Wednesday, June 12, 2024
BusinessCommercial banks to buy foreign currency without conditions

Commercial banks to buy foreign currency without conditions

Parallel market premium at historic low

The National Bank of Ethiopia (NBE) issued an order to commercial banks in Ethiopia to buy foreign currency from customers without any condition, The Reporter has learnt.

In a letter signed by Yehassab Tadesse, Director of Foreign Exchange Monitoring & Reserve Management Directorate with NBE, all commercial banks in are ordered to lift all prior restrictions and requirements to buy foreign currency of any amount from their customers. 

Previously, customers were supposed to come up with a declaration when they bring a foreign currency equivalent of 3,000 dollars and above. In the past, customers were allowed to deposit foreign currency of any amount if they have a diaspora account. 

However, following NBE’s directive, banks have now been directed to relinquish any requirement and accept foreign currency. in this regard, customers are not supposed to come with declaration documents irrespective of the amount of foreign currency they want to sell. By the same token, diaspora account holders cannot deposit foreign currency in their accounts but can exchange it and collect the equivalent amount in birr.

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This direction from the Central Bank came days after a statement from Prime Minister Abiy Ahmed (PhD) urging the public to sell foreign currency in their possession using formal channel (Banks).

Since the address by the PM, we are buying foreign currency like never before, a CEO of a private bank told The Reporter. We are now buying as much foreign currency as USD 30,000 from just one customer, the CEO said.

In a related news, the difference between parallel market and bank exchange rates has registered a historic decline this week. There is now around a 50 cent premium between the rate of exchange of US dollars in the parallel market and formal market.
Ed.’s Note:  This story has been edited on July 26, 2018 because of erroneous statements in the third and fourth paragraphs regarding diaspora account holders.

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