Addis Abeba — In early September 2025, Mamo Mihretu announced his resignation as Governor of the National Bank of Ethiopia (NBE), marking the end of a tenure that spanned seven years in senior economic leadership roles. Two weeks after Mamo’s departure, Prime Minister Abiy Ahmed appointed Eyob Tekalign (PhD) as the new Governor of the NBE. Eyob, who previously served as State Minister at the Ministry of Finance and earlier led the National Planning Commission, brings more than 18 years of experience spanning government, the private sector, multinational corporations, supranational organizations, and academia. His professional background reflects a blend of technical expertise and policy-making experience that positions him to navigate Ethiopia’s complex economic challenges.
Eyob assumes leadership at a critical juncture. Ethiopia, home to over 120 million people, is grappling with high inflation, foreign exchange shortages, exchange rate instability, balance of payments deficits, reserve shortages, and deep-rooted structural weaknesses in its financial system. Against this backdrop, Eyob’s appointment can be viewed as an opportunity to recalibrate the country’s macroeconomic direction. The decisions he makes in the months and years ahead will be pivotal in determining whether Ethiopia can stabilize its economy, restore investor confidence, and chart a sustainable path toward long-term growth.
High stakes, hard choices
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In recent years, the NBE has faced significant challenges in stabilizing the economy. Inflation has frequently surpassed double-digit levels, while foreign exchange reserves have steadily declined. These imbalances have constrained private sector development, deterred foreign direct investment, and eroded confidence in the banking system. Concurrently, the rapid expansion of commercial banks, fintech firms, and diaspora remittances has heightened the urgency for comprehensive regulatory modernization and stronger oversight.
These pressing macroeconomic challenges demand that Eyob assume leadership of the NBE with a clear, reform-oriented vision, combining decisive policy action with strategic oversight to restore stability, strengthen institutional credibility, and guide the country toward sustainable macroeconomic growth.
Widely recognized for his analytical rigor and pragmatic approach, he has consistently emphasized the importance of monetary discipline, exchange rate reform, and the deepening of Ethiopia’s financial sector. His appointment comes at a pivotal moment: Ethiopia is approaching the final stages of negotiating debt restructuring under the G20 Common Framework, and the presence of a credible, effective central bank is critical to restoring both domestic and international confidence. In this context, a strong and trusted central bank is not merely beneficial but essential to restoring both domestic confidence and international credibility.
Inflation is more than a mere economic statistic–it functions as a hidden tax on the poor, eroding the purchasing power of households already struggling with rising food and essential goods prices. Rapid price increases diminish the value of savings, leave wages trailing behind, and create uncertainty that clouds investment decisions. Ethiopia cannot establish a stable foundation for sustainable growth until inflation is brought under control.
Although officials have reported that the economy has made notable progress over the past two years–citing a decline in the 12-month moving average inflation rate from 34.5% in August 2022 to 16% in June 2025–many observers remain skeptical. Despite measures such as the adoption of a market-based exchange rate, foreign exchange reforms, and ongoing debt restructuring, inflation persists stubbornly in the double digits, raising questions about the effectiveness of existing policies and the accuracy of official figures.
It is precisely in this context that the newly appointed Governor of the NBE must place price stability at the very core of his mandate. At this critical juncture, the credibility of the central bank–and by extension, the confidence of both domestic citizens and international partners–hinges largely on its ability to deliver and sustain low, predictable inflation. Without that anchor, even the most well-designed reforms risk losing their footing.
His [Eyob’s] leadership comes at a time when Ethiopia’s economy is in urgent need of confidence and stability.”
To this end, implementing a tighter monetary policy should be a central focus of the new governor’s agenda. In practical terms, this entails slowing the expansion of money and credit within the economy. For Ethiopia, this could involve raising policy interest rates to moderate borrowing and incentivize savings, as well as capping credit growth to ensure that banks channel loans toward productive investments rather than speculative activities. Rather than lifting the credit cap on banks entirely, the central bank earlier this week increased the private sector credit growth limit from 18% to 24%. I support this decision, as eliminating the cap altogether at this time may not be prudent considering the prevailing economic vulnerabilities.
