Ethiopia to Issue 117B Birr in T-Bills in Q3 Amid Market-Based Reform Push

Ethiopia’s Finance Ministry has released its first treasury bill (T-bill) issuance calendar, outlining plans to raise 117 billion Birr in the third quarter of the 2024/25 fiscal year. The schedule, which covers auctions between July and September, includes maturities ranging from 28 to 364 days.

The move follows the Ministry’s pledge to end its reliance on direct advances from the National Bank of Ethiopia (NBE) to finance budget deficits, a longstanding practice widely seen as inflationary. NBE, which acted as the issuing agent for the Ministry, sold 207 billion Birr in T-bills in the third quarter of the last financial year, with an average weighted yield of 9.44% and participation from 102 bidders.

The issuance calendar was first signaled by State Minister of Finance Eyob Tekalign (PhD) at a ceremony two weeks back marking the registration of T-bills on the new Ethiopian Securities Exchange (ESX). At the event, Eyob urged commercial banks to assess their liquidity positions and prepare to participate in upcoming auctions.

The change comes amid a broader policy shift by the NBE towards market-based dynamics. In June, the central bank repealed a controversial directive that had required commercial banks to invest 20% of their loan disbursements in five-year treasury bonds. The removal of that mandate may increase banks’ interest in short-term debt instruments, especially as T-bills can now be traded on the secondary market through the ESX.

Ethiopia has traditionally issued T-bills in four standard maturities via primary auctions. But with the listing of securities on the nascent exchange, authorities hope to attract a broader range of investors, including non-bank institutions, aside from the pension funds, and the general public.

As of the end of the 2023/24 financial year, commercial banks held 61% of all outstanding T-bills, totaling 317 billion Birr.