.73 Swedish Kroner 0.1488 0.1481 0.1202 -18.86 -19.24 Djibouti Frank 0.0056 0.22 0.22 Swiss Frank 1.0569 1.1194 1.0708 -4.34 1.31 Saudi Riyal 0.2666 0.01 0.01 UAE Dirhams 0.2723 -0.01 -0.01 Canadian Dollar 0.9574 0.9349 0.8094 -13.43 -15.46 Japanese Yen 0.0102 0.0099 0.0081 -17.82 -20.24 Euro 1.3029 1.3616 1.1112 -18.39 -14.71 SDR 1.5051 1.5438 1.4067 -8.88 -6.54 Source: Staff Compilation The end period mid market exchange rate of the US dollar appreciated against virtually all major international currencies such as Swedish Kroner (18.9 percent), Euro (18.4), Japanese Yen (17.8 percent), Canadian Dollar (13.4 percent), SDR (8.9 percent), Pound Sterling (7.8 percent), Swiss Frank (4.3 percent) and UAE Dirhams (0.01 percent). It however depreciated vis-à-vis Djibouti Frank (0.2 percent) and Saudi Riyal (0.01 percent) (Table 5.11).

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Table 5.12: End Period mid Market Rates
(Birr per Unit of Foreign Currency) Currency 2012/13 2013/14 2014/15 Percentage change A B C C/B C/A USD 18.7358 19.675 20.6688 5.05 10.32 Pound 28.6284 33.49275 32.4437 -3.13 13.33 Swedish Kroner 2.7871 2.9131 2.4838 -14.74 -10.88 Djibouti Frank 0.105 0.1104 0.1160 5.07 10.27 Swiss Frank 19.8011 22.02505 22.1316 0.48 11.77 Saudi Riyal 4.9959 5.246 5.5108 5.05 10.31 UAE Dirhams 5.101 5.35665 5.6274 5.05 10.32 Canadian Dollar 17.9376 18.3947 16.7291 -9.06 -6.74 Japanese Yen 0.1908 0.19405 0.1682 -13.35 -11.87 Euro 24.4109 26.78945 22.9671 -14.27 -5.91 SDR 28.1998 30.37425 29.0748 -4.28 3.10 Source: Staff Compilation Meanwhile, the end period exchange rate of the Birr appreciated against most international currencies. For instance, Birr appreciated 14.7 percent against Swedish Kroner, 14.3 percent against Euro, 13.4 percent against Japanese Yen,
9.1 percent against Canadian Dollar, 4.3
percent against SDR and 3.1 percent against Pound Sterling. Nevertheless, the end period Birr rate depreciated against Djibouti Frank, USD, UAE Dirham’s and Saudi Riyal by 5.1 percent each and 0.5 percent against Swiss Frank (Table 5. 12).
5.8.2. Movements in Real Effective
Exchange Rate
The real effective exchange rate of the Birr (REER) has been appreciating since 2010/11 due to higher domestic inflation relative to that of major trading partner countries. In 2014/15, REER of the Birr highly appreciated by 11.9 percent compared to 0.44 percent appreciation in the previous year due to the combined effect of relatively higher domestic inflation and fast deprecation of trading partners’ currency against USD than that of the Birr (Table 5.13).

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Accordingly, the nominal effective exchange rate (NEER) of the Birr appreciated by 4 percent annually compared to 3.3 percent deprecation in 2013/14.
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 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
About, USD 14.5 million was traded in the inter-bank foreign exchange market in 2014/15 which was 22.5 percent lower than that of 2013/14. Of the total amount of traded, USD 2.0 million (or 13.8 percent) was among commercial banks the remaining USD
12.5 million (86.2 percent) was supplied
by NBE (Table 5.10).
Meanwhile, foreign exchange purchase of forex bureau of commercial banks decreased by 27.7 percent over the preceding year and reached USD 364.7 million. Their sales, however, increased by 29.6 percent to USD 210 million from USD 162.1 million in 2013/14 due to higher foreign exchange demand for business, education and medical relate travels (Table 5.14).

