The National Bank of Ethiopia (NBE) has announced a significant revision of the country's foreign exchange system, introducing a market-based exchange rate effective immediately. Key changes include:
- Allowing banks to buy and sell foreign currencies at freely negotiated rates.
- Ending surrender requirements to the NBE.
- Lifting import restrictions on 38 product categories.
- Improving retention rules for exporters.
This reform addresses economic distortions and is part of the broader Home-Grown Economic Reform Plan to restore macroeconomic stability, boost private sector activity, and promote inclusive growth.
The reforms also abolished the waiting list system for FX allocation, introduced non-bank FX bureaus, and relaxed various foreign currency account rules. Additionally, interest rate ceilings on private sector borrowing from abroad are removed, and Ethiopia's securities market will open to foreign investors.
The government will also temporarily subsidize essential imports and support those affected by high inflation, while debt service relief will preserve budget allocations for social and capital spending. A $10.7 billion support package from international partners, including the IMF and World Bank, will aid the transition.
The government anticipates that this move will enhance the competitiveness of the Ethiopian economy by encouraging private-sector investment and stabilizing inflation.
The NBE will provide regular updates on the progress of the reform and ensure compliance with the new directives. This transformative change aims to make Ethiopia one of Africa's most vibrant and competitive economies.
