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Toronto – The National Bank of Ethiopia is deepening liberal market practices as part of the Macro-Economic Policy Reform which the Ethiopian government started to implement.
Today, the bank announced that it is accepting applications for privately owned Forex Bureaus ( “Independent FX.”
In its announcement the Bank stated “Independent FX are authorized to engage in the buying and selling of foreign currency cash notes and are allowed to conduct such transactions on the basis of freely negotiated exchange rates with their customers.”
Mamo Mihretu, governor of the bank, has explicitly stated that the National Bank of Ethiopia is adopting “global practices” and he sees it as a measure to liberalize the banking sector in the country. He stated :
“With the licensing of Independent FX Bureaus, we are making yet another important milestone in opening up Ethiopia’s Financial Sector, and also bringing it in line with global norms and best practices.”
Qualifications to apply for Forex Bureau License
As of now, the government is allowing only Ethiopian Citizens, Non-resident Ethiopian Citizens or Foreign Nationals of Ethiopian origin to apply for the Forex Bureau Licence.
However, there is a financial requirement to be eligible to apply for it. A working capital of 15 million Ethiopian Birr and 30 million birr deposit in a closed account.
Other policy measures that the bank introduced recently
In what appears to be a submissive move to the International Monetary Fund (IMF) and the World Bank (WB) strings attached to loan to be make available to the Abiy Ahmed’s Administration, the National Bank of Ethiopia recently announced the devaluation of Ethiopian birr.
Since then the bird appears to be in a free fall. In less than two weeks, it lost well over 50 percent seventy percent of its value. A day before the policy was introduced sometime last week, the Ethiopian Birr was exchanging at a rate of 57 birr to the U.S. dollars. Today, one $US dollar is well over 100 Ethiopian Birr.
Yesterday, the National Bank of Ethiopia auctioned Ethiopian birr at a rate of 107.9 Ethiopian birr. It disclosed that 27 Ethiopian Banks participated in the auction. Winners were allowed only a maximum of 20 percent of the currency made available for auction.
On August 8, the bank was selling $US1 at $110.25 birr.
Price rise for basic consumer goods
Unprecedented spikes in the price of basic consumer goods are observed in response to the devaluation of Ethiopian birr which the Ethiopian government framed as a “necessary measure” to narrow the gap between the exchange rates in the banks and the parallel market.
The Ethiopian government shutdown thousands of businesses ( in the capital Addis Ababa) for increasing prices.
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