Central Bank To Exit Gold Market End-2026, Private Banks Will Overtake: IMF

Banks’ merger and acquisition directive underway

The National Bank of Ethiopia (NBE) will exit the gold market towards end of December 2026, giving venue for private banks involvement in the gold business. This is confirmed by the IMF in its Fourth Review released this week.

NBE has been the solely authorized gold purchaser and exporter in Ethiopia. The central bank has been purchasing gold from domestic suppliers, adding up to 15 percent premium margin on the international market price. But this led to significant losses on the central bank. It also has been affecting NBE’s balance sheet and distorted the markets, according to the IMF.

“The premium above international prices paid to miners will be phased out, and private banks will be allowed to participate in gold purchases.  A detailed implementation plan to address these issues will be developed based on a study to be completed by end-March 2026. In the interim, quality control will be enhanced by extending and improving gold testing procedures across all purchasing sites. The NBE will also prepare a long-term exit plan from the gold market by end-December 2026, taking into account implications for international reserve accumulation objectives,” reads the latest IMF document.

Ethiopia’s gold exports recorded sharper increase, from just over 4 metric tons in 2023/24 to nearly 39 metric tons in 2024/25. Gold export volumes are expected to decline to around 30 metric tons in 2025/26, reflecting the depletion of inventories accumulated during the Tigray conflict.

There was a large swing in errors and omission to a significant outflow that is at least partially explained by the migration of previously smuggled gold from unrecorded production and exports into official statistics, or the sale of previously accumulated inventory. The time lag between NBE’s purchase of raw gold from artisanal miners and its export following refinement also contributes to errors and omissions. Time lags between NBE gold purchases and sales of refined gold are likely to contribute to additional discrepancies in external statistics.

Overall, gross international reserves increased by USD3 billion to USD4.4 billion. Work to strengthen external sector statistics with IMF technical assistance has focused on reducing errors and omissions, and improving estimation of personal transfers and recording of gold transactions. Forex reserves are projected to reach USD10.5 billion by the end of the program in 2028, covering 3.5 months of following year’s imports.

Broad money grew by 34 percent year-on-year at end-September 2025, driven mainly by strong deposit growth at CBE. Reserve money grew by 71 percent, reflecting liquidity injected through NBE’s gold purchase operations, which flow through CBE.

The current account deficit narrowed further in 2024/25, supported by strong export performance. Coffee and gold exports benefited from record-high international prices, alongside exceptional increases in volumes. Imports of goods were largely flat over the previous year, at USD18.8 billion, and the trade balance strengthened by USD4.2 billion.

However, adverse terms of trade shocks—falls in gold and coffee prices, rises in oil prices—could widen trade and fiscal deficits and make achievement of reserve accumulation targets more difficult. Upside risks include improvements to security conditions, which could strengthen economic recovery and unlock investment, and sustained increases in export volumes, which could strengthen growth.

Strengthening the financial sector safety net is a priority. Relatively weaker banks face a challenging environment, and the potential entry of foreign banks could intensify competition. A formal bank resolution framework was established in April 2025, providing clear procedures for addressing failing banks and supporting broader crisis preparedness. The authorities issued a recovery plan directive and, with the support of the World Bank, plan to establish a Prompt Corrective Action framework by end-March 2026 and establish a dedicated resolution unit. A merger and acquisition framework is also being finalized. Next steps should include initiating resolution planning, stressed IMF.

Ethiopia’s capacity to repay the Fund is considered adequate and has improved due to successful program implementation, securing financing assurances, and continued progress on debt restructuring, although substantial downside risks remain, concludes the IMF report.