Ethiopia Targets ETB 197 Billion in T-Bills as Borrowing Costs Fall
Ethiopia plans to raise 197.2 billion birr through Treasury bill (T-bill) auctions during the first quarter of the 2026/27 fiscal year, as government borrowing costs continue to decline and the country’s transition toward market-based monetary policy gathers pace.
According to the Ministry of Finance’s auction calendar, seven Treasury bill auctions are scheduled between July 8 and September 30, with the largest single issuance—40 billion birr—planned for August 5.
The first auction of the fiscal year raised 30.71 billion birr at an average yield of 9.2 percent, marking the return of Treasury bill rates to single digits after a prolonged period of elevated borrowing costs.
The decline continues a trend that emerged during the previous fiscal year, when average T-bill yields fell to 11.7 percent by year-end before declining further in the latest auction. Lower yields reduce the government’s domestic borrowing costs while providing an important benchmark for interest rates across Ethiopia’s financial system.
Planned Treasury Bill Issuance
| Maturity | Planned Issuance |
| 28 Days | ETB 19.72 billion |
| 91 Days | ETB 39.00 billion |
| 182 Days | ETB 59.15 billion |
| 364 Days | ETB 78.90 billion |
| Total | ETB 197.2 billion |
The easing in yields coincides with the National Bank of Ethiopia’s broader shift away from administrative controls toward an interest rate-based monetary policy framework.
In recent months, the central bank has increasingly relied on open market operations (OMOs) and repurchase (repo) agreements to manage banking system liquidity. Under repo transactions, the central bank injects or absorbs short-term liquidity by buying or selling government securities with an agreement to reverse the transaction at a later date, allowing it to influence short-term market interest rates more effectively.
The International Monetary Fund (IMF), in its latest review of Ethiopia’s economic reform program, said the National Bank had strengthened its market-based liquidity operations by moving from fixed-rate, full-allotment operations to uniform-rate auctions beginning in January 2026. The Fund described the shift as an important step toward improving monetary policy transmission, although it noted that liquidity absorption operations have become more expensive for the central bank and auction volumes have declined despite strong demand from commercial banks.
The IMF has repeatedly encouraged Ethiopia to rely more heavily on indirect monetary policy instruments such as repo operations and open market transactions while phasing out quantitative controls, including credit growth ceilings.
The broader policy transition accelerated earlier this month when the National Bank’s Monetary Policy Committee raised the benchmark policy interest rate from 15 percent to 16 percent and abolished the three-year credit growth cap, replacing it with a targeted reserve requirement framework for individual banks.
The Treasury bill market has also become increasingly important since Ethiopia launched its macroeconomic reform program in mid-2024. Government securities now serve not only as the government’s primary domestic borrowing instrument but also as the collateral underpinning the central bank’s expanding repo market and other open market operations.
Under the approved 2.3 trillion birr federal budget for the 2026/27 fiscal year, the government expects to finance approximately 330 billion birr of its spending through domestic borrowing, primarily via Treasury bill issuances.
Market participants say the convergence of declining Treasury bill yields, lower open market operation rates, and the growing use of repo transactions reflects the gradual maturation of Ethiopia’s money market. If sustained, the shift could deepen domestic financial markets, improve liquidity management, strengthen monetary policy effectiveness, and reduce the government’s financing costs.
Source: Capital