New directives to boost foreign currency reserves

Diaspora's current account limit jumps from 5,000 to 50,000USD

By Tedla Yeneakal - Capital

01 September 2006

The National Bank of Ethiopia (NBE) announced this week that it has issued three directives, including a decree forcing all banks nationwide to open a separate window for money transfer services and use new Swift transfer service technology to reduce the remittance charge, the Bank disclosed to Capital.

According to a press statement from the Bank, the new directives also increase the foreign currency limit of accounts belonging to the Ethiopian Diaspora from USD 5,000 to USD 50,000.

Abebe Demessie, Public Relations head with NBE told Capital that the need for the three new directives primarily dealing with remittance, arrangements of opening bank accounts for the Diaspora and Flower Export and Foreign Exchange Repatriations came after the country recorded remarkable earnings from exports in the stated sectors. During the last fiscal year revenue from exports reached USD 1 billion, showing a 107.2% increase from three years ago.

Dealing with remittance, banks are also required to display clearly how much they charge for their remittance services.

In addition to the increase of the current account savings limit for the Diaspora, the new directive also offers the privilege to open a non-repatriable Birr account, in addition to the previously allowed Current and Time limited Savings accounts.

To encourage more savings, the new directive has also doubled the interest rates on non-repatriable and current accounts to 6 percent. Moreover, banks have also been given the authority to determine the interest rate on Time limited savings accounts based on international banking procedures.

In order to enhance investment and enhance the accumulation of foreign exchange reserves, the new directive associated with saving has exempted income tax payments obtained from foreign exchange with the money earned used as collateral if individuals want to borrow money from local banks.

The public relations department of the National Bank has given special attention to the growing floriculture sector of the economy by writing a new directive that sets new sales arrangements and the flower export permit processing by banks. Amongst the many decrees, the new directive obliges commercial banks, Flower Growers & Exporters' Association, the Ethiopian Customs Authority, and flower exporters to report detailed information to the National Bank. For example, the new directive states: “The Ethiopian Customs Authority shall send to NBE monthly reports of flower exports processed through their office, classifying the details by exporter's name, type of flower, number of stems and the estimated value in Foreign Exchange, Bank permit number or partial shipment reference.”According to the National Bank, the directive will enter into force tomorrow, Monday, August 28.