Includes how foreign exchange is managed and implications for U.S. business
Last Published: 6/21/2017

Foreign Exchange reserves were heavily depleted in 2012 and remain at low levels.  By July 2016, gross reserves were $3.05 billion which covers approximately 1.7 months of imports. In addition, the decrease in foreign exchange reserves has been exacerbated by weaker than expected earnings from coffee exports and low international commodity prices for other important exports such as gold and oil seeds. 

All payments abroad require permits and all transactions in foreign exchange must be carried out through authorized dealers supervised by the NBE.  The NBE has delegated most of the foreign exchange transaction functions to the commercial banks but strictly dictates margins.  Importers and exporters can obtain import/export permits through the commercial banks.  In addition, exporters can retain indefinitely 10% of their foreign exchange proceeds, but must sell the remaining 90% 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 set a directive that dictates the commercial banks to allocate foreign currency to importers based on priority projects with government mega projects as stated in GTP II. State owned enterprises and government sponsored infrastructure projects usually are given priority over the private sector while competing for access to foreign exchange. The foreign exchange crunch has intensified recently with delays of more than a year, especially to investors in non-priority sectors. 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.
 

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Ethiopia Market Access Foreign Exchange