Ethiopia’s interbank money market has surpassed 1 trillion birr (ETB) in total transaction volume less than a year after its launch, marking a major step in efforts to modernize the country’s tightly controlled financial system.
The platform, launched in October 2024 and operated by the Ethiopian Securities Exchange (ESX), allows commercial banks to borrow and lend short-term funds to manage daily liquidity. Market participants say the milestone signals growing confidence in the financial sector and momentum behind the government’s wider economic reforms.
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In a statement, the ESX called the development a “clear vote of confidence by market participants,” crediting the National Bank of Ethiopia (NBE) and the engagement of commercial banks for the rapid uptake. The platform had already crossed the 500 billion ETB mark within six months of operation.
The interbank market is a key pillar of the NBE’s shift from direct controls to market-based monetary policy. It operates under the “Interbank Money Market Directive (MFAD/IBM/03/2024)” and facilitates transactions with maturities of one day or seven days.
As part of the reform push, the NBE has introduced a policy rate of 15% and set an interest rate corridor of plus or minus 3% for interbank transactions. Central bank officials say these measures are designed to deepen liquidity and improve price signaling in the banking sector.
At the market’s launch, then-Governor Mamo Mihretu, who has since announced his departure, described the initiative as “a significant step towards enhancing liquidity management in the banking sector and promoting financial stability.”
Ethiopia’s banks have faced persistent liquidity pressures in recent years. Analysts say a functioning interbank market is needed to stabilize short-term interest rates and improve the flow of funds across institutions.
The milestone comes as Ethiopia prepares to open its financial sector to foreign banks for the first time in decades. Officials and economists view a robust domestic financial architecture—including an efficient interbank market—as essential to successful liberalization.
Despite the progress, the market is still in its early stages. Market watchers say more work is needed to strengthen supporting infrastructure and ensure liquidity reaches smaller private banks. But the speed of growth is seen as a strong indicator of latent demand for more flexible liquidity tools.
