Ethiopia has launched its first Automated Interbank Foreign Exchange Market, marking a significant milestone in the country’s ongoing macroeconomic reforms and efforts to modernize its financial sector.

The National Bank of Ethiopia (NBE) announced that the new interbank foreign exchange trading platform has officially begun operations, enabling commercial banks to trade foreign currency through a real-time, market-based system for the first time.

The platform is operated by the Ethiopian Securities Exchange (ESX) and represents a shift away from administratively guided FX mechanisms toward a transparent framework where exchange rates are determined by supply and demand dynamics among banks.

“This is a decisive step in modernizing Ethiopia’s foreign exchange market infrastructure,” NBE Governor Eyob Tekalign (PhD) said at the launch. “The platform provides a transparent, efficient, and rules-based environment that will improve price discovery, strengthen market discipline, and support broader financial sector reforms.”

Market-Driven FX Pricing

Under the new system, interbank FX transactions are conducted through competitive real-time bidding, allowing banks equal visibility into market depth and pricing. NBE said the mechanism is expected to improve the accuracy of wholesale FX pricing and establish a more reliable benchmark for the secondary foreign exchange market.

The move is seen as a key pillar of Ethiopia’s reform agenda, which aims to enhance competitiveness, reduce distortions in FX allocation, and improve liquidity management across the banking system.

Regulatory Oversight Remains Central

While embracing market pricing, NBE emphasized that the interbank FX market will operate under strict regulatory oversight. Participating banks are required to comply with Foreign Exchange Directive No. FXD/01/2024 and the Foreign Exchange Exposure Limits of Banks Directive No. SBB/96/2025, alongside newly issued FX Market Guidelines and a Code of Conduct aligned with global standards.

The central bank said it will closely supervise market operations to ensure the transition remains orderly and consistent with financial stability objectives.

ESX Platform Powers Trading

The FX market operates on ESX’s state-of-the-art automated trading platform, which includes a dedicated FX market segment. According to NBE, the unified platform eliminates information asymmetry, supports price aggregation, and enables effective regulatory supervision in real time.

“The use of a single, advanced platform ensures transparency, competitive pricing, and equal access for all commercial banks,” the central bank said.

Broader Economic Implications

NBE said the launch will allow foreign currency to move more efficiently across the banking system, improving liquidity allocation and strengthening Ethiopia’s overall financial resilience.

The initiative also signals Ethiopia’s intent to align its foreign exchange management practices with international norms as it advances broader macro-economic reforms, including financial sector liberalization and capital market development.