The National Bank of Ethiopia (NBE), financial sector regulatory body of the country, today passed a directive that allows local banks to borrow from foreign banks.
The decision of NBE the country followed the chronic foreign currency shortage the country has been facing for many years. “Recently we have been looking for options on how we can get additional hard currency… We are introducing this directive to help us get additional hard currency,” said Yinager Dessie (PhD), Governor of National Bank of Ethiopia.
In Ethiopia banks were forbidden from borrowing money from foreign banks. Ethiopia is among the countries in the world, which by law closed its financial system for foreign banks. All banks, insurances and microfinance institutions are owned by Ethiopians. Meanwhile the country has a few months ago has allowed Ethiopians with other country passports to invest in banking. Export trade, remittance, FDI, aid and loan have been the major sources of hard currency for Ethiopia.
In a related development, NBE has also introduced a directive that will allow microfinance institutions in the country to upgrade themselves into banks. In addition, NBE has also announced limiting the amount of cash a company or an individual can hold to 1,5 million birr (around $42,300).