Since the commencement of comprehensive macroeconomic reforms in July 2024 (Hamle 2016 E.C.), the National Bank of Ethiopia (NBE) has been implementing various foreign exchange (FX) reforms to strengthen the FX market.
To further bolster the market, the NBE announces the following amendments to the Foreign Exchange Directive:
Key Amendments
* Retention Rights: Service exporters are now permitted to retain 100% of their foreign currency earnings in their retention accounts indefinitely, with no time limit for conversion.
* International Cards: Banks are authorized to issue international cards to FX account holders for overseas payments, including electronic transactions.
* Family Support: FX account holders can now cover education, medical, and travel expenses for their spouses and children by presenting legal documentation to their respective banks.
* For-Profit Entities: Any for-profit organization can open foreign currency current, savings, or fixed-term accounts, provided the source of funds is verified as aid/grants or other non-export sources.
* Lower Entry Barriers: The previous $100 minimum balance requirement for Ethiopians and Diaspora members to open an FX savings account has been abolished.
* Capital Reduction: Organizations are permitted to repatriate capital following a registered capital reduction, subject to NBE registration.
* No-Questions-Asked Conversion: Residents returning to Ethiopia can convert any amount of foreign currency into Birr or deposit it into an FX account via banks or authorized FX bureaus without needing customs declarations.
* Remittances for Relatives: Ethiopians can now transfer up to $3,000 (or equivalent) abroad to support relatives living overseas upon presentation of legal documentation.
* Forward Transactions: Banks are now authorized to engage in forward foreign exchange transactions without prior NBE approval.
* Institutional Accounts: Foreign direct investors, embassies, international organizations, and NGOs can now open FX accounts at banks without requiring NBE confirmation.
* External Loans: The approval process for external loans (cash or in-kind) and suppliers’ credit is now fully delegated to commercial banks, provided they comply with FX directive criteria.
* Advance Payments for Exporters: Exporters can receive advance payments from foreign entities by presenting a signed agreement to their bank.
* Advance Payment Criteria: Foreign currency inflows will be treated as advance payments for future exports if:
* (a) The agreement specifies the payment is for future exports/imports.
* (b) The receipt details the items to be exported, an invoice number, or a contract number.
* Loan Guarantees: Banks are permitted to provide foreign loan guarantees to the private sector for up to 10% of their capital.
* Medical & Education Payments: Banks can process up to $20,000 (or equivalent) for medical and educational expenses without requiring a visa or flight ticket upfront, based on institutional confirmation and client requests.
* Dividend Repatriation: Foreign investors can repatriate dividends through their banks without NBE confirmation, provided they submit the required documentation as per NBE directives.
* Capital Support for FX Bureaus: To boost liquidity, the NBE will refund the security deposits required during licensing (30 million Birr for bureaus operating for 1+ year; 15 million Birr for those operating for at least 6 months).
* Cash Holding Limits: The limit for physical foreign currency cash held by FX bureaus has been increased from 10% to 25% of their capital. Excess funds must be sold to banks.
* Service Fees: FX bureaus are now authorized to sell physical foreign currency for visa fees, passport fees, and permit renewals upon presentation of required documents.
Would you like me to clarify any specific point or help you draft a formal summary of these changes for a business report?