The National Bank of Ethiopia (NBE) has taken steps to improve transparency in its special foreign exchange auctions by adopting a more informative approach, supported by newly issued guidelines that align with international best practices. These efforts, which include restricting foreign exchange interventions to auctions, have been positively received by the International Monetary Fund (IMF).
In its most recent auction on Tuesday, March 20, the central bank provided more detailed results, marking a departure from its previous practices. This change follows the introduction of foreign exchange auctions as part of the broader economic reforms and forex market liberalization initiated in mid-2024.
Commercial banks had previously expressed frustration over the lack of transparency in the auction process, reporting that procedures and outcomes were not clearly communicated, leaving them uncertain about how bids were evaluated.
An anonymous banker told Capital several months ago, “We were only informed verbally that our bid was unsuccessful and were instructed to collect the funds we offered.”
An international banking expert at one of Ethiopia’s 32 commercial banks noted that while banks submit bid rates via email as directed by the NBE, the bidding mechanism itself remained unclear. “We have no information about how the bidding works,” he stated last April. “We do not even know who opens our emails or whether our bid details are shared.”
Another banker mentioned that their bank was disqualified for bidding below the average rate, while a different institution reported its bid was rejected for being slightly above the average in the third auction held on April 1, 2025.
Criticism also extended to the NBE’s announcement of results, which bankers claimed lacked sufficient detail, previously revealing only the average rate and the number of successful banks without listing participants or full outcomes.
In response to feedback from market participants and international partners, the NBE issued special foreign exchange auction guidelines on December 30.
These guidelines clarify that allotment is based solely on bid prices, with multiple rates applied for successful bids.
Rates are arranged from highest to lowest in sales auctions and from lowest to highest in purchase auctions until the offered amount is exhausted. In cases of tied bids, foreign exchange is distributed equally among those bidders.
The guidelines also specify that auction results must include the marginal rate, weighted average rate, highest and lowest bid rates, and the number of participants.
The most recent auction exemplifies these improvements. The NBE reported that 21 banks participated, with 15 successfully securing foreign exchange. The lowest bid rate was 150 birr per USD, the highest was 155 birr, and the weighted average rate of successful bids was approximately 154.92 birr per USD. The marginal rate stood at 154.78 birr. The central bank allotted USD 70 million against a total bid amount of USD 94.7 million.
Over the past two months, following the release of a four-month auction schedule, the NBE has sold USD 390 million, including USD 150 million outside the originally published schedule.
The IMF recently acknowledged these developments, stating: “Ongoing efforts by the National Bank of Ethiopia to strengthen FX market functioning are welcome, including publishing FX auction guidelines consistent with international best practice and limiting FX intervention to auctions.”
