Welcome to the 66th edition of ፍራንክ Digest!

Your weekly brief on all things Finance and Investing. Quick, enjoyable reads for busy professionals in 5 minutes or less.

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Hello Capital Markets? About Those T-bills

Investing

What would you do if you were told you needed to raise ETB 117 Billion in three months? 

📞 Call your rich uncle?… Offer a seat at the Palace dinner table for 1B Birr each?

📃 Or, issue Treasury Bills?

Hint: we’re a finance newsletter, of course it’s treasury bills.

News broke that the Ethiopian government has set a target to sell T-bills and raise 117B by September. 

Here’s a quick breakdown 🔽

T-bills (bills can be interchanged for bonds here) are certificates issued by the government in exchange for a cash advance. That cash advance is returned to the buyer of the T-bill with an interest.

Technically, the issuer sells them at a ‘discounted’ price and then buys them back at face value, meaning you’re still getting a return.

It’s like buying mangoes for 50 Birr per kilo when the market price is 65 and then you sell them back with a 15 Birr profit. You might say, that sounds silly because where is the incentive for the issuer?

The government is not looking for profit here rather a short term cash injection. And by short term we mean 28 days up to 52 weeks. T-bills mature in a predictable timeline - you get your initial investment back plus interest in a short period, essentially with a 28 day bills, the pay-off will be at the end of that period.

Most of you might remember the rally of bond sales from when the government asked the whole nation for cash that was going to the construction of the Grand Ethiopian ህዳሴ Dam. The push to fund such a gargantuan project had us unite in ways never seen before.

So treasury bills have always been around. 

The Ministry of Finance is shifting away from direct financing from the National Bank to bridge the budget deficit. Its move also coincides with the inclusion of T-bills as tradable assets on the stock exchange.

Based on the last auction on July 23, 2025, these are the numbers:

Total subscribed = ETB 31.3B

Total offered       = ETB 21.0517B

Remark: There is more demand than supply which shows the appetite of the investor community - while people are showing more interest to short term debt (28 and 91 days bills are clearly oversubscribed), longer term bonds seem to be slightly marginalized.

Important to note that the cut-off yield is different for each category, where you’ll see higher yields (interest rate on your returns) for long term bonds and relatively lower yields for short-term ones.

In a nutshell, T-bills are a great way for governments to raise funds in order to plug budget deficits. They can be used as an investment instrument for anyone looking for a reliable and predictable return.

The Ministry of Finance is looking to raise ETB 117B through T-bill issuance. This might seem like a tall order but investor appetite would suggest that there is huge interest with subscriptions exceeding offers (Close to ETB 10B difference in supply/demand from the latest auction 🤯).

Whether T-bills would become an essential financial instrument for regular investors in the future remains to be seen but one thing is for certain, access to these financial products will become easier when the ESX finally releases that trading platform that they have been raving about…don’t take our word for it, take the words from the website itself.

ፍራንክ Picks 

🚶🏽 Event: Jumpstart Investment Bootcamp [August 13 · 3:45 - 7pm EAT]

🗞️ In the news: Safaricom puts smiles on shareholders faces with $373 dividend

♟️ Innovation: Abyssinia drops the paper, picks up kiosks and tablets

Unraveling Ethiopia’s Report Card

Economy

We took our time to read through the latest IMF Country Report published in July 2025, exactly one year from the start of a four-year arrangement under the Extended Credit Facility (ECF) to support the Ethiopian government’s Homegrown Economic Reform Agenda (HGER).

Here’s what we found noteworthy to help you understand how the economic engine is running…Birrrrrrrr cough rrrrrrr.

The IMF Board approved of the efforts done by the Ethiopian government to correct macroeconomic imbalances, restore external debt sustainability and lay the foundations for greater private sector participation.

One year into the program, key macroeconomic indicators have improved:

Ethiopia has launched a National Medium-Term Revenue Strategy, targeting a tax-to-GDP ratio of 9.9% by 2027/28. From only 6.2 percent of GDP in 2023/24, down from 12.7 percent of GDP in 2014/15.

Progress is expected to be driven by greater compliance to income tax plus widening VAT and excise reforms. Further reforms will include property tax measures and efforts to broaden the tax base. Yes, online media content creators too…👮 እጅ ወደ ኪስ

The banking sector remains stable:

The Commercial Bank of Ethiopia (CBE) given its 51% of assets (five times larger than the next largest bank) of the financial sector and shouldering bad loans to State-Owned Enterprises has been recapitalized to support the overall sector, with:

The Development Bank of Ethiopia (DBE) will shift to a wholesale lending model and mandatory bond sales to commercial banks will cease by end-2025 thereby seeking new funding sources from international development partners.

Progress on improving the functioning of the foreign exchange (FX) market has been generally positive:

However, reports of queuing and high fees contribute to the persistent 15% parallel ጥቁር market premium, indicating further reforms are still required.

Ethiopia made progress in domestic debt management:

Despite recent improvements, exports and imports remain weak, at under 20% of GDP in 2023/24, down from over 40% in 2010. Main contributing factor for tax-to-GDP ratio revenue declining to 6.2% of GDP, down from 12.7% in 2014/15.

Foreign Direct Investment (FDI) has fallen since peaking in 2017, due to:

To address this, reforms have:

Tight macroeconomic policies will continue to moderate short-term growth. Over the medium term, reforms are expected to drive stronger growth and further disinflation.

However, risks remain:

One year into Ethiopia’s IMF supported macroeconomic program, the country has made commendable progress in stabilizing its economy. Reducing inflation, improving fiscal discipline, restoring real interest rates, recapitalizing CBE and reforming its foreign exchange systems. However, despite this strong start, structural challenges remain: investment is held back by security concerns, FX market inefficiencies, arbitrary taxation and weak property rights.

Sustaining reform momentum will be critical to unlocking Ethiopia’s growth potential and building resilience to climate, conflict and global economic shocks.

Thanks for sticking with us, ፍራንክ family! Keep those wallets smart and your inbox open - we’ll be sliding in next week!