Ethiopia Moves to Raise National Savings Rate as It Looks to Boost Growth
The Ethiopian central bank’s decision to raise the minimum deposit rate at commercial banks to 5 percent from 4 percent and create government bonds for individual savers aims to boost the country’s low savings rate, a bank official said.
The nation saved 2.3 percent of its gross domestic product in 2009, according to World Bank statistics. Its neighbors Kenya and Sudan saved 9.7 percent and 25.7 percent respectively.
“It is assumed there are a lot of savings outside the banking system,” Alemayehu Kebede, a spokesman for the central bank, said in an interview in the capital, Addis Ababa, yesterday. “These measures will attract those savings, especially in rural areas.”
Increased savings would help the government finance its five-year growth plan that aims to boost growth to as much as 14.9 percent a year, Prime Minister Meles Zenawi said on Dec. 2.
The National Bank of Ethiopia raised the deposit rate at all financial institutions effective from Dec. 2. Also introduced were inflation-linked government bonds starting at 500 birr ($30) that will pay an initial rate of 5.5 percent when held for up to five years, and six percent for longer.
Credit caps placed on banks to try and stem inflation that peaked at 64 percent in July 2008 will be “lifted in a very short period of time,” Alemayehu said.
To contact the reporter on this story: William Davison in Addis Ababa via Johannesburg at pmrichardson@bloomberg.net.
To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net.
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