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Foreign currency shortage forced Ethiopia’s central bank to cut bank reserves down to 5 percent

February 20, 2013

(ADDIS FORTUNE) – Regulators at the National Bank of Ethiopia (NBE) have issued a directive cutting down the reserve requirement of commercial banks to 5%, from the previous 10%.

This is the second decrease in the reserve requirement in two years, from the constant 15% three years ago.

Banks have also been given a 2-year grace period within which they are to restructure their loan portfolios, so that 40pc of loan advances comprise of short-term loans, which are due within one year.

The move by the central bank is believed to be in response to the liquidity crunch that is being experienced by banks that rely on medium (one to five year) and long-term loans.

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