Ethiopia Doubles Reserve Ratio to Rein In Surging Inflation

Ethiopia doubled the statutory reserve requirement for commercial lenders and increased the amount of foreign currency they must remit to the central bank, in an effort to rein in inflation, Bloomberg News reported. From Sept. 1, the reserve requirement will increase to 10%, according to Fikadu Digafe, the National Bank of Ethiopia’s vice governor in charge of monetary policy and its chief economist. Banks will also be required to transfer 50% of their foreign-exchange holdings to the central bank, compared with 30% previously, he said. The central bank is adjusting its policies to slow inflation that accelerated to 26.4% in July, the fastest pace in almost a decade. Africa’s second-most populous nation has for long had to contend with a shortage of foreign currency, which has made it harder to import goods and service the nation’s external debt. Read more.