Radar | Oct 03,2020
Bank clerks count 900,000 Br worth of bills stashed on top of one another on a busy day at the main branch of one of the private banks.
In the main hall of the bank, the scene was not as calm, as tellers try to tell customers that the “system is down,” a response that has been plentiful since mid-November.
In many cases, this really meant that the branch did not have the cash to process large value transactions, a challenge faced by almost all of the commercial banks in the city. Although the National Bank of Ethiopia (NBE) requires banks to maintain liquid assets of at least 15pc of their net current liabilities, the current lack of cash at some banks dwindled to as low as 10pc.
A liquidity problem at this time of the year is not unusual. The period between October and February is a tax season, as well as a time when banks pay dividends to their shareholders. The current Belg harvest season is no help either given that farmers make most of their transactions using cash. Bank executives also blame the government for not dispersing as much cash as it used to into the economy. Despite the criticism, the central bank availed cash to the banks in the form of loans. The most recent was the disbursement of nine billion Birr to 12 of the 16 private banks in the country.
The loans did not fully address the problem, however, and some banks are cutting down on additional loans. But the situation will not remain as gloomy as it is now, according to experts. Alemayehu Geda (Prof.), a macroeconomist, projects that the cash crunch will not last or cause them insolvency, especially given the lifting of the 27pc mandatory bill purchase imposed on private banks by the regulator.
You can read the full story here
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