· Ethiopian Business Review · Betegbar Yaregal
NBE Lifts Credit Cap and Raises Policy Rate to 16 Percent in Unified Shift to Interest Rate-Based Monetary Policy
Summary of the Ethiopian Business Review report
The National Bank of Ethiopia has ended its annual cap on bank credit growth and raised its policy rate from 15 to 16 percent. The governor says the move changes the method, not the tight stance. Banks get more room to lend, but a targeted reserve requirement and a higher rate could still limit home loans.
Key points
- The National Bank of Ethiopia removed its annual credit growth limit and raised the policy rate from 15 percent to 16 percent.
- The NBE can apply an extra reserve requirement to individual banks based on their loan-to-deposit ratio.
- The foreign exchange commission falls from 2.5 percent to 1.5 percent, and the export surrender requirement from 50 percent to 30 percent.
- Headline inflation was 13.4 percent in May 2026, up from 9.7 percent in December 2025.
Real.et analysis
Ethiopian Business Review reports that the National Bank of Ethiopia (NBE) has removed its annual limit on credit growth, known as the credit cap. At the same time it raised its policy rate from 15 percent to 16 percent. The board approved the measures after the Monetary Policy Committee met on July 13, 2026. Governor Eyob Tekalign said the cap was a temporary tool and that its removal is a change of method, not a looser policy. The rate rise is meant to offset the extra lending that the end of the cap could allow.
The package has three more parts. The NBE can apply an extra reserve requirement to individual banks, based on their loan-to-deposit ratio, when credit growth is a risk to inflation. The foreign exchange commission falls from 2.5 percent to 1.5 percent. The surrender requirement on goods exports falls from 50 percent to 30 percent. Headline inflation was 13.4 percent in May 2026, up from 9.7 percent in December 2025.
What this means for borrowers
The credit cap limited how much each bank could add to its loan book in a year. Home loans competed with all other loans for that space. Without the cap, banks have more room to lend, so mortgage supply could improve. Two limits remain:
- Price. A higher policy rate can raise the cost of money for banks. Home loan rates may rise or stay high. Ask your bank if your rate is fixed or can change.
- Bank-level limits. A bank with a high loan-to-deposit ratio could face the extra reserve requirement and lend less.
The report does not give mortgage rates. Compare offers from several banks before you sign.
What this means for buyers and builders
A lower foreign exchange commission is meant to cut import costs. That could help the price of imported steel and finishing materials, but the effect is not certain. The committee expects inflation to stay in double digits for the next six months.
Our mortgage guide explains loan terms and bank requirements. For the supply of long-term funds, read about the planned mortgage refinance company and why Goh Betoch halted mortgages.