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Table 5.14: Foreign Exchange Transactions by Forex Bureaux of Commercial Banks
(In Millions of USD)
Name of Forex Bureau
2012/13 2013/14 2014/15 Percentage Change A B C D E F E/C F/D Purchases Sales Purchases Sales Purchases Sales Purchases Sales Commercial Bank of Ethiopia 73.64 2.24 412.21 70.77 292.96 100.82 -28.93 42.47 Bank of Abyssinia 4.5 6.77 4.41 5.13 5.32 10.02 20.58 95.22 Dashen Bank 28.52 34.84 33.55 37.30 22.80 28.51 -32.05 -23.56 Awash International Bank 7.09 13.08 9.13 12.53 6.68 19.51 -26.84 55.65 Construction & Business Bank 4.91 1.25 4.27 1.40 4.36 3.03 2.11 116.15 Wegagen Bank 5.73 4.26 5.02 6.73 4.62 5.71 -7.84 -15.16 United Bank 25.87 12.1 16.25 10.09 11.22 13.41 -30.95 32.94 Development Bank 3.53 0.27 3.72 0.73 0.43 0.65 -88.38 -10.94 Nib International Bank 5.94 6.67 4.47 6.40 2.66 8.39 -40.58 31.05 Lion International Bank 3.65 1.03 2.59 1.73 2.21 2.62 -14.50 51.48 Oromia International Bank 1.99 1.66 2.81 2.11 6.18 4.62 119.90 118.88 Zemen Bank 0.97 2.65 0.90 4.07 0.67 3.97 -26.13 -2.43 Cooperative Bank of Oromia 0.58 0.79 0.41 0.41 0.93 3.07 125.31 641.36 Buna International Bank 1.51 0.57 0.38 0.29 0.67 1.37 76.62 370.58 Birhan International Bank 0.45 0.37 0.01 0.03 0.33 0.45 3122.37 1402.43 Abay Bank 1 0.9 0.54 1.36 0.88 2.09 64.52 53.30 Addis International Bank 1.8 0.22 1.61 0.47 0.95 0.96 -41.15 102.84 Debub Global Bank 0.05 0.05 1.28 0.25 0.29 0.27 -77.40 7.73 Enat Bank - - 0.62 0.26 0.52 0.54 -16.53 104.29 Total 171.7 89.7 504.18 162.07 364.67 210.00 -27.67 29.57 Average Exchange Rate 18.2085 18.5881 19.0997 19.4255 20.1003 20.4798 5.24 5.43 Source: Staff Compilation

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VI. General Government Finance
6.1 General
The overall fiscal operations of the general government in 2014/15 resulted in a deficit of Birr 30.8 billion, which was greater than Birr 27.3 billion (including grants) recorded in 2013/14. Total revenue (including grants) depicted a 26.3 percent annual growth (Table 6.2). Thus, revenue to GDP ratio increased to 15.1 percent from 13.8 percent last year (Table 6.2). General government expenditure also rose by 24.3 percent during the review period due to growth in both current and capital expenditures (Table 6.3). The ratio of expenditure to GDP slightly rose to 18.6 percent from 17.5 percent a year earlier. (Table 6.1)

6.1 Measuring Fiscal Sustainability (In %)
Fiscal
Year PD/GDP IP/RR Debt/GDP R(Debt) R(GDP) Exp/GDP Rev/GDP R(OR) 2001/02 -7.3 9.7 41.8 0.0 -2.2 26.8 15.8 -1.8 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 Source: Staff Computation PD = Primary Deficit IP/RR = Share of interest payments in Recurrent revenue D(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 GDP 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, registered 26.3 percent increase to Birr 199.6 billion in the review year (Table 6.2). Its GDP ratio increased to (15.1 percent) from 13.8 percent in 2013/14. About 88.6 percent of the total domestic revenue was generated through taxes which surged by 24.2 percent and reached Birr 165.3 billion on account of improved collection of taxes from direct taxes (27.9 percent) and indirect taxes (22.1 percent). Hence, the respective contributions of direct and indirect taxes to tax revenue were 36.4 percent and
63.6 percent in 2014/15.
A total of Birr 21.3 billion was collected through non-taxes in 2014/15, which showed a 63.2 percent growth over last year same period due to improvements in all components of non-taxes except reimbursement & property sales (Table 6.2). External grants stood at Birr 13 billion, about 9.4 percent higher than a year ago. All in all, total revenue performance including grants in the 2014/15 was about 103 percent of the total annual budget.

