The Ethiopian government plans to raise Birr 171 billion through biweekly Treasury bill (T-bill) auctions in the first quarter of the new budget year, marking a shift from relying on direct central bank advances to market-based financing.

According to Finance Minister Ahmed Shide, the government will use tax revenues and T-bills as the main sources to finance the budget deficit, avoiding direct borrowing from the National Bank of Ethiopia (NBE). This approach, he noted, has contributed to a slowdown in base money growth.

NBE data shows reserve money growth declined from 24.8% in July 2024 to 17.3% by November, while broad money growth fell from 24.8% to 19% during the same period.

The Ministry of Finance has released its first quarterly T-bill auction calendar, planning to raise Birr 117.7 billion across five auctions beginning July 23. This follows the Birr 53 billion raised during the July 9 auction, which exceeded the initial Birr 30 billion offer.

Increased interest in the auctions is partly attributed to rising yields that have remained above the policy rate and inflation since February. The NBE’s removal of the mandatory 20% Treasury bond purchase requirement for banks has also allowed more participation.

For the 2025/26 fiscal year, the approved budget is Birr 1.93 trillion, with a Birr 417 billion deficit. About 67% of this gap is expected to be financed domestically. Tax revenue is projected at Birr 1.1 trillion, while Birr 463 billion is allocated for debt servicing.

Source: Capital Ethiopia