Ethiopia’s informal foreign exchange market is facing tighter space after the National Bank of Ethiopia granted commercial banks authority to conduct forward foreign exchange transactions and issue private external loan guarantees without prior central bank approval.

In a public notice issued on February 11, the central bank announced a series of amendments to its foreign exchange directive, expanding the role of authorised banks in currency operations and external financing. The measures form part of the macroeconomic reform launched in July 2024, which has progressively removed current account restrictions.

Authorised banks may now enter into forward exchange contracts freely, a tool previously constrained by approval requirements. They are also permitted to offer private external loan guarantees of up to 10 percent of their total capital. In addition, approval of external loans, including suppliers’ credit in cash or in kind, will be handled fully by commercial banks in line with directive requirements.

The directive also broadens access to foreign exchange accounts and cross border payments. Service exporters, like freelancers, are allowed to retain 100 percent of export proceeds in foreign currency accounts for an indefinite period. Exporters may receive advance payments from abroad, provided contractual terms are presented to authorised banks.

Foreign direct investment companies may remit net profits or dividends through commercial banks without seeking separate approval from the central bank, subject to submission of required documents. Embassies, international organisations and non governmental organisations may open foreign currency accounts at authorised banks without prior clearance.

Authorised banks may issue internationally recognised payment cards to foreign exchange account holders for outbound retail transactions, including e-commerce, provided sufficient balances are available. Foreign exchange account holders may also pay for the education, medical and travel expenses of spouses and children abroad upon presentation of valid documentation.

Outbound remittances of up to 3,000 US dollars per case are permitted for Ethiopians for family support, subject to documentation. Banks may also effect advance payments of up to 20,000 US dollars per case for medical and education services abroad without requiring visas or air tickets, based on proof from foreign institutions.

The minimum balance requirement of 100 US dollars to open a foreign currency savings account for residents and non resident Ethiopians, including foreign nationals of Ethiopian origin, has been removed.

Independent foreign exchange bureaus will see their operating conditions eased. Those in operation for at least one year will have their full Birr 30 million security deposit released, while those operating for at least six months will have half of the Birr 15 million deposit returned. Their cash holding limit has been raised to 25 percent of capital from 10 percent, with excess holdings to be sold to commercial banks.

Individuals entering Ethiopia with foreign currency may convert the full amount at authorised forex bureaus or deposit it into foreign currency accounts without presenting a customs declaration.