Mamo Mihretu, Governor of the National Bank of Ethiopia (Photo: ENA)

Addis Abeba – The National Bank of Ethiopia (NBE) has revised its foreign currency retention policy, granting exporters increased flexibility in the use of their hard currency earnings.

Effective today, 14 November, 2024, the updated policy permits exporters to retain 50% of the foreign currency they generate in their Ethiopian accounts for an indefinite period, while requiring them to surrender the remaining 50% to commercial banks.

Previously, exporters were mandated to sell half of their foreign currency earnings to banks immediately, with the remaining portion converted into local currency within one month.

In an interview with state media, Mamo Mihretu, Governor of the National Bank of Ethiopia (NBE), explained that the measure, which he described as “temporary,” is intended to secure a consistent flow of foreign currency.

According to the governor, the country’s foreign currency reserves have grown from $1.4 billion prior to the recent macroeconomic reforms to the current level of $3.4 billion.

Mamo revealed that commercial banks have successfully cleared their outstanding foreign currency debt. He noted that they have fully settled accumulated debts exceeding $500 million, which had previously remained unpaid under letters of credit (LCs).

“Consequently, they are now debt-free and are expected to manage payments solely for new LCs moving forward,” he added.

He also highlighted that, over the past three months, commercial banks have, on average, acquired approximately $500 million in foreign currency from exports each month. In total, during this period, banks have purchased around $1.2 billion, enabling them to sell up to $1.7 billion to those in need of foreign currency.

“The macroeconomic reform, which has been in effect for over 100 days, is already showing numerous positive outcomes,” he stated.

Mamo further disclosed that the central bank is routinely monitoring each commercial bank’s foreign currency holdings and liabilities.

“The current state of these banks indicates that the foreign currency buying and selling system is becoming more stable,” he observed.

He also expressed optimism regarding a recently launched system that enables banks to buy and sell foreign currency from each other.

In late October 2024, the National Bank of Ethiopia (NBE) announced the launch of an interbank money market platform, enabling commercial banks to engage in short-term borrowing and lending transactions.

This platform facilitates lending operations with durations of one day and seven days between banks.

The central bank has set specific operational guidelines for the platform, requiring that trades be conducted within an interest rate corridor tied to the National Bank Rate (NBR). The upper limit for this corridor is NBR + 3%, while the lower limit is NBR – 3%.

“In just the past two weeks, $100 million in trades have taken place between banks,” disclosed the governor of the NBE. AS