The Transition of Ethiopia's Treasury Bill Market: From Administrative Controls to Market-Based Monetary Policy

Ethiopia has experienced one of the most significant monetary policy reforms in its recent economic history. For decades, monetary policy relied on direct instruments, including administrative credit controls, regulated interest rates, and central bank financing of government deficits. These policies constrained financial market development and weakened monetary policy transmission. In 2024, the National Bank of Ethiopia (NBE) initiated comprehensive monetary and financial sector reforms to establish an interest-rate-based monetary policy framework. A central component of these reforms was the modernization of the Treasury bill (T-bill) market. During the transition period, a temporary credit growth cap was introduced to contain inflation while the market-based framework was being developed. Following the removal of the credit cap in 2026, Treasury bills became the principal instrument for liquidity management and open market operations. This article reviews the evolution of Ethiopia's Treasury bill market across the pre-reform, transition, and post-transition periods and discusses its implications for monetary policy and financial market development.