Ethiopia’s Foreign Exchange Administration Measures Yield Significant Results: NBE Governor

Addis Ababa, October 3, 2024 (FBC) – The implementation of Ethiopia’s comprehensive macroeconomic reform, particularly the foreign exchange administration, have begun to deliver positive outcomes for the economy over the past two months, Governor of the National Bank of Ethiopia, Mamo Mihretu stated.

“The reform, particularly in foreign currency administration, led to a decrease in the black market premium, increased exports including gold, remittances, and foreign exchange reserves in the banking system,” Mamo pointed out, as quoted by ENA.

Following the reforms, the total foreign currency reserves in the banking system have increased by 80 percent over the past two months.  Prime Minister Abiy Ahmed chaired a macroeconomic meeting today.

The Governor stated that the performance of the  foreign currency administration in the past two months was discussed and evaluated during the meeting.

The Governor stated the substantial progress made in stabilizing the foreign currency market and the black market premium has narrowed to less than 3 percent from 100 percent prior to the reforms.

“So it has literally collapsed. The black and bank markets are more or less adjoining. Less than 10 percent is successful in many countries. Ours is less than 3 percent. This is a key success. This kind of strong and historic reform being implemented without causing huge price inflation makes Ethiopia’s reform so unique.”

Exports have also witnessed a surge, with exports during the month of September increasing by 53 percent compared to the same period last year.

Compared to the first quarter of the past year, remittances have grown by 145 percent, and gold exports have seen a remarkable 540 percent increase. Only 58 million USD was earned from gold export in the first quarter last year while it is 488 million USD in this similar period.

“Last year 255 million USD was earned from gold export. This year we earned almost 500 million USD in the first three months. It means that we earned double of the past annual earning in three months. This is the result of the reform.”

The reforms have encouraged the legal export of gold, which was previously smuggled out of the country.

The foreign currency reserves of both the National Bank of Ethiopia and commercial banks have experienced significant growth. In the two months following the reforms, the total foreign currency reserves in the banking system have increased by 80 percent.

“In general, if you take the foreign currency reserve in the banking system, including the National Bank of Ethiopia, the private banks, increased by 80 percent in the two months,” Mamo said.

Governor Mamo emphasized the positive impact of the reforms on the availability of foreign currency. Individuals and businesses can now obtain foreign currency from banks, improving the efficiency and competitiveness of the economy.

To sustain these positive results, the governor suggested that exporters and remitter companies be served by banks at similar exchange rates. Additionally, the National Bank of Ethiopia granted licenses to five foreign exchange bureaus today.

The Ethiopian government has been implementing comprehensive macroeconomic reforms aimed at stabilizing the economy and attracting investment. These reforms have focused on various areas, including foreign currency administration.