NBE Monetary Policy Committee Removed Credit Caps and Hikes Interest Rates to 16%
The National Bank of Ethiopia (NBE) has officially ended the era of administrative credit caps, shifting to a modern, interest-rate-driven monetary policy. Following the July 13, 2026, meeting of the Monetary Policy Committee, the central bank announced a series of aggressive measures to stabilize inflation and deepen the financial market.
- The economy-wide annual credit growth ceiling, introduced in 2024 to curb inflation, has been fully lifted. Banks now have greater autonomy to manage their loan portfolios.
- To offset the removal of the cap and maintain a tight monetary stance, the NBE raised its benchmark policy rate from 15% to 16%.
- Replacing the broad credit cap is a new mechanism allowing the NBE to impose bank-specific reserve requirements on institutions that engage in excessive lending relative to their deposit mobilization.
- FX Liberalization:
- Mandatory foreign exchange surrender requirements for banks dropped from 50% to 30%, allowing banks to retain more hard currency.
- FX commission fees were reduced from 2.5% to 1.5% to lower import/export costs.
Governor Eyob Tekalign emphasized that these changes are not a softening of policy, but a shift in tools. By moving from “blunt” volume controls (the credit cap) to “precise” price-based instruments (the policy rate and targeted reserves), the NBE aims to control inflation while fostering a more competitive and efficient banking sector.
