Ethiopia’s Domestic Debt Climbs to 2.56 Trillion Birr as Investors Flock to Short-Term T-Bills
Addis Ababa, November 2025 — Ethiopia’s total domestic debt surged to 2.56 trillion birr at the end of September 2025, reflecting a growing reliance on short-term borrowing as the government deepens its use of the Treasury Bill (T-bill) market to finance its budget.

According to recent data from the Ministry of Finance, the government successfully mobilized 53.35 billion birr through two T-bill auctions held before the end of September. However, the enthusiasm from investors was largely concentrated on short-term instruments, notably the 28-day and 91-day bills. In contrast, longer-term instruments, such as the 364-day T-bills, saw limited uptake, revealing lingering investor hesitation about long-term commitments.

Shift Toward Short-Term Borrowing

Between July and mid-September 2025, yields on short-term bills continued to decline, indicating strong demand and confidence in near-term debt securities. Yet, yields on the 364-day T-bills rose sharply—from 15% to 20%—suggesting growing concern among investors over Ethiopia’s economic trajectory, inflationary pressures, and fiscal sustainability in the months ahead.

Financial analysts interpret the jump in long-term yields as a sign that investors are seeking protection from rising inflation and macroeconomic uncertainty, preferring to park their funds in instruments that mature sooner rather than later. “The yield spread clearly shows the market’s lack of confidence in long-term stability,” said one Addis Ababa-based economist. “Investors are pricing in higher risk for holding one-year paper.”

Who Holds the Debt

The composition of Ethiopia’s domestic debt remains heavily concentrated among state-linked institutions. The Commercial Bank of Ethiopia (CBE) holds the largest share, accounting for 43% of the total domestic debt. The National Bank of Ethiopia (NBE) follows with 26.3%, while the Pension Fund controls around 19.3%. This concentration underscores the limited participation of private investors and the underdeveloped nature of Ethiopia’s domestic capital market.

Government Eyes Expanded Issuance

Despite concerns about investor appetite for long-term debt, the Ministry of Finance has announced plans to issue an additional 243.05 billion birr in T-bills in the next quarter. The expanded issuance aims to finance budgetary gaps and refinance maturing debt, part of a broader effort to strengthen domestic resource mobilization amid tightening access to external financing.

The government’s growing dependence on the domestic market follows a challenging external environment marked by constrained foreign aid, limited foreign direct investment inflows, and mounting foreign debt obligations.

Macroeconomic Context

Ethiopia continues to grapple with double-digit inflation, a weakening birr, and fiscal pressures linked to reconstruction spending and public sector reforms. The government has been pushing for greater private-sector participation and financial market liberalization to enhance economic resilience.

However, analysts caution that sustained reliance on short-term domestic debt could increase refinancing risks and interest rate pressures, especially if inflation remains high. “The short-term borrowing spree offers temporary relief,” one analyst noted, “but it doesn’t resolve the underlying structural imbalances in the economy.”

As Ethiopia enters the final quarter of 2025, the Ministry of Finance faces a delicate balancing act—maintaining investor confidence, managing inflation, and sustaining fiscal discipline while continuing to fund development priorities.