@EthiopianCentralBank – Ethiopian Business Review

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The National Bank of Ethiopia (NBE) has introduced a new round of regulatory reforms aimed at easing access to hard currency and aligning market practices with international standards.

The central bank has capped all bank-related foreign currency transaction fees at 4%, effective May 26, 2025, and will require banks to publicly disclose FX-related charges starting next month. This measure is designed to promote transparency, rein in non-standard pricing practices, and protect businesses and individuals navigating the increasingly active FX market.

At the same time, NBE has lifted the long-standing import advance payment ceiling from USD 5,000 to USD 50,000 per transaction—a step aimed at relieving one of the most persistent bottlenecks faced by importers. The updated threshold reflects what the NBE describes as a necessary adjustment, considering how long the previous limit had been in place and the evolving nature of global trade norms.

The foreign exchange regulator has also revised the rules governing how much travelers can take abroad. Under the new guidelines, personal travelers will be permitted to purchase up to USD 10,000, while business travelers may access up to USD 15,000. Additionally, individuals holding foreign exchange accounts will now be allowed to spend up to 20% of their balance via debit card—doubling the previous 10% ceiling.

These changes follow nearly a year of progressive liberalization, launched in July 2024 when the NBE unveiled a more market-based exchange rate regime. Since then, the central bank reports that goods exports have more than doubled, while service exports, remittances, and both official and private capital inflows have shown marked improvement.

As a result, the country’s foreign currency reserves have reached record highs, with increased FX availability enabling firms to secure vital inputs and expand operations. Bi-weekly FX auctions, another cornerstone of the reform effort, have added liquidity to the banking system and contributed to narrowing the gap between official and parallel market rates.

The latest measures, according to NBE, are a direct response to the positive feedback loop generated by these reforms and are intended to further normalize the foreign exchange environment. By enforcing fairer pricing, relaxing outdated limitations, and encouraging transparent financial intermediation, the central bank aims to strengthen trust in Ethiopia’s FX system—one that remains critical to sustaining business confidence, investor participation, and broader macroeconomic recovery.

While challenges remain, NBE’s phased approach suggests a careful calibration between regulatory oversight and market flexibility, with a clear shift away from rigid controls that have long characterized the foreign currency regime.

The National Bank of Ethiopia’s (NBE) latest foreign currency auction has sparked confusion among industry stakeholders after concluding at a significantly higher rate than the prevailing market price. While the USD exchange rate stood at ETB 124.0086 on the market, the auction saw USD60 million sold at an average rate of ETB 135.62 per dollar. This unexpected outcome has raised concerns about its impact on the broader market.

A financial expert close to the banking sector explained that for banks, participating in the auction is often their only option to secure the foreign currency needed to cover essential expenses. He noted that NBE holds these auctions to manage forex distribution and stabilize market fluctuations.

In a recent policy shift, NBE has transferred a significant portion of fuel import-related forex responsibilities to commercial banks. Fuel imports require large sums of foreign currency, which could strain reserves. “With payment deadlines for fuel imports approaching, banks likely raised their bids to ensure they could meet their obligations,” the expert said.

Smaller banks also participated aggressively, bidding at higher rates. “They prefer the auction as it offers a better deal compared to purchasing from larger banks, which often charge high commissions,” he added.

A seasoned economist highlighted the uncertainty surrounding future auctions, which has led banks to maximize their forex purchases whenever possible. While acknowledging the auction system’s benefits, he cautioned that the latest auction’s near ETB 136 per USD rate could exert inflationary pressure on the economy. “Exporters may withhold their goods, anticipating further depreciation of the ETB and higher profits in future auctions,” he warned.

According to NBE, 27 banks participated in the auction. Sources indicate that only 12 banks secured foreign currency, with winning bids ranging from a minimum of ETB 130 to a maximum of ETB 141 per dollar. Notably, a single bank reportedly obtained just USD200,000 at the highest rate of ETB 141 per dollar.

Source: The Reporter

NBE Caps Forex Fees at 4%, Raises Import Advance Limit to USD50,000

NBE’s Auction Wraps Up: Why Banks Are Rushing to Secure USD?