In mid-December the National Bank of Ethiopia (NBE, the central bank) announced that the minimum savings rate for banks would be increased from 4% to 5% to encourage higher public saving. One of the government's greatest economi.c challenges is raising national savings as real interest rates have been negative for several years. The minimum savings rate was last increased from 3.5% to 4% in 2008, but inflation averaged over 40% that year, severely eroding the value of savings. Although the NBE's decision to increase the minimum rate sends an important signal, it will have little practical impact. In November year-on-year inflation was 10.2%, down slightly from the 10.7% recorded in October. However, it means that the negative real interest rate continues to hover around 5%, creating little incentive for people to save.

Despite these obstacles, the government will continue to try to boost national savings in order to support its new five-year Growth and Transformation Plan (GTP). It has recently issued new higher rate bonds through the Development Bank of Ethiopia (November 2010, Economic policy), as well as small denomination bonds from the NBE to encourage low-income communities to engage in formal savings schemes. The government hopes to increase the financing available to small and medium-sized businesses from commercial banks by increasing deposits. However, all of these efforts will founder unless the real interest rate becomes positive. The government will thus continue to try to build on recent success in lowering inflation in order to achieve its development goals.