Assessment of the Performance of Ethiopian Financial and Economic Environment

Abstract

The financial system plays a pivotal role in economic activities in any country. Thus it is vital to determine the status and assess the financial health of the financial system and take corrective policy measures continuously. The objecitve of the paper is to evaluate the status of financial and banking system in Ethiopia. Descriptive statistical tools like percentages, growth rates, mean values and comparisons using ANOVA and Kruskal-Wallis tests have been used. Ethiopian financial sector in general and the Banking Sector in particular is performing well from year to year in terms of assets, deposits, loans and equities owned in the study period. Financial intermediation has increased during the study period as measured by Total Financial Assets to GDP, Financial System Deposits to GDP, Loans to GDP and Loans to Deposits. Ethiopia can be characterized as a least developed economy registering highest rate of economic growth. The financial sector is not that much developed in Ethiopia. Hence, the financial system needs to be developed to support the economy well.