NBE Audit Reveals Scale Of Forex Losses, Mounting Government Debt

Audit conducted under terms of IMF deal

The latest audit report of the National Bank of Ethiopia (NBE) details the central bank’s struggle with losses in forex dealing and gold trading, as well as mounting government debt.

MSE Audit Service LLP conducted the audit covering the year beginning July 2022 as part of the terms of the government’s agreement with the International Monetary Fund (IMF), which included the NBE in its demands for audits of state-owned enterprises.

The audit report was approved at the end of last month and published on the NBE website on April 4, 2025.

Wholly owned by the government, the NBE operates as the central bank of Ethiopia and acts as the banker, fiscal agent and financing advisor to the government.

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Auditors found the central bank had a negative general reserve balance of close to one billion birr at the end of the reporting period, arising from losses of 1.8 billion birr in 2022 and 1.4 billion birr the year prior.

The losses were due to impairments on government and state-owned bank securities and loans and advances, disparities in gold purchase and selling prices, and the depreciation of the local currency, according to the report.

Auditors stated the concerns will likely impact the NBE’s ability to meet its operational and debt obligations as they come due, while placing pressure on its ability to fulfil policy mandates such as maintaining price stability and exchange rates.

The central bank incurred net forex losses of more than 12 billion birr during the reporting period, and a similar amount the year prior. The report cites devaluation policies and the NBE’s high exposure to forex-denominated assets and liabilities, including obligations to international financial institutions, as reasons behind the sizable losses.

Auditors warn the government’s sweeping forex regime reforms enacted in July 2024 could introduce further volatility, jeopardizing the central bank’s already shaky position.

The NBE recorded losses on currency notes of 6.4 billion birr, down from 10 billion birr in 2022.

The central bank faced losses in its gold trading activity, with revenue from sales of gold dwindling from 22 billion birr in 2022 to 14 billion birr in 2023.

This was because “revenue from sale of gold was less than the gold purchase cost due to the increase on premium price which was paid to the suppliers of gold on the world gold price,” reads the audit report.

The NBE’s gold purchases also halved from 27 billion birr in 2022 to 15.5 billion birr in 2023.

The central bank managed to reverse net operating income losses in 2021 and 2022 to record a 588 percent increase to nine billion birr in 2023. The upsurge was driven by interest earned on loans and advances and deposit investments held abroad, and fees and charges, according to the report.

It also managed to slightly reduce its general and administrative expenses, from 15 billion birr in 2022 to 13 billion birr in 2023.

The central bank extended 137 billion birr in credit to state-owned banks and 15 billion birr to private commercial banks in 2023, according to the report.

The NBE generated 11 billion from commissions on exchange services, and a further 852 million birr from service charge commissions. The NBE is legally obligated to transfer 20 percent of its net profit to the general reserve, which showed an improvement of 64 percent to reach a negative balance of 986 million birr during the reporting period.

Meanwhile, the central bank registered net interest income of 17.4 billion birr in 2022/23, up from 11.6 billion birr the year before.

Its assets also grew by more than 25 percent to 833 billion birr, with dues from the government accounting for 583 billion birr in the form of direct advance bearing a three percent interest rate and bonds bearing a two percent rate and set to mature in batches in 2044 and 2047. Another batch of non-interest bearing bonds are expected to mature in 2034.

As of June 30, 2023, the value of direct advances to the government stood at 130 billion birr while it held 430 billion birr in interest-bearing bonds.

The central bank’s authorized capital stood at half a billion birr in 2023, but a new proclamation introduced by Parliament this year has raised the figure to a staggering 20 billion birr.

The total cost of printing bank notes and minting of coins jumped from 2.4 billion to 3.8 billion birr, according to the audit report, while currency in circulation exhibited an increase from 209 billion birr to 255 billion birr over 2023.

The figure was adjusted to reflect an estimated 60 million birr that was lost during the state of armed unrest in parts of the country, according to the report.

At the end of June 2023, the NBE’s forex reserves had dropped to the equivalent of 655 million birr. The central bank has recently reported a significant improvement in reserve levels following the IMF deal.

NBE held shares in Afrexim bank, Africa Reinsurance and EthSwitch valued at a total of 913 million birr in 2023, according to the report.

It reveals the NBE received a time deposit of USD one billion from Saudi Arabia in late 2015 for a period of six years at a three percent interest rate, and additional deposit of half the amount in June 2019 after it repaid the same amount.

The two parties have agreed to a new repayment plan and the NBE did not offer any form of collateral for the time deposit, according to the report.

The central bank also received a USD one billion time deposit from the UAE in 2019 at a fixed rate of three percent payable semi-annually.