National Bank of Ethiopia lifts FX restrictions

The National Bank of Ethiopia lifted restrictions on the foreign currency market on Monday, a crucial move to secure funding from the International Monetary Fund (IMF) and advance a long-delayed debt overhaul.

The central bank announced that banks can now freely trade foreign currencies at negotiated rates, with minimal intervention from the National Bank of Ethiopia.

According to Reuters, Ethiopia, grappling with high inflation and chronic FX shortages last December, defaulted on its debt, becoming the third African economy to do so in recent years.

Ethiopia has been negotiating with the IMF since last year to establish a new lending programme, following the abandonment of the previous programme due to the Tigray conflict, which ended with a peace deal in November 2022.

As part of these reforms, Ethiopia will receive $10.7 billion in external financing from development partners, including exceptional support from the IMF, the World Bank, and other creditors, according to central bank governor Mamo Mihretu. The government has also introduced economic reforms linked to the IMF negotiations, such as an interest rate-based monetary policy.

Attribution: Reuters