Addis Abeba –In an effort to address upcoming fuel-related import payments, the National Bank of Ethiopia (NBE) has announced the allocation and sale of $175 million to the foreign exchange market.
According to the NBE, these funds are intended to meet the foreign exchange requirements of the Ethiopian Petroleum Supply Enterprise (EPSE), the country’s principal importer of fuel and related products.
“Ethiopia’s foreign exchange reform has made a remarkably positive start within just two months,” stated Mamo Mihretu, governor of the NBE. “The parallel market premium has dropped significantly from nearly 100% to below five percent; there has been a strong supply response in exports and remittances, and the availability of foreign exchange for businesses seeking to open import Letters of Credit (LC) is increasing.”
The governor noted, “Foreign exchange reserves at the National Bank of Ethiopia (NBE) and at commercial banks have reached record levels in recent weeks,” following the implementation of macroeconomic reforms that transitioned Ethiopia from a crawling peg exchange rate system to a market-based foreign currency regime.”
These reforms, implemented on 28 July, 2024, aim to correct long-standing distortions within the Ethiopian economy, including chronic and severe foreign exchange shortages.
According to the NBE, the sale of $175 million is part of a comprehensive plan designed to address all fuel-related foreign exchange payments for the current year while also ensuring improved access to and availability of foreign exchange for other economic sectors.
Mamo indicated that to facilitate the financing of fuel-related import payments contracted prior to the foreign exchange rate reform, foreign exchange allocations for this specific purpose will be conducted at periodic intervals throughout the year, depending on market conditions.
In alignment with the new foreign exchange regime, the NBE has announced that it may also conduct periodic auctions to provide foreign exchange funds to banks as needed to address disorderly market conditions. AS
