@economicreform – Ethiopian Business Review

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the National Bank of Ethiopia (NBE) has enacted a comprehensive new directive requiring all banks to implement robust recovery planning frameworks. The Recovery Plan of Banks Directive No. SBB/93/2025, effective since May 13, 2025, represents a paradigm shift in Ethiopia’s approach to banking sector risk management.

The directive establishes rigorous standards for crisis preparedness, mandating that financial institutions develop detailed strategies to maintain viability during periods of severe stress. Banks must now incorporate sophisticated monitoring systems to detect early warning signs of financial deterioration, with specific thresholds triggering predefined corrective actions.

A cornerstone of the new regulation is the requirement for institutions to conduct extensive scenario analyses. These stress tests must evaluate potential impacts from both institution-specific difficulties and broader market disruptions, with particular attention to liquidity pressures, capital adequacy, and operational continuity. The framework emphasizes the importance of maintaining critical functions even during periods of financial distress.

Governance requirements under the directive are particularly stringent. Bank boards now bear direct responsibility for approving and regularly reviewing recovery plans, with clear lines of accountability established for crisis decision-making. For foreign bank branches operating in Ethiopia, the rules mandate close coordination with parent institutions while ensuring local obligations are fully safeguarded.

The NBE has established a phased implementation timeline, with banks required to submit their inaugural recovery plans within eight months. Ongoing compliance will involve annual updates and prompt reporting of any material changes to business models or risk profiles. The central bank has introduced strict penalties for banks that fail to comply, including fines of ETB 100,000 for missing the initial submission deadline and ETB 50,000 for delayed annual updates. Persistent non-compliance could result in further administrative actions under the Banking Business Proclamation.

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Three of the country’s state-owned financial institutions—the National Bank of Ethiopia (NBE), the Commercial Bank of Ethiopia (CBE), and the Development Bank of Ethiopia (DBE) have jointly launched the Financial Sector Strengthening Project (FSSP), a USD700 million initiative financed by the World Bank.

The project’s first disbursement, amounting to USD250 million, was transferred today to the Commercial Bank of Ethiopia , signaling the operational kickoff of the reform agenda.

Announced during the Ethiopia Finance Forum, the FSSP is aimed at enhancing the resilience, inclusiveness, and functionality of Ethiopia’s financial sector. It focuses on regulatory reform, institutional capacity building, and expanding access to finance—particularly for underserved communities and high-impact sectors such as agriculture and manufacturing.

Ethiopia and France have solidified their ongoing economic partnership with the signing of a significant financial agreement aimed at advancing Ethiopia’s reform agenda. The agreement, concluded between Ethiopia’s Ministry of Finance and Agence Française de Développement (AFD), signals a critical step in supporting Ethiopia’s economic transformation through both budgetary and technical assistance.

The deal includes a USD27 million budget support package, with USD11.34 million already disbursed in December 2024, alongside a USD4.07 million grant for technical assistance. On December 21, 2024, Ethiopian Finance Minister H.E. Ahmed Shide and AFD CEO Rémy Rioux finalized the budget support agreement, while today’s technical assistance agreement was signed by State Minister of Finance H.E. Dr. Eyob Tekalign and AFD Country Director Mr. Louis-Antoine Souchet.

This agreement focuses on strengthening Ethiopia’s Homegrown Economic Reform (HGER) 2.0 through strategic reforms in key sectors. The technical assistance will be managed by the Ministry of Finance and the National Bank of Ethiopia, with a strong emphasis on financial sector reforms, restructuring State-Owned Enterprises (SOEs), refining Public-Private Partnership (PPP) regulatory frameworks, and implementing sectoral reforms across multiple agencies.

State Minister of Finance Dr. Eyob Tekalign expressed that this partnership represents a significant milestone in Ethiopia’s reform journey. He explained that while the budgetary support will provide vital fiscal space, the technical assistance would play a pivotal role in enhancing the country’s Public-Private Partnerships, improving governance within SOEs, increasing financial sector competitiveness, and strengthening institutional capacity for effective policy execution.

Dr. Eyob further acknowledged AFD’s ongoing support, highlighting the flexibility of the technical assistance program, which accommodates multiple partners and ensures value for money.

In a similar vein, Mr. Louis-Antoine Souchet, AFD’s Country Director, reaffirmed his institution’s commitment to Ethiopia’s reform agenda. He emphasized that this collaboration was a reflection of France’s sustained investment in Ethiopia’s economic sustainability and public sector efficiency. AFD, he added, would continue to foster peer-to-peer exchanges and knowledge-sharing between French and Ethiopian institutions, ensuring successful reform implementation and long-term economic resilience.

Ethiopian Banks Get Eight Months to Meet NBE Recovery Rule

Three State-Owned Banks Unite for USD700M Financial Sector Reform

Ethiopia and France Sign USD30.8 Million Agreement to Accelerate Economic Reform