The National Bank of Ethiopia (NBE) has issued a comprehensive amendment to its Foreign Exchange Regulation (FXD/04/2026), introducing wide-ranging reforms aimed at liberalizing the country’s tightly controlled forex regime, improving liquidity, and easing foreign currency access for businesses, investors, and individuals.

The new directive signals a continued shift toward gradual foreign exchange reform, with expanded powers for banks, greater flexibility for exporters and investors, and strengthened operational capacity for forex bureaus.

Below is a detailed breakdown of the key changes and their implications.

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Greater Flexibility for Exporters and Service Providers

One of the most significant changes allows service exporters to retain foreign exchange earnings in their retention accounts without any time limit. Previously, exporters were subject to strict timelines for utilizing or surrendering foreign currency.

This measure is expected to:

• Improve foreign currency liquidity management
• Encourage service exports
• Reduce pressure on forced conversions

Additionally, exporting organizations may now make advance payments to foreign entities, provided a formal advance payment agreement is submitted to their bank.

Foreign exchange receipts can also be treated as advance payments for future exports if:

• The agreement explicitly states the payment is for future export or import,
• The future export goods are listed, or
• The invoice or transaction agreement number is indicated.

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Expanded Rights for Individuals with Foreign Currency Accounts

The amended regulation introduces greater flexibility for individuals holding foreign currency accounts.

Key updates include:

• Customers may use their forex accounts to cover education, medical, and travel expenses for spouses and children upon submission of legal documentation.
• Ethiopians may transfer up to US$3,000 to relatives abroad, subject to documentation.
• Residents returning to Ethiopia may convert or deposit any amount of foreign currency through banks or licensed bureaus without requiring customs documentation.
• Banks may provide foreign exchange advances of up to US$20,000 for medical or educational expenses abroad, based on confirmation from a foreign institution — even without visas or air tickets in a single case.
• The US$100 minimum deposit requirement for Ethiopians and Ethiopians of Ethiopian origin opening foreign currency savings accounts has been removed.

These measures aim to ease the burden on households requiring legitimate foreign payments.

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Banks Granted Greater Operational Autonomy

The new directive significantly expands the authority of commercial banks.

Banks are now permitted to:

• Issue international payment cards linked to foreign currency accounts for electronic and cross-border payments.
• Conduct forward foreign exchange transactions without prior NBE approval.
• Process foreign loans (cash or in kind) brought into the country in accordance with directive requirements.
• Provide guarantees for foreign loans to the private sector, capped at 10 percent of their capital.

These reforms represent a partial decentralization of forex approvals from the central bank to commercial banks.

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Reforms for Investors and Organizations

Foreign investors and organizations also benefit from the new amendments.

Highlights include:

• Foreign direct investors, embassies, international institutions, and aid agencies may open foreign exchange accounts without NBE approval.
• Foreign investors may repatriate dividend earnings without prior central bank approval, provided documentation requirements are met and verified by banks.
• Organizations may invest abroad, subject to verification of their investment status by the NBE.
• For-profit organizations may open foreign currency accounts if the source of forex is from grants, gifts, or other non-export sources.

These changes are likely aimed at improving investor confidence and easing capital flow restrictions.

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Strengthening Forex Bureaus and Market Liquidity

In a move to enhance liquidity within the forex trading ecosystem, the NBE has introduced reforms targeting licensed foreign exchange bureaus.

Key changes include:

• Refund of licensing deposits:
  • 30 million birr for bureaus operating for one year or more
  • 15 million birr for bureaus operating for at least six months
• Increase in the allowable foreign currency holding limit from 10 percent to 25 percent of capital
• Requirement that any excess foreign currency be sold to banks
• Authorization for forex bureaus to sell cash foreign currency for visa, passport, and license renewals upon documentation

These measures aim to improve operational cash flow and expand foreign currency availability in the formal market.

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Broader Economic Implications

The amendments reflect Ethiopia’s continued efforts to modernize its foreign exchange framework amid ongoing macroeconomic pressures, forex shortages, and reform commitments.

By:

• Relaxing surrender requirements,
• Expanding bank autonomy,
• Facilitating investor repatriation,
• Increasing forex bureau capacity,

the NBE appears to be taking incremental steps toward a more flexible and market-responsive foreign exchange system.

However, the effectiveness of these reforms will depend on:

• Overall foreign currency inflows,
• Export performance,
• Remittance trends,
• Banking sector capacity to manage new instruments such as forward contracts.

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The revised Foreign Exchange Regulation (FXD/04/2026) marks one of the more comprehensive updates in recent years. While not a full liberalization, it significantly reduces procedural bottlenecks and broadens access to foreign currency for households, exporters, banks, and investors.

If implemented effectively, the reforms could ease forex shortages, strengthen financial intermediation, and support Ethiopia’s broader economic restructuring agenda.