An Overview of Ethiopia’s National Bank New Strategic Plan 2023-2026

The National Bank of Ethiopia (NBE) has recently released its Strategic Plan for 2023–2026. This strategic plan aims to address the challenges faced by the Ethiopian economy and set a direction for the central bank’s activities. With a focus on stability, financial inclusion, and technological advancements, the NBE aims to create a favorable environment for economic growth and development.

The strategy focuses on tackling the existing gaps and challenges in the market and achieving several goals, such as low and stable inflation, an increase in foreign exchange reserves, addressing the wide gap between official and parallel market rates, introducing a modern price-based system for monetary policy implementation, and establishing a well-functioning inter-bank foreign exchange market.

It also recognizes the need for building strong regulatory and supervisory systems for a sound financial sector, encouraging innovation in the financial sector to serve a broad range of end-clients and promote financial inclusion, fast, simple, and secure payment mechanisms, and digitization in the financial system, development of capital markets to broaden financing sources, and nurturing NBE’s internal capacities.

Key initiatives include transitioning to a price-based monetary policy using interest rates, expanding the financial sector to include foreign investment, operationalizing the capital markets, and modernizing internal operations to enhance transparency and research capabilities.

The Strategic Plan has five objectives: price and external stability, financial stability, broadening financial inclusion, operational excellence, and enhanced governance systems.

1. Ensuring Price and External Stability

The strategic plan emphasizes the importance of price and external stability. To achieve this, the central bank plans to transition to a more market-based monetary policy regime. This includes establishing a Monetary Policy Committee, implementing open market operations, and improving foreign exchange reserves management. The NBE aims to maintain low and stable inflation and a well-managed exchange rate by adopting a price-based system and enhancing data analysis and research capabilities.

2. Ensuring Financial Stability

Another key objective is financial stability. The central bank plans to enhance the regulation and supervision of financial institutions, improve currency management systems, and strengthen payment system infrastructure. It also plans to introduce a dedicated financial system stability unit, regular reports, and a stability policy framework.

3. Ensuring Financial Inclusion, Deepening, and Digitization

NBE recognizes the importance of financial inclusion, deepening, and digitization in promoting economic development. To achieve this objective, the central bank plans to implement and monitor the existing National Financial Inclusion Strategy, enhance financial education and consumer protection, and establish an independent Insurance Regulatory Agency.

NBE also aims to promote the widespread adoption and usage of digital financial services, improve credit information infrastructure, and broaden access to financial services for all segments of society.

4. Ensuring Excellence in People, Processes, and Technology

To effectively achieve its strategic objectives, NBE acknowledges the need to enhance its internal capabilities. The central bank plans to transform its human capital talent management, enhance internal processes and digitalization, and strengthen planning and performance management systems. By investing in its workforce, adopting efficient internal processes, and leveraging technology, the NBE aims to improve its operational efficiency and effectiveness.

Additionally, the Ethiopian Institute for Financial Studies is planned to be re-established as a Center of Excellence for the financial sector, providing training and research opportunities to enhance the skills and knowledge of industry professionals.

5. Strengthening Governance

NBE has also committed to promoting transparency and accountability in its operations. The strategic plan includes measures to establish strong institutional accountability and transparency systems, implement a modern and effective Communications Strategy, and ensure a strong and independent Internal Audit and Risk Management function. By enhancing governance practices and stakeholder communication, the NBE aims to build trust and confidence in its activities.

The Strategic plan also includes a set of action plans, Key Performance Indicators (KPIs), and specific targets for each objective.

The NBE’s Strategic Plan for 2023–2026 sets a roadmap for the central bank to align its work with global best practices while also addressing the unique and specific conditions of Ethiopia’s current economic situation and future ambitions. It also shows how the central bank plans to Re-orient its work priorities to focus on the key task of maintaining low and stable inflation, transitioning from the current monetary policy regime, fundamentally transforming the size, shape, and scope of Ethiopia’s financial sector, and modernizing its internal operations.

To gain a comprehensive understanding, I encourage you to look at the full National Bank’s strategic plan for 2023-2026 available on their website.

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Tewodros Tassew