“The reform introduces a competitive, market-based determination of the exchange rate and addresses a long-standing distortion within the Ethiopian economy,” the bank said. Foreign exchange will now be retained by exporters and commercial banks to substantially increase the supply of foreign exchange to the private sector, effectively eliminating the previous surrender requirements to the NBE. The rules for allocation of foreign exchange by banks, which were based on a waiting list system for different categories of imports, have been abolished, while the foreign exchange retention rules for exporters have been improved, allowing them to retain 50 per cent of their foreign exchange proceeds, up from 40 per cent. The NBE has also simplified the rules for foreign currency accounts, especially those currently held by foreign institutions, foreign direct investors and the diaspora, and allowed residents to open foreign currency accounts based on remittances, transfers from abroad, foreign exchange-based salary or rental income and other specified cases, as well as the ability to use such foreign currency accounts for payments for foreign services. The central bank has also granted special foreign exchange privileges to companies in special economic zones, including the ability to retain 100 per cent of their foreign exchange earnings.
