Includes how foreign exchange is managed and implications for U.S. business
Last Published: 10/30/2019

Foreign Exchange reserves maintained by the government of Ethiopia remain at low-levels, a longstanding challenge for those seeking to source from abroad. The decrease in foreign exchange reserves has been exacerbated by international debt obligations contracted to fund previously built infrastructure projects.

All payments abroad require permits and all transactions in foreign exchange must be carried out through authorized dealers supervised by the NBE. Imports must be funded through accounts held in Ethiopia. The NBE has delegated most of the foreign exchange transaction functions to the commercial banks but maintains authority to approve large foreign exchange allocations. Importers and exporters can obtain import/export permits through the commercial banks. In addition, exporters can retain indefinitely 30% of their foreign exchange proceeds, but must sell the remaining 70% to commercial banks within four weeks. Foreign investors may repatriate all of their profits abroad.

Foreign exchange shortages due to weak export performance and high demand for foreign currency will continue to present significant market challenges, particularly for potential Ethiopian buyers of U.S. goods and services. Private sector actors widely complain about the shortage of foreign exchange and point out the adverse implications on their businesses. As a result of the critical shortage of foreign currency, NBE regulations require commercial banks to allocate foreign currency to importers based on GTP II priorities, and debt obligations. State owned enterprises and government sponsored infrastructure projects usually are given priority over the private sector when competing for access to foreign exchange. Given the poor performance of exports in past years and growing demand for import of capital goods, foreign exchange availability will continue to be a challenge for businesses in the future. Local sourcing of inputs and partnering with export-oriented partners are strategies employed by the private sector to address the foreign exchange shortage.

As the new government of Prime Minister Abiy Ahmed introduces more economic reforms, changes to foreign exchange policy can be expected in 2019 and 2020.
 

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Ethiopia Market Access Foreign Exchange