In a major shift, Ethiopia has overhauled its foreign exchange regulations, allowing private authorized foreign exchange dealers to play a more prominent role alongside banks in determining the exchange rate.
The new Foreign Exchange Directive No. FXD/01/2024, issued by the National Bank of Ethiopia (NBE), aims to create a more open and competitive foreign exchange market. Previously, the exchange rate was primarily determined by the NBE, but now authorized private foreign exchange dealers have been empowered to actively participate in rate setting.
Under the new directive, authorized foreign exchange dealers can now buy and sell foreign currency, with the final exchange rate emerging through negotiations between dealers and their customers. Banks continue to play a key role, but they now operate alongside the private dealers as equal participants in the foreign exchange market.
The NBE hopes that the reformed foreign exchange framework will help attract more inflows, ensure efficient resource allocation, and foster greater transparency. Experts say this shift aligns with Ethiopia’s broader economic liberalization agenda.
