Diaspora international remittance service providers can now open a foreign currency account and maintain foreign currency in retention accounts, according to a new directive issued by the National Bank of Ethiopia.

Signed by Yinager Dessie (PhD), governor of the central bank, and issued on September 2, 2019, the directive allows remittance service providers to hold a foreign currency account, which was previously allowed for non-resident Ethiopians, Ethiopian-born diaspora and export companies.

It is necessary to create an incentive for Ethiopian diaspora to maintain foreign currency accounts at home to encourage domestic investment, according to the directive.

"It will support the international foreign currency reserve and ease the balance of payments problem of the country, and it could encourage foreign direct investment," reads the directive.

The directive also relaxed the procedure that was imposed on the deposits of non-resident Ethiopians' foreign currency accounts. In the previous directive that was issued last year, only the account holders were authorised to make deposits. The new directive stipulates the account holder's spouse, employer, business partners and organisation can make deposits.

While relaxing the requirements mentioned above, the directive tightens the former procedure that allowed a foreign currency account holder to transfer money to another diaspora account.

Account holders can open three types of foreign currency accounts: fixed, current and non-repatriable Birr. Fixed or time deposit takes the form of deposits certified and issued in the name of the depositor. Maturity may vary based on the arrangement made between the depositor and the bank. However, the minimum maturity period is three months.

Under a current account, withdrawals may be made at any time upon demand by writing a check and or a pre-arranged procedure adopted by the opening bank, while non-repatriable Birr accounts take the form of savings deposits that can be used for local payments only. The minimum amount for an initial deposit under a current account is 100 dollars or equivalent to other eligible international currencies.

Fixed account holders have to make a minimum initial deposit of 5,000 dollars or equivalent value of eligible foreign currencies.

A person or a company can open only one current account at one of the authorised banks and multiple fixed accounts in more than one bank. In foreign currency accounts, the money is maintained in dollars, pound sterling and euro. Other eligible currencies have to be converted into the three currencies.