Ethiopia moves to combat forex trading on black market

The National Bank of Ethiopia (NBE) has initiated processes to better regulate foreign exchange transactions and by that weaken the black market.

According to a new directive, importers are obliged to request for foreign currency from the NBE based on the international prices of their imports.

The central bank’s chief economist and its vice governor Yohanes Ayalew, confirmed that the directive had been circulated to commercial banks and was already being enforced.

Ethiopia’s economy continues to get good reviews from international lenders like the World Bank and the International Monetary Fund (IMF). The IMF chief, Christine Lagarde recently visited Ethiopia and urged the government to work at alternative drivers of growth.

In November 2017, custom authorities said they continued to record increasing incidence of forex smuggling especially via its main airport, Bole International Airport in the capital Addis Ababa.

They said, they had intercepted an audacious attempt to take out 4 million US dollars via the airport in 2016.

According to current directives of the central bank, National Bank of Ethiopia (NBE), passengers are allowed to carry cash of up to 1,000 Ethiopian birr.

In the case of forex rules, passengers are only allowed to enter or leave the country with a maximum of $3,000 or its equivalent in other foreign currencies without a permit. They are required to notify the authorities if they are carrying an amount that exceeds the threshold.

The NBE in October announced a devaluation of the country’s currency, the birr by 15%. Along with the devaluation which is the first since 2010, interest rates on deposits were pushed up to 7% from the previous 5%.

The measure is seen by economic players as helping to boost the growth of the country’s export sector which has experienced a sluggish outlook. It is also expected to reduce forex shortages and to ease debt burden.

Some of the NBE’s forex rules as issued in a directive on its website reads:

• Foreign currency cash notes shall be exchanged into Birr only with banks and authorized forex bureaus.

• Reconversion of birr into foreign currency is allowed, if the reconversion request is supported by original receipts produced by banks and customs declaration for value exceeding USD3,000.

Surrender of Foreign Exchange

1. Ethiopian and Residents of Ethiopia shall surrender, through an authorized forex bureaux, all foreign currencies in their possession against payment to them of the equivalent sum in Birr within 45 days from the date of acquisition.

2. Any resident of Ethiopia found in possession of foreign currency and that do not have evidences to justify holdings shall be punished under the penal code of Ethiopia and the money shall be confiscated.