Ethiopia Eases Restrictions on Foreign Currency Accounts

The National Bank of Ethiopia has implemented significant reforms to its foreign currency exchange management system. The new approach shifts to a market-based model, allowing banks and their customers to negotiate exchange rates. In this framework, the National Bank focuses on stabilizing the market instead of directly controlling exchange rates.

One major change allows exporters and commercial banks to keep their foreign currency earnings rather than transferring them to the National Bank. This reform is expected to significantly enhance the supply of foreign currency available to the private sector.

The bank has lifted the previous ban on 38 imported goods while maintaining restrictions on capital account outflows. However, these reforms liberalize the foreign exchange market for importing goods and services. Previously, exporters had to retain 40% to 50% of their foreign exchange earnings, but this requirement has now been relaxed.

The existing rules governing foreign exchange transactions for various incoming goods will remain unchanged. The National Bank plans to establish private non-bank foreign exchange bureaus, which will receive licenses to buy and sell foreign currency at market rates, complementing the existing bank-operated bureaus.

In the near future, the bank will issue an amendment to remove restrictions on importing goods in franco currency. Additionally, several outdated laws regulating foreign currency accounts held by foreign institutions, investors, and Ethiopians living abroad have been repealed.

Ethiopian residents can now open foreign currency accounts, enabling them to deposit remittances, salaries, rental income, and other foreign currency earnings. They can also use these accounts for making payments for foreign services.

Moreover, the National Bank has lifted the interest rate ceiling on foreign loans that private companies or banks could pay. Qualified foreign investors can now participate in the Ethiopian Securities Exchange. Companies operating in special economic zones will enjoy special rights regarding foreign currency usage, including the ability to fully retain their foreign currency earnings. Finally, the bank has abolished restrictions on the amount of foreign currency cash that travelers can carry when entering or leaving Ethiopia, facilitating international travel and trade.

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