Banks in Ethiopia laud FX reform as key driver for financial sector growth

Addis Ababa, August 19, 2024 (FBC) – The National Bank of Ethiopia’s foreign exchange (FX) administration reform, implemented as part of the broader macroeconomic reforms, has significantly catalyzed the growth of financial institutions, Bank officials remarked.

Banking industry officials asserted that the government’s macroeconomic reforms will significantly contribute to the nation’s economic growth.

They emphasized that the National Bank’s adoption of a market-driven foreign exchange rate system, a key component of the reform, will foster a competitive financial sector essential for overall economic health.

Chief Transformation Officer of Awash Bank, Temesgen Busha noted that the banking sector has undergone significant transformations in recent years, notably the adoption of a digital financial system.

He emphasized that the government’s macroeconomic reforms, including the implementation of a market-led foreign exchange rate system, have been pivotal in driving broader economic development beyond the banking sector.

Endalsh Woldemichael, Chief Strategy and Innovation Officer at Amhara Bank, asserted that the market-driven foreign exchange rate system, a cornerstone of the government’s macroeconomic reforms, presents a substantial opportunity for the banking industry.

She further emphasized that liberalizing the foreign exchange market will not only enhance the competitiveness of banks but also serve as a catalyst for attracting foreign direct investment.

Chief Strategy Officer at Ahadu Bank, Fikru Woldetinsae stated that banks must adapt to remain competitive in light of the government’s macroeconomic reforms.

He highlighted that the National Bank’s market-oriented foreign exchange rate policy will create a transparent system by unifying the previously disparate official and parallel exchange rates.

The bank officials added that the establishment of a market-based foreign exchange rate system will foster a healthier economic environment by aligning exchange rates across the formal and informal markets, as reported by ENA.

This system will empower financial institutions to provide more comprehensive currency services, bridging the gap between the two markets, they added.