Breaking: Ethiopia allows Market based Foreign currency exchange rates

 National Bank of Ethiopia (NBE) has allowed commercial banks to freely negotiate foreign currency exchange rates with clients and amongst themselves, effectively ending the tight grip NBE had on forex rates for more than 50 years.

Starting July 29, 2024 Banks alongside exporters have the liberty to hold onto their foreign exchange earnings, which is a departure from the prior obligation to surrender forex to the central bank. Non-bank foreign exchange bureaus have been given the permission to conduct business using foreign currency cash notes at market rates.

Exporters can now hold 50% of their foreign exchange earnings, a slight increase from the earlier 40%. The waiting list system for bank allocation of forex is no longer needed. Ethiopian residents can now open accounts based on incomes in forex, inclusive of remittances and salaries.

The ban on 38 categories of products has been removed thus liberalising foreign exchange access for importing a various goods and services. Companies in the special economic zones are now allowed to keep 100pc of their foreign exchange earnings.

Update July 29, 2024

As of July 29, 2024 less than 24 hours after the announcement, Commercial Bank of Ethiopia Foreign exchange prices have shown 31% devaluation of Ethiopian Birr.

1USD was equivalent to 57.4895 ETB on July 26, 2024 before the announcement was made which has now increased to 74.7364, according to Exchange rates posted by the Bank.