Ethiopia introduced Monday market-based foreign exchange rate, which followed the nation’s entrance into a full-fledged macroeconomic reform program implementation.
Following the country’s embarking on the macroeconomic reform program issued Sunday, the National Bank of Ethiopia (NBE) announced a major revision of the country’s foreign exchange (FX), which it said is a competitive, market-based rating of foreign exchange.
NBE released a new Foreign Exchange Directive which will govern the implementation of the reform.
NBE’s new Foreign Exchange Directive involve significant new policy changes including a shift to a market-based exchange regime, whereby banks are allowed to buy and sell foreign currencies from/to their clients and among themselves at freely negotiated rates, and with the NBE making only limited interventions to support the market in its early days and if justified by disorderly market conditions.
NBE’s Monday statement also indicated that the reforms represent a comprehensive set of measures that will support Ethiopia’s current stage of development and its increasing integration with the rest of the world. These reforms are consistent with longstanding Government intentions outlined in key policy documents, which recognized that Ethiopia should eventually move towards a market-based foreign exchange system as its economy grows in complexity and evolves over time.
Governor of the National Bank of Ethiopia, Mamo Mihretu, said on a video message that government has secured over USD 10 billion in support of the reform. Specifically, the monetary backing from the IMF, World Bank and other partners will help Ethiopia cover transitioning cost and reduce the burdens of the new foreign exchange rating.
