Central Bank Revises FX Directive, Loosens Trade Finance Controls
Ethiopia’s central bank on Monday announced amendments to its foreign exchange rules for import financing and moved to curb inconsistencies in letter-of-credit charges imposed by commercial banks, extending reforms introduced after the country adopted a market-based exchange rate system last year. In a public notice issued on May 25, the central bank said banks would […]
Black News 
Ethiopia’s central bank on Monday announced amendments to its foreign exchange rules for import financing and moved to curb inconsistencies in letter-of-credit charges imposed by commercial banks, extending reforms introduced after the country adopted a market-based exchange rate system last year.
In a public notice issued on May 25, the central bank said banks would no longer need prior approval from the NBE to process letters of credit and cash-against-documents transactions for institutions holding foreign currency and retention accounts.
The amendments revise provisions under FX Directive No. FXD/01/2024, introduced after Ethiopia moved toward a market-based foreign exchange regime in July 2024.
Under the new measures, banks are authorized to approve letters of credit on acceptance for foreign currency account holders without seeking clearance from the central bank. Similar authority was extended to cash-against-documents arrangements, a trade financing mechanism commonly used in import transactions.
The NBE also said institutions with foreign currency accounts, including retention account holders, would be permitted to initiate shipments under cash-against-documents arrangements without prior bank approval, provided payment documents are later submitted and verified.
The central bank framed the reforms as part of efforts to remove administrative bottlenecks in foreign exchange management and improve the ease of doing business.
“The NBE has continued to advance reforms aimed at establishing a well-functioning foreign exchange system that aligns with international best practices,” the notice said.
Alongside the directive changes, the central bank ordered commercial banks to revise the way they calculate fees and charges on letter-of-credit transactions, saying current pricing structures remain inconsistent with global norms.
Under the new rules, fees on letters of credit for foreign currency account holders must be calculated on an annualized basis and applied proportionally according to the tenor of the transaction. The annualized rate may not exceed limits previously set by the central bank.
The NBE said the changes are intended to make trade finance charges more competitive, lower transaction costs for importers and exporters, and strengthen confidence in Ethiopia’s ongoing foreign exchange reforms.
Ethiopia has been implementing sweeping economic reforms since last year, including liberalizing its foreign exchange regime, as part of a broader macroeconomic restructuring program backed by international financial institutions.
The central bank said it would continue monitoring developments in the foreign exchange market and introduce additional measures when necessary to support stability and efficiency.
