Economy
NBE's New Liquidity Rules Open Path Towards Islamic Treasury
BirrMetrics · 7 hours ago · Read the Full Story on BirrMetrics
AI SUMMARY
The National Bank of Ethiopia has introduced a dedicated regulatory framework for interest-free monetary operations, paving the way for potential Islamic Treasury securities and sovereign Sukuk.
- The National Bank of Ethiopia published directive number EPD/01/2026 on 9 November governing interest-free open-market operations and standing facilities.
- The new regulatory framework establishes rules for interest-free monetary operations to help manage liquidity in the banking system.
- Ethiopia's conventional monetary operations involve absorbing excess liquidity through deposit-taking auctions offering interest-based returns.
- On 29 October 2026, the central bank absorbed 317 billion birr from six bidders through a two-week open-market operation at a fixed annual interest rate of 16 percent.
- Shariah principles prohibit the payment and receipt of conventional interest, requiring alternative financial structures for interest-free banking institutions.
- Islamic financial instruments such as Sukuk and short-term government securities can provide alternative mechanisms for managing liquidity without conventional debt securities.
- Ethiopia's conventional Treasury bill market operates with maturities of 28, 91, 182, and 364 days, and is distinct from potential Shariah-compliant instruments.
- The Ministry of Finance offered 22.55 billion birr in conventional Treasury bills in its 28 October auction, attracting bids totaling approximately 69.52 billion birr.
- Financial authorities and market-development institutions are working on broader initiatives involving interest-free capital-market instruments, sovereign Sukuk, and alternative money-market products.
- The development of a functioning interest-free money market requires dedicated arrangements for issuing, trading, settling, and using eligible instruments in central bank operations.
- The National Bank of Ethiopia previously established an electronic interbank money market in October 2024 to facilitate short-term borrowing and lending among financial institutions.
Related
Ministry of Revenues Drafts Directive to Correct Tax Notice Errors
TIKVAH Ethiopia · 6 hours ago
NBE to Auction 140 Million US Dollars as Bank Demand
BirrMetrics · 7 hours ago
Türkiye Targets $2 Billion from COP31 as Ethiopia Prepares for COP32
BirrMetrics · 8 hours ago
Ethiopia Gives Khat Exporters 30 Days to Complete Licensing
BirrMetrics · 7 hours ago