Ethiopia Opens Doors for Independent Forex Bureaus Amid Financial Reform

Ethiopia begins licensing independent foreign exchange bureaus as part of its financial sector liberalization. The move follows the recent floatation of the birr currency and the approval of a $3.4 billion program from the IMF, aiming to transform the financial landscape and address economic challenges.

Ethiopia has taken a crucial step in its financial sector liberalization by licensing independent foreign exchange bureaus, the central bank announced on Thursday. This initiative follows the recent floatation of the local birr currency, which was part of the government's broader economic reform program. Late last month, Africa's second-most populous nation secured a four-year, $3.4 billion program from the International Monetary Fund (IMF), enabling long-awaited debt restructuring.

The National Bank of Ethiopia's strategy aims to reshape and expand the financial sector significantly, according to central bank governor Mamo Mihretu. 'With the licensing of independent FX bureaus, we are making yet another important milestone in the opening up of Ethiopia's financial sector and aligning it with global norms and best practices,' Mihretu stated.

Facing high inflation and chronic foreign currency shortages, Ethiopia defaulted on its debt at the end of last year, making it the third African economy to do so recently. The nation has been in talks with the IMF to establish a new lending program, following an abandoned 2019 agreement impacted by conflict in Tigray. Prime Minister Abiy Ahmed defended the move to a market-determined exchange rate, emphasizing that it aimed to close the gap between official and black market rates.

(With inputs from agencies.)