Regulatory constraints in Ethiopia pushed Safaricom’s subsidiary in that market to take a $134.0 Million (Sh17.3 billion) worth of hard currency debt from external sources in the year ended March 2026, even as the telco keeps a keen eye on the risk of rising foreign exchange pressures triggered by the war on Iran.
Safaricom says that whereas it would have loved to tap into Ethiopia Birr denominated debt to allow it to match its borrowings with sales, which are in local currency, two key hurdles that Ethiopian banks are facing made that route impossible and therefore created need for US dollar denominated funding.
The telco indicates that single borrower limit regulations in Ethiopia created a challenge in the subsidiary’s ability to get local currency funding in the financial year that ended March 2026.
Single borrower limit refers to the regulatory cap prescribed by the central bank restricting the total credit exposure a bank can have to a single borrower or a group of related borrowers. The limits are designed to mitigate risk.
‘It was not a natural choice of going for foreign currency debt; that was certainly not our first preference. We ended up taking foreign currency debt simply because of the liquidity issue in Ethiopia. Most of the banks in Ethiopia are hitting their single borrower limit and our needs are much higher and that creates a challenge. Secondly, the National Bank of Ethiopia has a cap on how much a bank’s credit can grow on a year-on-year basis,’ Safaricom Plc CFO, Dilip Pal, told the Business Daily.
In the just concluded financial year, Safaricom Ethiopia trimmed its loss position to Sh21.2 billion compared to a loss of Sh36.0 billion reported in the previous year with the subsidiary’s service revenue having grown 58.3 percent to Sh14.1 billion.
Safaricom says that part of the reason why the Ethiopia subsidiary raised debt in the just concluded financial year was to ensure that it has an optimal capital structure given that a lot of its funding so far has been met through equity.
‘Funding for Ethiopia has been mostly driven by equity and we have spoken in the past about the need to ensure that we have a proper capital structure for that business. Last year we took a decision to ensure that we leverage Safaricom Ethiopia’s balance sheet to get more funding and set the Equity-to-Debt ratio on a more sustainable path,’ Dilip says.
With Ethiopia having launched its Securities Exchange in early 2025, Safaricom now says it is keenly watching the market to tap into any opportunity for raising local currency debt through the exchange.
‘This is one area where we are watching out very closely. We have always been looking for that opportunity and I think this will be subject to the maturity of the capital markets and how that evolves. If we can borrow money by raising a bond, we will be very happy to do that but we have to watch how the market develops,’ Dilip says.
In the full year ended March 2026, Safaricom Plc reported Sh73.7 billion in profit after tax with the group’s total service revenue having grown to close the year at Sh414.1 billion.