11 October 2017

Ethiopia: Central Bank Issues Directives to Harmonize Devaluation

Photo: Addis Fortune
Central Bank of Ethiopia.

The nation's commercial banks are told to transfer 30pc of their foreign currency earnings to the central bank, part of a series measures regulators took to complement the devaluation of the Birr against a basket of major currencies.

The National Bank of Ethiopia (NBE) has devalued the Birr by 15pc, hoping to see exporters encouraged to sell more.

The big prize goes to exporters. In a directive issued on Monday, exporters are privileged to retain 30pc of their export earnings, an amount which has been at 10pc. However, they are told to spend their retaining of forex on imports only related to their businesses.

The directive, which instructs banks to transfer all the "windfall profit" from currency adjustment, is seen by authorities complementary to the devaluation of the Birr effective as of today, October 11, 2017. During the past devaluation, seven years ago, the payment demanded from the banks was only 75pc of their windfall earnings.

The transfer was made in a bid to reduce the burden on the Commercial Bank of Ethiopia (CBE) in the allocation of Forex for the procurement of strategic goods such as petroleum and sugar, and payments made to cover the country's bills for shipping imported items, according to a source close to the case.

Ethiopia

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