In a move to encourage the use of local currencies and strengthen financial and commercial cooperation, the central banks of Ethiopia and the United Arab Emirates have signed a series of landmark agreements.
The National Bank of Ethiopia (NBE) and the Central Bank of the UAE (CBUAE) have signed a bilateral currency swap agreement for the UAE dirham (AED) and the Ethiopian birr. The two parties have also entered into two Memorandums of Understanding (MoUs) to establish a framework for using local currencies in settling cross-border transactions and linking their payment and messaging systems.
According to the statement released by the NBE, the currency swap agreement allows the CBUAE and the NBE to swap local currencies with a nominal value of up to AED 3 billion and 46 billion birr. This agreement aims to provide liquidity in local currencies to financial markets, enabling more efficient settlement of cross-border transactions between the UAE and Ethiopia.
“The deal supports the financial and commercial cooperation between the UAE and Ethiopia through the provision of liquidity in local currencies to financial markets, enabling more effective and efficient settlement of cross-border transactions,” the statement read.
Under the first MoU, the CBUAE and the NBE will work together to promote the use of their respective currencies in settling transactions between the two countries. The MoU covers various measures to facilitate the use of local currencies in commercial transactions and encourages financial and banking cooperation through knowledge-sharing.
“It also encourages financial and banking cooperation through knowledge-sharing, ultimately supporting the development of their respective financial markets whilst facilitating bilateral trade and bolstering direct investment,” the statement added.
The second MoU focuses on cooperation in the areas of payment platform services and electronic switches. The central banks will work to interlink their instant payment systems, national card switches, and messaging systems, in accordance with the regulatory requirements of each country. The agreement also includes cooperation in the field of financial technology and central bank digital currencies.
These agreements mark a significant step forward in strengthening the financial and economic ties between Ethiopia and the UAE, as the two countries look to promote the use of local currencies and enhance the connectivity of their payments systems.
