Central Bank Gains More Autonomy, Targets Five Foreign Banks in Five Years

Dec 22 , 2024


[ssba-buttons]

Parliament approved a new proclamation strengthening the National Bank of Ethiopia's (NBE) autonomy, granting it independence over monetary policy and foreign exchange management. The proclamation caps the government's access to central bank financing, limiting the fed’s access to credit to temporary overdrafts of no more than 15pc of the average annual domestic revenue from the previous three fiscal years. These overdrafts must be repaid within 12 months and cannot be rolled over. The legislation also establishes a financial stability committee responsible for managing bailouts during financial crises. The new law replaces the 2008 National Bank Establishment Proclamation and raises the minimum paid-up capital of the NBE from 500 million Br to 10 billion Br. While the proclamation seeks to limit the executive’s influence, the Prime Minister still retains the right to appoint the governor, vice governor, board chairperson, and six additional board members. Parliament also passed new legislation allowing foreign banks to establish subsidiaries, purchase shares in local banks, and open branches or liaison offices. However, the law prohibits foreign investors from owning more than 40pc of shares in local banks. It also limits the combined shareholding of foreign nationals and foreign-owned Ethiopian organizations to 49pc of a local bank’s total shares. The law stipulates that foreign banks can employ foreign nationals as senior executives and mandates the inclusion of resident Ethiopians on their boards. The government plans to issue banking permits to five foreign investors over the next five years. Some MPs opposed the bill arguing that the domestic banking sector, which suffers from a shortage of working capital and foreign currency, is not ready to face foreign competition. They added that the Central Bank lacks the capacity to effectively regulate foreign financial institutions. Three MPs voted against the proclamation. Governor Mamo Mihretu defended the law, stating that opening up the banking sector to foreign investors will benefit domestic banks and that the NBE has spent the past three years preparing regulatory mechanisms to oversee foreign banks.


Radar

Construction Sector Faces 'Serious Trouble,' Minister Warns

The construction industry in Ethiopia is in "serious trouble," said Chaltu Sani, Minister of Urban & Infrastructure Development, citing major challenges with finance, competitiveness and material costs. Speaking at the opening of the BIG 5 Construct Ethiopia expo and the inaugural East African Infrastructure & Water Expo at Millennium Hall last week, Chaltu stressed the need for concerted efforts from government, private sector, and international partners to support the 67 billion dol...


Radar

Wegagen Bank, Gift Real Estate Partner to Promote Diaspora Homeownership

Wegagen Bank S.C. and Gift Real Estate Plc. signed a Memorandum of Understanding (MoU) on June 23, to offer housing loans for homebuyers, with a special focus on the Ethiopian diaspora. The agreement enables eligible diaspora members to access loans covering up to 80pc of a home's value at reasonable interest rates. The bank's Deputy CEO Kidane Gebreselassie noted the deal will promote the real estate sector and expand homeownership options. Founder and CEO of Gift Real Estate, Gebreyesus Igata...


Radar

Jimma University Signs Sports Science Agreement to Strengthen National Programmes

Jimma University has signed a four-party Memorandum of Understanding (MoU) with the Ethiopian Academy of Sciences, Derartu Tulu Sports Training & Research Institute, and the Oromia Youth & Sport Bureau to advance Ethiopia's sports science and training capacity. Signed on June 26, the agreement includes joint research, shared facilities, and hosting of national and international competitions. It is expected to strengthen youth development, public health, and national pride through coor...