Ethiopian Gov’t targets 10.1 percent growth as central bank schedules $840 million in dollar auctions

The National Bank of Ethiopia building in Addis Ababa, April 2008 (Shagada, via Wikimedia Commons, public domain) [file photo]

The Ethiopian government is aiming for 10.1 percent economic growth in the new fiscal year and wants to bring inflation below 10 percent, President Taye Atske-Selassie told a joint session of Parliament on Tuesday, as the National Bank of Ethiopia announced that it would sell $840 million to commercial banks through six foreign exchange auctions between mid-October and late December.

Taye opened the joint session of the House of Peoples’ Representatives and the House of Federation a day after lawmakers reappointed Prime Minister Abiy Ahmed for a second five-year term. Addressing both chambers, he said the government’s plan for the 2019 Ethiopian fiscal year rested on raising productivity and quality, mobilizing more domestic revenue, widening the tax base and tightening control of public spending, according to Fana and Birr Metrics. He put annual inflation at 13.4 percent and said the goal was to push it into single digits, Birr Metrics reported. That figure matches May’s reading, while the World Bank put headline inflation at 15.1 percent in August.

The president also set targets for public services. Electricity access is to reach 65 percent, health insurance coverage 85 percent and school feeding 70 percent, and the government expects more than 1.6 million foreign tourists in the year, according to the same reports. He cited export earnings of $11.2 billion, foreign direct investment of $4.5 billion, manufacturing growth of 15.8 percent and credit to the economy of 1.3 trillion birr as signs that the economy had gained strength, Birr Metrics reported. The Ethiopian News Agency reported him as saying that the results of the past five years sustainably guarantee economic sovereignty.

Also on Tuesday, the central bank published its auction calendar for the second quarter of the fiscal year. Each of the six auctions will offer $140 million, starting on 13 October and continuing on 27 October, 10 November, 24 November, 8 December and 22 December, according to Birr Metrics and Reuters. The bank began regular competitive dollar auctions after the birr was floated in July 2024. Demand has cooled in recent rounds. At the 23 September auction, banks bid $123.49 million against an offer of $125 million, leaving $1.51 million unsold, while in May the bank offered $500 million and received bids of about $1.06 billion, Birr Metrics reported.

The government’s figures sit beside a more cautious outlook from the World Bank. In its October Macro Poverty Outlook for Ethiopia, the bank estimated growth of 9.2 percent for the fiscal year that ended in July but forecast a slowdown to 7.8 percent in the current year, citing spillover from the Middle East conflict. It said food and fuel prices had pushed headline inflation up from 9.4 percent in March, and that the central bank responded by raising its policy rate by one percentage point to 16 percent in July and lifting the bank credit cap that had been in place since August 2023.

The World Bank also pointed to stronger external buffers. Foreign exchange reserves reached $7.1 billion by the end of August, enough for about 2.4 months of imports, and the gap between the official and parallel market exchange rates narrowed to 13 percent in August from about 18 percent at the start of the year. The bank credited central bank measures, more dollar supply through auctions and weaker demand on the parallel market. It projected that the poverty rate would reach 37.6 percent this fiscal year, about half a percentage point higher than it had expected before the Middle East conflict.

The new targets arrive with the country at war on several fronts. Fighting between federal forces and an alliance of seven armed and political groups, including the Tigray People’s Liberation Front (TPLF), has spread across Tigray, Afar and Amhara since late September. Ethiopian Airlines suspended flights to Tigray in September after Tigrayan forces seized Mekelle’s airport, which federal forces retook on Saturday. Residents of Mekelle told BBC Amharic that pharmacies, supermarkets and other large shops stayed shut for fear of looting even after phone service came back and money transfers resumed on Sunday, and AFP reported that banks and petrol stations in the city were still closed on Monday.

Fuel is the most direct channel from regional turmoil to Ethiopian prices. Brent crude traded at around $100 a barrel on Tuesday, CNBC reported, as markets weighed attacks on Saudi Arabia by Yemen’s Houthis and the fighting around the Bab el-Mandeb Strait. Ethiopia relies heavily on imported fuel, and about 90 percent of its trade passes through Djibouti, according to the Africa Center for Strategic Studies. The central bank’s own Monetary Policy Committee said in July that fuel supply disruptions linked to the Middle East war had pushed inflation back into double digits from April.

Doubts about the official numbers have also grown. A survey-based report by the Ethiopian Economics Association, released this month, found low confidence in official inflation figures and in the central bank’s independence.

On X, Umut Çağrı Sarı (@umutcagrisariii), a Turkish researcher who writes on the Horn of Africa, wrote that the central bank “plans to sell $840 million in foreign currency to the market,” in six rounds every two weeks, and that “the main aim is to ease the shortage of US dollars.” The state broadcaster’s English service, EBC World (@ebczena), presented Taye’s speech as Ethiopia “transitioning from a passive recipient of foreign diplomatic initiatives into a proactive and influential decision-maker on the world stage.”

Taye said meeting the targets would require closer coordination between federal and regional governments, better project execution and tighter management of public finances, according to Birr Metrics. The first of the six dollar auctions is set for 13 October.

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Ethiopian Gov’t targets 10.1 percent growth as central bank schedules $840 million in dollar auctions

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