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0
50000
100000
150000
200000
250000 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 Non-tax revenue Grants

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Table 6. 2: Summary of General Government Revenue by Component
(In Millions of Birr)
Particulars
2013/14 2014/15
Perce ntage
Chang e Perform-
[A] [B] [C] ance Rate
Pre. Act [C/A]
Revised
Budget Pre. Act [C/B]
Total Revenue and Grants 158,076.5 193,807.6 199,639.1 26.3 103.0 Total Revenue 1/ 146,172.8 176,980.2 186,618.7 27.7 105.4 Tax Revenue 133,118.3 158,239.7 165,312.5 24.2 104.5

1. Direct Tax Revenue 47,020.7 56,411.5 60,154.4 27.9 106.6
   1.1 Income and Profit
   Taxes 45,708.7 53,998.6 58,288.1 27.5 107.9 Personal 13,796.3 17,370.6 20,432.8 48.1 117.6 Business 26,909.9 30,731.4 30,444.1 13.1 99.1 Others 2/ 5,002.5 5,896.7 7,411.2 48.1 125.7
   1.2 Rural Land Use Fee 326.3 407.6 239.7 (26.5) 58.8
   1.3 Urban Land Use Fee 985.7 2,005.3 1,626.6 65.0 81.1
2. Indirect Taxes 86,097.6 101,828.2 105,158.0 22.1 103.3
   2.1 Domestic Taxes 40,498.9 46,566.9 52,367.9 29.3 112.5
   2.2 Foreign Trade Taxes 45,598.7 55,261.3 52,790.1 15.8 95.5
   Import 45,598.7 55,261.3 52,790.1 15.8 95.5 Export
3. Non-Tax Revenue 13,054.5 18,740.5 21,306.2 63.2 113.7
   3.1 Charges and Fees 1,527.5 1,367.8 2,384.2 56.1 174.3
   3.2 Govt. Invt. Income 3/ 3,562.8 4,249.1 4,997.2 40.3 117.6
   3.3 Reimb. And Property
   Sales 245.3 511.2 199.9 (18.5) 39.1
   3.4 Sales of Goods &
   Services 2,538.3 4,374.2 3,017.3 18.9 69.0
   3.5 Others 4/ 5,180.5 8,238.2 10,707.6 106.7 130.0
4. Grants 11,903.7 16,827.4 13,020.4 9.4 77.4
   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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6.3 Expenditure
A total of Birr 230.5 billion was spent on different general government operations, which was 24.3 percent higher than in 2013/14 due to both increased in recurrent and capital expenditures (Table 6.3). Recurrent expenditure reached Birr
113.3 billion, showing 45.2 percent
growth over last fiscal year and its share in total expenditure stood at 49.2 percent. Capital expenditure at Birr 117.1 billion depicted 9.1 percent increase vis-à-vis 2013/14. The performance rate of capital expenditure was 94 percent. In summary, general government expenditure performance rate was 100.3 percent of the annual budget.

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Table 6.3: Summary of General Government Expenditure
(In Millions of Birr)
Particulars
2013/14 2014/15
Percentage
Change Perform-
[A] [B] [C] ance Rate
Pre. Act [C/A]
Revised
Budget Pre. Act [C/B]
Total Expenditure

185,471.78

229,742.62 230,521.18 24.3 100.3

1. Current Expenditure

78,086.90

105,167.42 113,375.50 45.2 107.8 General Services

29,193.90

29,336.63

38,915.70 33.3 132.7
Economic Services

10,370.60

14,335.82

14,840.50 43.1 103.5
Social Services

32,519.40

41,534.17

51,688.60 58.9 124.4
Interest and Charges

3,794.20

5,417.30

5,337.70 40.7 98.5
External Assistance1/
Social Safety Net
Others (miscellaneous)

2,208.80

14,543.50

2,593.00 17.4 17.8
2. Capital Expenditure

107,384.88

124,575.20 117,145.68 9.1 94.0 Economic Development

73,461.69

86,009.50

76,398.81 4.0 88.8
Social Development

26,200.00

31,632.70

28,639.51 9.3 90.5
General Development

7,723.18

6,933.00

12,107.36 56.8 174.6
3. Special programs
Source: Ministry of Finance and Economic Development Note: 1/ Includes mapping, science and technology, public buildings, etc

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0
50000
100000
150000
200000
250000
1998/99 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 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 In Percent of GDP Fiscal Year Fig.VI.3: Trends in General Government Expenditure and Revenue (% of GDP) Expenditure/GDP Revenue/GDP

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6.4 Deficit Financing
During the review period general government budgetary operations, including external grants, resulted in a deficit of Birr 30.8 billion, which was ,
12.7 percent higher than a year earlier.
Primary deficit as percentage of GDP was 2.5 percent. The deficit was mainly financed by net domestic and external borrowing.

