Hey crew, here’s to another week of cutting through the noise and focusing on what actually moves financial minds forward.

No buzzwords, just the stuff affecting wallets, business & the economy:

📈 ESX Has a Type: Same Person With Different Haircuts

💿 Beyond The Headline: Navigating Ambition and Constraint

Here’s to the 119th edition

Let’s dive in.

Ethiopia’s stock market has a type.

Banks. Preferably established, conservative, deeply committed to photocopies and legally required to publish several hundred pages nobody intends to read.

Bank of Abyssinia joined the Ethiopian Securities Exchange (ESX) with the ticker BOAX on July 28, becoming its sixth listed company.

The full lineup is now five banks and…Ethio telecom.

At this stage, ESX is more a bankers’ association meeting where one telecom executive took the wrong elevator.

More companies are approaching the door. Ayat, Sidama Bank, Nib Insurance and ZamZam Bank have received approval in principle to list, although they must still complete the remaining regulatory steps.

That would bring some welcome variety.

Specifically: one real estate company, one insurer….and, well, two more banks.

The growing pipeline is genuinely good news.

More listings can make shares easier to trade, improve corporate transparency and give Ethiopians more places to invest.

But more company names do not automatically mean more diversification.

An investor could buy shares in Wegagen, Gadaa, Awash, Abay and Bank of Abyssinia and proudly announce that they own five different investments.

Technically correct.

Economically, they may have bought the Ethiopian banking sector five times.

The banks have different management teams, customers and strategies.

But they are still exposed to many of the same forces: interest rates, credit defaults, liquidity conditions, regulation, currency movements and the health of the Ethiopian economy.

When the tide rises, several may rise together.

When it falls…you see where this is going.

New investors often confuse a familiar company with a safe investment.

They know the bank. They use its app. Their salary arrives there. The branch manager once gave them a calendar.

None of this tells them whether the share is reasonably priced.

The important questions are less exciting:

How much profit does the company earn per share?

Are those profits growing?

How strong is its loan portfolio?

What dividend does it pay?

And how much are investors being asked to pay for each birr of earnings?

Buying a good company at a ridiculous price remains an excellent way to make a bad investment.

We’re keeping our promise to do a deep dive on the Ethiopian budget for the coming fiscal year.

Our initial takeaway as we unpacked was a mix of economic pragmatism and underlying tension.

Sitting at approximately 2.3 Trillion Birr, or roughly USD 14.6 Billion, the figure sounds staggering on paper.

It marks a real increase of 11% over the previous year after factoring in persistent inflation.

Yet, as any seasoned analyst knows, the true character of a nation’s economy is revealed not by the size of its headline numbers, but by looking inside the fiscal ጓዳ to see where the money comes from and where it is spent.

Funding this budget requires a formidable revenue effort.

The government anticipates generating Br. 1.8 Trillion from domestic revenues and official grants.

Tax collections form the overwhelming bedrock of this figure at 82%, supplemented by non-tax revenues at 7% and external grants making up the remaining 11%.

A closer look at the Br. 1.612 Trillion tax revenue target exposes who shoulders the heavy burden.

This leaves a fiscal deficit gap of Br. 520 Billion. To cover this deficit, the Ministry of Finance is relying on a combination of external loans and domestic financing through Treasury bills.

The government’s plan to plug Br 330 Billion of its deficit domestically through Treasury bills means the state will be competing directly with the private sector for banking funds.

As commercial banks channel significant liquidity into government T-bills, private business loans, trade financing and overdraft facilities may remain tight despite National Bank of Ethiopia lifting the credit cap for banks recently.

On the expenditure side, recurrent spending claims the largest piece of the pie at 52.9%. What catches the eye is that debt servicing alone consumes nearly half of the total recurrent commitments.

Capital expenditure receives 24.3% of the allocation, while regional subsidies account for 22.3%, leaving a modest 0.6% earmarked directly for Sustainable Development Goals.

The trajectory of capital expenditure over the last decade tells a compelling story about Ethiopia's changing growth model.

Back in the 2016/17 fiscal year, capital spending reached a high of 8.3% of GDP, driving state-led megaprojects across logistics, energy and infrastructure.

Over the following years, fiscal tightening and macroeconomic rebalancing saw this share contract sharply, bottoming out at a historical low of 1.7% of GDP in 2023/24.

While the 2026/27 budget projects a mild recovery to 2.7% of GDP, public sector capital accumulation remains constrained compared to the aggressive expansionary years of the past decade.

Where a state allocates its funds reveals the ambitions, vulnerabilities and priorities.

The federal offices securing notable budget increases in 2026/27 include the Office of the Prime Minister, Federal Police Commission, Artificial Intelligence Institute, Customs Commission, Ministry of Health, Ministry of Agriculture, Ministry of Water and Energy, Ethiopian Roads Administration and Ministry of Urban Infrastructure.

Significantly, the Ministry of Defense has received a substantial budgetary increase.

This expansion takes on urgent relevance following news of fighting breaking out in Western Tigray.

With security risks flaring up and regional stability under strain, maintaining defense readiness and internal policing drains vital fiscal resources that might otherwise fund developmental projects.