The growth of deposits in private banks, in Ethiopia, is expected to decline said a study conducted by Access Capital. Increase in deposits is to lower to 24% in 2012 from the 36% registered in 2011 according to the research.

The slow down is a reflection of more stringent monetary policies and stronger competition from widely expanding state banks noted the study.

The National Bank changed its monetary policy to increase the amount of cash banks have available for lending according to economists.

The amount of ‘liquid assets’ to be held as a proportion of deposits was also decreased from 25% to 20% confirmed Alemayheu Kebede Director of the Communications Directorate of the Central Bank.

The move by the central bank to reduce reserve requirements freed an estimated 2.75 billion birr for loans by private banks.
It is to be remembered that Bank loans to various sectors of business in Ethiopia including exports declined following a central directive in April which instructed banks to buy government bonds, to finance infrastructural projects, equivalent to 27% of their total loans every month according to Eyob Tsefaye, an independent economist.   

The National Bank made the appropriate decision in loosening its monetary policy to prevent the export sector from being affected he said.

Source: Capital