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2014/15 Annual Report 106
Table 6.4 Summary of General Government Finance
(In Millions of Birr)
Particulars
2013/14 2014/15
Percentage
Change
Perform￾ance
[A] [B] [C] Rate
Pre. Act [C/A]
Revised
Budget Pre. Act [C/B]
Revenue and Grants 158,076.5 193,807.6 199,639.1 26.3 103.0 Revenue 146,172.8 176,980.2 186,618.7 27.7 105.4 Grants 11,903.7 16,827.4 13,020.4 9.4 77.4 Total Expenditure 185,471.8 229,742.6 230,521.2 24.3 100.3 Current Expenditure 78,086.9 105,167.4 113,375.5 45.2 107.8 Capital Expenditure 107,384.9 124,575.2 117,145.7 9.1 94.0 Overall Surplus/ Deficit (Including Grants) (Excluding Grants) (27,395.3) (35,935.0) (30,882.1) 12.7 85.9 Total Financing (39,299.0) (52,762.4) (43,902.5) 11.7 83.2 Net External Borrowings 27,395.3 35,935.0 30,882.1 12.7 85.9 Gross Borrowing 20,493.3 15,293.5 18,733.6 (8.6) 122.5 o/w Special Programs 21,877.4 17,502.9 20,683.3 (5.5) 118.2 Amortization Paid HIPC Relief 1,424.3 2,209.4 1,949.7 36.9 88.2 Net Domestic Borrowings 40.2 Banking System 13,510.0 20,641.5 18,466.2 36.7 89.5 Non-Banking Systems 2,218.2 10,738.6 384.1 Privatization Receipts 11,291.8 7,727.6 (31.6) Others and Residuals 485.0 (6,608.0) (6,802.7) 2.9 Source: Ministry of Finance and Economic Development

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2014/15 Annual Report 107
VII. Investment
The Ethiopian Investment Agency (EIA) and Regional Investment Offices licensed a total of 407 projects in 2014/15. All of which entered operational stage. The projects started operation with investment capital of Birr 4.1 billion showing 173.5 and 640 percent annual growth in total investment capital and number of projects, respectively. All the investment projects were private. Out of the total private investment projects for the year, 362 (89 percent) were domestic with a capital of Birr 1.5 billion; whereas 45 projects were foreign having Birr 2.6 billion as capital. The average capital per project for domestic investment projects was Birr 4.2 million and that of foreign was Birr 57.9 million; implying that foreign investment projects were more of capital intensive than domestic investment projects. The investment projects have created job opportunities for about 11,227 permanent and 10,505 casual workers (Table 7.1).

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2014/15 Annual Report 108
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

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2014/15 Annual Report 109
Fig.VII.1: Number 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

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Fig.VII.2: Capital of Operational Investment Projects by Source Source: Ethiopian Investment Agency
7.1 Investment by Sector
Of the total number of investment projects in 2014/15, 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.
In terms of 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). 0 500 1,000 1,500 2,000 2,500 3,000 2012/13 2013/14 2014/15 In million Birr Domestic Foreign Public

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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

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2014/15 Annual Report 112
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.

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2014/15 Annual Report 113
7.2 Distribution by Region
Out 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 established in Oromia, followed by 49 projects (12.0 percent) with Birr 207.3 million capital were in Tigray, 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).
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.

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VIII. International Developments
8.1 International Economic Developments
8.1.1 Overview of the World Economy8
Global growth in 2014 was a modest 3.4 percent, reflecting a pickup in growth in advanced economies relative to the previous year and a slowdown in emerging market and developing economies. Despite the slow￾down, emerging market and developing economies still accounted for three-fourths of global growth in 2014. Complex forces that affected global activity in 2014 are still shaping the outlook. These include medium￾and long-term trends, such as population aging and declining potential growth; global shocks, such as lower oil prices; and many country- or region-specific factors, such as crisis legacies and exchange rate swings triggered by actual and expected changes in monetary policies. In the first quarter of 2015, the starting point for this update of the IMF’s global economic forecasts, world growth at 2.2 percent fell some 0.8 percentage point short of the forecasts in the April 2015 WEO.