Additional measures include managing liquidity through open market operations and higher reserve requirements and guiding the exchange rate to reflect market realities while preventing excessive depreciation that could further fuel inflation.
However, none of these corrective measures come without cost. Businesses will confront higher borrowing expenses, households will experience tighter access to credit, and economic growth may moderate in the short term. Yet these near-term hardships must be weighed against the far graver consequences of unchecked inflation–eroded savings, distorted price signals, diminished investment, and deepened inequality.
Navigating economic crossroads
It is precisely because the stakes are so high that Eyob’s assumption of leadership at the NBE arrives at such a critical moment. The decisions made in the coming months will not only shape the trajectory of monetary policy but also determine whether Ethiopia can transition from volatility to stability, laying the groundwork for durable, inclusive growth.
The immediate consequence of tighter monetary policy is a moderation in demand. Investment projects may be postponed, and households are likely to reduce discretionary spending. This is, in fact, the intended effect: to alleviate upward pressure on prices. Over time, as inflation expectations become better anchored, the broader benefits emerge–restored purchasing power for consumers, a more stable birr, and renewed confidence among domestic and international investors.
That said, the limitations of monetary policy must be acknowledged. In Ethiopia’s case, a significant portion of inflation is driven not by excess demand but by supply-side constraints–particularly volatile food prices. Rising costs of imported fuel and fertilizer, logistical bottlenecks, and low agricultural productivity all contribute substantially to price pressures. Interest rate hikes alone cannot resolve these structural issues. For monetary tightening to be truly effective, it must be complemented by targeted supply-side reforms in agriculture, energy, and transport infrastructure.
For this strategy to succeed, three pillars–grounded in professional rigor and institutional integrity–are essential. First, clarity of purpose. The NBE must articulate explicit, time-bound inflation targets–such as bringing inflation down to 10% within two years–and adhere to them consistently. These targets must be based on objective economic realities, not political considerations, and should reflect genuine conditions in the market rather than aspirational narratives.
Second, transparency and proactive communication. The NBE has a responsibility to clearly explain its policy decisions to businesses, households, and financial markets. Regular, timely public updates on economic developments–issued before external commentators or international agencies weigh in–will help manage expectations and prevent unnecessary panic. In this role, the NBE should position itself as the nation’s most credible source of economic analysis. Its in-house economists must produce and disseminate high-quality, data-driven assessments that invite informed public debate and strengthen policy accountability.
Third, close coordination with fiscal policy. Monetary tightening will be undermined if fiscal policy remains expansionary. Unchecked government spending, especially when financed directly by the central bank, fuels inflation and erodes monetary credibility. The Ministry of Finance must therefore reinforce macroeconomic discipline by containing the budget deficit and refraining from central bank borrowing.
Beyond these immediate priorities, Ethiopia must also strengthen its financial infrastructure. Developing deeper interbank markets and a more liquid government securities market would enhance the transmission and effectiveness of monetary policy tools. At the same time, supply-side initiatives–such as expanding domestic food production, streamlining logistics, and boosting export capacity–must advance in parallel with monetary discipline. Only through this integrated approach can Ethiopia achieve lasting price stability and lay the foundation for resilient, inclusive growth.
While Eyob’s appointment carries significant promise, the risks of overextension, political interference, and institutional weakness cannot be ignored.”
Eyob’s appointment comes at a critical juncture. He inherits an economy that has registered tangible progress yet remains deeply fragile: external shocks continue to pose significant risks, food price volatility remains elevated, and public patience–worn thin by years of economic hardship–is in short supply. His challenge extends beyond the technical levers of monetary policy, such as raising interest rates or curbing credit growth. Equally critical will be his ability to persuade Ethiopians that the short-term discomfort of tightening is a necessary step toward lasting macroeconomic stability. This will not be an easy task, particularly given past experiences in which similar measures failed to deliver promised relief, leaving many skeptical of renewed calls for austerity.
