A letter urging Ethiopian private banks to purchase new Treasury bills was sent out by the National Bank. The new bills will be charged to the banks’ Payment and Settlement Accounts (PSAs) at the NBE.

An agreement in regards to the purchase of the new bills was made between the Ethiopian Bankers Association and National Bank officials stated Yohannes Ayalew, Chief Economist and Vice Governor of Monetary Stability at the NBE, in his letter to the banks.

Private Banks will purchase T-bills to the value of the money in their PSAs, which approximates 3% of their total deposit according to the agreement mentioned in the letter.

The new T-bills are being issued to cover the government expenditure commitments established by the Growth and Transformation plan explain industry sources.

The T-bills are particularly  relevant because the Ministry of Finance is limited from borrowing from the central bank this fiscal year due to the government’s commitment to curb inflation by reducing borrowing.

The National Bank also introduced T-bills with 364-day maturity to the T-Bill market according to a new directive recently issued. As per this directive auctions for T-bills will be held every week rather than every other week.   

In related news the National Bank offered to loan foreign exchange to private banks for equivalent local currency at the current exchange to be held by the bank as collateral. Most private banks are said to short of foreign currency while the central bank has a surplus.

Source: The Reporter