8 Excerpted from European Central Bank report monthly reports through January to June, 2015 and World Economic Outlook, April and July 9, 2015 The shortfall reflected to an important extent an unexpected output contraction in the United States, with attendant spillovers to Canada and Mexico. One-off factors, notably harsh winter weather and port closures, as well as a strong downsizing of capital expenditure in the oil sector contributed to weakening U.S. activity. Outside North America, positive and negative surprises were roughly offsetting. Growth in output and domestic demand in emerging market and developing economies broadly weakened, as expected. Oil prices have rebounded more than expected in the second quarter of 2015, reflecting higher demand and expectations that oil production growth in the United States will slow faster than previously forecast. Nevertheless, the average annual oil price expected for 2015 USD 59 a barrel is in line with the oil price assumption in the April 2015 WEO, with a somewhat smaller increase forecast for 2016 and beyond, as global oil supply is running well above 2014

National Bank of Ethiopia
2014/15 Annual Report 115 levels and global oil inventories are still rising. The reduction in oil investment may, however, lead to a somewhat weaker boost to activity in North America from lower oil prices than expected earlier. Growth in the United States was stronger than expected, averaging about 4 percent annualized in the last three quarters of 2014. Consumption the main engine of growth has benefited from steady job creation and income growth, lower oil prices, and improved consumer confidence. The unemployment rate declined to 5.5 percent in February, more than 1 percentage point below its level of a year ago. In Japan, after a weak second half of the year, growth in 2014 was close to zero, reflecting weak consumption and plummeting residential investment. In the euro area, activity was weaker than expected in the middle part of 2014 but showed signs of a pickup in the fourth quarter and in early 2015, with consumption supported by lower oil prices and higher net exports. Although activity was broadly in line with the forecast, investment growth in China declined in the second half of 2014, reflecting a correction in the real estate Sector and high-frequency indicators point to some further slowdown. Growth in Latin America in the second half of 2014 was modest, reflecting weak activity in Brazil, lower- than-expected growth in Mexico, and weakening momentum in other economies in the region. Economic performance in Russia was a bit stronger than expected in the second half of 2014, but the increase in geopolitical tensions, declining confidence, and the repercussions of the oil price decline point to a more severe weakening of the outlook in the Commonwealth of Independent States (CIS) as a whole at the start of the year.

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Table 8.1: Overview of World Economic Outlook and Projection
(Annual Percentage Change) Particulars 2013 2014 Projection 2015 2016 World Output 3.4 3.4 3.3 3.8 Advanced Economies 1.4 1.8 2.1 2.4 United States 2.2 2.4 2.5 3.0 Euro Area -0.4 0.8 1.5 1.7 Japan 1.6 -0.1 0.8 1.2 Emerging Market & Developing Economies 5.0 4.6 4.2 4.7 World Trade Volume (goods & services) 3.3 3.2 4.1 4.4 Imports Advanced Economies 2.1 3.3 4.5 4.5 Emerging Market & Developing Economies 5.2 3.4 3.6 4.7 Exports Advanced Economies 3.1 3.3 3.2 4.1 Emerging Market & Developing Economies 4.6 3.4 5.3 5.7 Commodity Prices (U.S. dollars) Oil -0.9 -7.5 -38.8 9.1 Non- oil -1.2 -4.0 -15.6 -1.7 Consumer Prices Advanced Economies 1.4 1.4 0.0 1.2 Emerging Market & Developing Economies 5.9 5.1 5.5 4.8 Source: IMF, World Economic Outlook, April and July 9, 2015
8.1.2 Inflation and Commodity Prices
Headline inflation has declined in advanced economies, reflecting the decline in oil prices, softer prices for other commodities, and a weakening of demand in a number of countries already experiencing below-target inflation, such as the euro area and Japan. This decline in inflation, together with changes in the growth outlook and announcements by the Bank of Japan in October and the European Central Bank (ECB) in January of larger than expected asset purchase