What sets the new governor apart is the breadth of his background: his career bridges rigorous academic training in economics with hands-on experience in high-level policymaking. This dual grounding equips him not only with the analytical tools to design sound, evidence-based strategies but also with the political acumen needed to navigate Ethiopia’s complex and often unpredictable policy environment.
I believe this blend of technical expertise, reform experience, and international exposure uniquely positions him to lead the country through the intricate process of financial modernization. His proven record in complex negotiations and institutional reform suggests he possesses both the patience and the integrity required to rebuild that confidence.
At this juncture, Ethiopia’s financial sector reforms demand more than bold vision–they require meticulous execution, steady communication, and a deep understanding of domestic realities. In my opinion, Eyob’s prior roles have equipped him with precisely the perspective, judgment, and skill set needed to strike this delicate balance and steer the nation toward a more stable and inclusive economic future.
Experiences from other African countries, such as Ghana and Kenya, demonstrate that strong central bank leadership can play a decisive role in restoring macroeconomic stability during challenging periods. For example, Ghana’s central bank successfully navigated a debt crisis by implementing clear and decisive inflation-targeting policies. Ethiopia can draw valuable lessons from such experiences, applying a similar approach that balances fiscal and monetary discipline with innovation to chart a sustainable path toward economic stability and growth.
The predecessor, Mamo Mihretu, initiated numerous reforms, but many were left incomplete or insufficiently consolidated. Eyob now has the opportunity to build on these foundations. His leadership comes at a time when Ethiopia’s economy is in urgent need of confidence and stability. If he succeeds in restoring credibility to monetary policy and effectively guiding reforms, Ethiopia’s financial system could finally become a driving force for inclusive growth, increased investment, and deeper integration into global markets.
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Balancing reform, reality
While the new governor brings valuable experience to the governorship, his appointment is not without challenges. The NBE has historically been vulnerable to political influence, and even a reform-minded governor may face pressure to prioritize short-term political objectives over long-term economic stability.
Policy execution capacity also presents a significant concern. Ethiopia’s financial sector reforms–from digital transformation to capital market development–require robust regulatory institutions, advanced technology, and highly skilled professionals. While the governor possesses vision and expertise, successful implementation will depend on strengthening the NBE’s internal capabilities, which remain limited.
Furthermore, Eyob’s close association with the government, though advantageous for policy coordination, may raise questions about the central bank’s independence. Investors and international partners will be closely monitoring whether the NBE under his leadership can act autonomously to uphold price stability and enhance financial resilience.
History demonstrates that reforms inevitably create both winners and losers. Liberalizing the banking sector may challenge domestic banks that are unprepared for increased competition, while implementing tighter monetary policies to curb inflation can place short-term strains on businesses and households. How the new governor navigates these social and political pressures will be as critical as the technical decisions he makes.
While Eyob’s appointment carries significant promise, the risks of overextension, political interference, and institutional weakness cannot be ignored. His success will depend on striking a careful balance between reform and pragmatism, ensuring that the credibility of the central bank remains intact.
This moment, therefore, represents more than a simple change of leadership. It is an opportunity to redefine the role of the NBE in shaping the country’s economic future. For ordinary citizens, hope lies in a stable currency, affordable prices, and broader access to financial services. For businesses, the opportunity comes in the form of a more predictable and transparent financial environment. And for the government, it offers a renewed chance to align fiscal and monetary policies in pursuit of shared prosperity.
In Eyob’s hands rests not only the task of reforming an institution but also the responsibility of shaping Ethiopia’s economic destiny. His success will be measured not merely in economic indicators, but in the trust he cultivates and the opportunities he creates for millions of Ethiopians. AS
Editor’s Note: Abreham Tesfaye is a consultant and trainer specializing in change management, sustainability, and transformational leadership. He brings more than 15 years of experience in Ethiopia’s financial sector, having served in both public institutions and private banks, rising from a junior officer position to the role of vice president. Abreham can be reached at [email protected]
