In a significant move to streamline its foreign exchange market, the National Bank of Ethiopia (NBE) has issued a comprehensive new foreign exchange directive, titled “Foreign Exchange Directive No. FXD/01/2024”. This directive aims to establish clear rules, roles, and responsibilities in Ethiopia’s foreign exchange landscape, with the goal of fostering greater trade, financial stability, and economic growth.

The directive, which consolidates and revises various previous regulations, addresses a wide range of foreign exchange-related activities, including the role of banks and authorized foreign exchange dealers, exchange rate determination, foreign exchange retention, exports, imports, services, forex bureau operations, remittances, payment instruments, foreign currency accounts, capital account transactions, and other miscellaneous items.

One of the key highlights of the directive is the emphasis on promoting a more open and competitive foreign exchange market. “A more open and competitive foreign exchange market can attract substantial foreign exchange inflows, ensure efficient resource allocation, and foster greater transparency in foreign exchange transaction activity,” the directive states.

The directive outlines the roles and responsibilities of various market participants, such as banks, authorized foreign exchange dealers, and forex bureaus. It also provides detailed guidelines on foreign exchange-related transactions, including export and import procedures, service transactions, and the operation of foreign currency accounts.

Additionally, the directive addresses capital account transactions, such as capital repatriation, external loans, and foreign portfolio flows, in an effort to facilitate capital movement and attract foreign investment.

The new directive is set to come into effect immediately, replacing previous regulations and providing a unified framework for the management and regulation of Ethiopia’s foreign exchange market.