Sep 23 , 2023

Ethiopians living abroad for over a year and non-residents of Ethiopian origin can now deposit foreign currency notes of up to 10,000 dollars, provided they can present entry visas not exceeding 30 days.

The latest amendment from the National Bank of Ethiopia (NBE) continues the stringent requirements for non-residents hailing from neighbouring countries and the Middle East, compelling them to provide authenticated resident or work permits and file a customs declaration.

Vice Governor of the Central Bank, Fikadu Digafe, underscored the new amendment is primarily directed at simplifying access to funds for people visiting the country.

"The previous amount was just too small," he told Fortune.

Requirements of a customs declaration for crediting into a foreign currency account for non-residents had been set at 3,000 dollars by the Central Bank directive put forth two and half years ago. Amended later down the months, peculiar modalities were introduced to what is colloquially referred to as a 'diaspora account'.

A series of directives since the re-establishment of the National Bank of Ethiopia (NBE) in 2008 have defined the circumstances for the ownership and utilisation of foreign currency by both residents and foreigners reflective of the country's general economic policy orientations.

During favourable winds, withdrawals of up to 10,000 dollars when leaving the country had been permitted while forex lulls had seen the regulators restrict even local currency amounts leaving the country to 3,000 Br such as in September 2022.

While the latest move by the Central Bank repeals three articles regarding the amounts permitted for non-residents and clarifies requirements for a customs declaration, it does not redefine any of the original terms.

Fixed or time deposits with minimum maturities of three months, current accounts based on prearranged agreements for withdrawal from the bank and repatriable saving deposits that may be used for local payments, are the three types of accounts permitted under this modality.

Bankers with experience in handling foreign currency accounts at commercial banks recognise the alluring incentives of the latest amendment.

Sirak Yifru, former head of trade finance and current internal auditor at Nib Bank, observes that tourists already received an accommodating reception from financial institutions, while business people who need cash to make payments have been restricted by the small amount.

He suggests that increasing the amount will benefit entrepreneurs who have frequent trips abroad, whereas incentivising tourism can only reach a certain degree without sustained resolutions to political problems plaguing the country.

"It should be promoted heavily to Ethiopians living abroad," he told Fortune.

A foreign currency account allows making transfers abroad, withdrawals for travel allowances and payments for imported goods listed as priorities such as fuel and pharmaceuticals for beholders with business licenses.

Over 2.5 million Ethiopians are estimated to be living abroad with a large concentration in the Middle East and North America. While people who hold a power of attorney are not permitted to open an account on the beholder's behalf, they are entitled to withdraw and make payments from the account.

Awlachew Masre, engagement coordination director at the Ethiopian Diaspora Agency, insisted that no complaints had been formally filed to the Agency with regard to the amount of the forex permitted while its utility is self-evident.

The foreign currency account modality was originally intended for non-residents who mainly make their living abroad. The access has been used by importers who either manage to get work permits in other countries or have associates who can open an account, prompting the regulators at the Central Bank to ban its allocation to non-priority items.

A businessman who spoke to Fortune anonymously disclosed the amount does not really matter as long as one manages to get approval from the Central Bank. He said the 'diaspora' account is helpful for importers who bring in priority goods listed by the NBE in small amounts.

"Most people underreport prices when requesting forex," he told Fortune.

The National Bank of Ethiopia has introduced a slew of reforms aiming to encourage forex inflows into the country in the past year, including raising the retention rates for exporters to 40pc and the issuance of a directive to allow offshore accounts for strategic foreign direct investments into the country.

Despite the reforms, foreign direct investment has gone through a 14pc decline in the third quarter of the fiscal year from the same duration in 2021/22.

Eshetu Fantaye, former president of Ahadu Bank and a veteran of the financial industry, applauded the development, underscoring its commensurate quality with amounts typically allowed to exit from other countries.

"Most countries allow exits with a similar amount," Eshetu told Fortune.

The Boston University fellow also pointed to the importance of thoughtful and meticulous reflection in designing laws. He cautioned against possible loopholes that might arise with regard to for how long or how much of the forex that entered into the country may be used or even for what purpose.

"Further clarifications or a comprehensive overview are deemed necessary," he said.

Legal professionals such as Yehualashet Tamiru point out that legally binding interpretations are usually given by cassation benches when there is a lack of clarity in implementation.

He explained that definitions of terms given by original laws are maintained if the amendments do not explicitly state otherwise, or if further clarification is not issued by the responsible body.

PUBLISHED ON Sep 23,2023 [ VOL 24 , NO 1221]

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