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2014/15 Annual Report 117 programs, has strengthened expectations of a protracted divergence in monetary policy stances across the main advanced economies, widening long-term interest rate differentials. With regard to emerging markets, lower prices for oil and other commodities (including food, which has a larger weight in the consumer price index of emerging market and developing economies) have generally contributed to reductions in inflation, with the notable exception of countries suffering sizable exchange rate depreciations, such as Russia. On the other hand, global inflation is projected to decline in 2015 in both advanced economies and most emerging market and developing economies, reflecting primarily the impact of the decline in oil prices. The pass-through of lower oil prices into core inflation is expected to remain moderate, in line with recent episodes of large changes in commodity prices. In advanced economies, inflation is projected to rise in 2016 and thereafter, but to remain generally below central bank targets. In the euro area, headline inflation turned negative in December 2014, and medium￾term inflation expectations have dropped substantially since mid-2014, although they have stabilized somewhat after the ECB’s recent actions. The projected modest pickup in economic activity, together with the partial recovery in oil prices and the impact of the euro depreciation, is assumed to imply an increase in both headline and core inflation starting in the second quarter of 2015, but both measures of price increases are expected to remain below the ECB’s medium-term price stability objective. In Japan, the projected modest pickup in growth and the waning downward pressure on prices from lower commodity prices as well as higher real wage growth on tight labor market conditions are expected to help push up underlying prices next year, but under current policies and constant real exchange rates, inflation is projected to rise only gradually to about 1½ percent in the medium term. In the United States, annual inflation in 2015 is projected to decline to 0.4 percent, increasing gradually beginning in midyear as the effects of the oil price decline wear off, while the effects of dollar appreciation and

National Bank of Ethiopia
2014/15 Annual Report 118 muted wage dynamics act as a headwind. Inflation is then projected to rise gradually toward the Federal Reserve’s longer-term objective of 2 percent. Inflation is projected to remain well below target in a number of other smaller advanced economies especially in Europe. Consumer prices are projected to decline in both 2015 and 2016 in Switzerland, following the sharp appreciation of the currency in January, and to remain subdued elsewhere, notably in the Czech Republic and Sweden. In emerging market economies the decline in oil prices and a slowdown in activity are expected to con- tribute to lower inflation in 2015, even though not all the decline in the price of oil will be passed on to end- user prices. Countries that experienced large nominal exchange rate depreciations are a notable exception to this trend. In subsequent years the effect of lower oil prices is expected to be phased out, but this effect is projected to be offset by a gradual decline in underlying inflation toward medium-term inflation targets. In China, consumer price index inflation is forecast to be 1.2 percent in 2015, reflecting the decline in commodity prices, the sharp appreciation of the renminbi, and some weakening in domestic demand, but to increase gradually thereafter. In India, inflation is expected to remain close to target in 2015. In Brazil, inflation is expected to rise above the ceiling of the tolerance band this year, reflecting an adjustment of regulated prices and exchange rate depreciation, and to converge toward the 4.5 percent target over the following two years. In contrast, inflation is projected to spike to about 18 percent in 2015 in Russia, reflecting the large depreciation of the ruble, and to decline to about 10 percent next year. A few emerging markets, especially some in Europe, are projected to experience headline inflation well below target in 2015, with modest increases in 2016. These economies include Poland and a number of smaller countries whose currencies are tightly linked to the euro.
8.1.3 Exchange Rate
In currency markets, the dollar has depreciated by some 2 percent in real effective terms relative to the baseline values assumed for the April 2015 WEO, while the euro has appreciated by about 1

National Bank of Ethiopia
2014/15 Annual Report 119 percent. But compared to average levels in 2014, the euro and the yen are still at depreciated levels and will, therefore, continue to support the recovery in the euro area and Japan in 2015/16. Given the constraints on monetary policy in these economies because of the zero lower bound on policy interest rates, this is expected to be a net positive for the global economy, as discussed in the April 2015 WEO. Bond yields and risk premiums in emerging market economies have risen broadly in line with those on advanced economy instruments. But capital flows to those economies are estimated to have decreased in 2015 compared to the second half of 2014, and many have seen further currency depreciation.
8.2 Implications for Ethiopia
Despite the gradual recovery of the global economy, export fell by 8.5 percent. The fall in these export earnings was in turn partly a result of a decrease in international price registered during the report period. On the other hand, the fall in international oil prices resulted in the decline of fuel import bill by 20.7 percent in 2014/15. Net services payments stood at USD 341.4 million due to decline in net travel services partly as result of decline in travel from oil producing countries owing to the decline in their income following international fuel price decline. However, official long-term capital, other public sector long-term capital and foreign direct investment rose by 11.1 percent, 571.3 percent and 50.1 percent, respectively. On the other hand, as a result of low trading partners head-line inflation and relatively higher domestic price, REERI appreciated by 11.9 during 2014/15.