1. Mention some of the financial markets in Ethiopia and Explain. __ __ disappointed Markets? Explain __

Ethiopia's financial markets are still developing, but some key components are present:<br /><br />* **Ethiopia Commodity Exchange (ECX):** Established in 2008, the ECX is the most prominent financial market in Ethiopia. It facilitates trading of key agricultural commodities like coffee, sesame seeds, beans, and maize. It provides a platform for price discovery, reduces transaction costs, and improves market efficiency by standardizing quality and delivery procedures. This helps farmers get better prices and connects them with buyers more effectively.<br /><br />* **Money Market:** This market deals with short-term borrowing and lending of funds. In Ethiopia, this primarily involves commercial banks lending and borrowing from each other and the National Bank of Ethiopia (NBE), the central bank. Instruments traded include Treasury bills and repurchase agreements (repos). The NBE uses this market to manage liquidity and influence short-term interest rates.<br /><br />* **Foreign Exchange Market:** This market facilitates the exchange of different currencies. The NBE plays a significant role in this market, managing the exchange rate of the Ethiopian Birr against other currencies. Authorized banks and forex bureaus also participate in this market, facilitating transactions for businesses and individuals.<br /><br />* **Government Bond Market:** The Ethiopian government issues bonds to finance its budget deficit. These bonds are traded on the primary market (when initially issued) and can be traded on a secondary market among investors. This market is still relatively underdeveloped compared to more mature economies.<br /><br />* **Stock Market (under development):** Ethiopia is in the process of establishing a stock exchange. This will provide a platform for companies to raise capital by issuing shares and for investors to trade those shares. The development of a stock market is seen as a crucial step in deepening Ethiopia's financial sector and promoting private sector investment.<br /><br /><br />**Disappointed Markets?**<br /><br />The phrase "disappointed markets" isn't a standard financial term. It likely refers to markets that have not performed as well as expected or hoped. In the context of Ethiopia, this could refer to several aspects:<br /><br />* **Limited Depth and Liquidity:** Ethiopia's financial markets, except for the ECX for certain commodities, are relatively shallow and illiquid compared to more developed markets. This means there are fewer participants and lower trading volumes, which can make it difficult to buy or sell assets quickly and at fair prices.<br /><br />* **Regulatory Challenges:** Developing robust regulatory frameworks and ensuring their effective implementation is crucial for market development. Challenges in this area can hinder investor confidence and limit market growth.<br /><br />* **Limited Access to Finance:** Access to finance remains a challenge for many businesses in Ethiopia, particularly small and medium-sized enterprises (SMEs). The underdeveloped nature of the financial markets contributes to this problem.<br /><br />* **Lack of Diversification:** The Ethiopian economy is heavily reliant on agriculture, and the financial markets reflect this. Greater diversification of the economy and the development of markets for other sectors are needed.<br /><br /><br />The development of robust and efficient financial markets is a key priority for Ethiopia's economic growth. Addressing the challenges mentioned above will be crucial for attracting investment, promoting private sector development, and achieving sustainable economic development.<br />