Saturday, July 13, 2024

Macroeconomic committee changes forex rules


The macroeconomic committee that Prime Minister Abiy Ahmed (PhD) recently formed passed several new economic rules.
The committee’s major goal is to find ways to bring more hard currency into Ethiopia. According to the Fitsum Arega, Chief of Staff at the Prime Minister’s Office, the committee has improved the interest rate on the controversial 27 percent National Bank of Ethiopia (NBE) bill that private banks are required to purchase every time they disburse a loan.
Accordingly the interest rate that was 3 percent with a maturity of five years has now increased to 5 percent. The NBE bill imposed as of April 2011 that replaced the directive limiting banks’ ablities to provide loans, remained a  controversial directive between the government, financial firms and international financial institutions like the International Monetary Fund (IMF). In its yearly consultation known as Article IV IMF frequently insisted the government lift the NBE bill directive because they felt this would help the private sector obtain finance.
Local financial firms are also claiming  the interest rate did not take into consideration the inflation rate and the conventional minimum interest rate that the government set. When the directive becomes effective the minimum saving interest  will change the NBE bill maturity was 3 percent until this week.
On different occasions when the private sector met with government officials the issue has been one of the major points. Financial firms have also asked the government to lift the scheme and recently the private sector submitted a proposal asking the  government to cut the percentage by half. However Hailemariam refused and argued that it is not the agenda of the business community, and instead was being promoted by international organizations.
The government argued that the directive helped  reduce the money circulation, reduce inflation and gain finance for developmental projects that it provides via its policy bank, the Development Bank of Ethiopia.
Experts said that the current decision made by the macroeconomic committee incicates the government will continue.
In a meeting chaired by Prime Minister Abiy Ahmed (PhD), the Macroeconomic Committee raised the interest rate yield for  a “27% NBE bill” that requires private banks to purchase the National Bank of Ethiopia (NBE) bonds from the current 3% to 5%.
The Committee also removed the current Diaspora account limit of USD 50,000, according to Fitsum.
Diaspora account holders can now save an unlimited amount in foreign exchange, Fitsum said on Twitter.
NBE’s purchase of 30% of the foreign exchange earnings of the private banks will be at mid-rate instead of the current buying rate, he added. Since October 2017 NBE announced that private banks must  sell 30 percent of their hard currency at the amount they purchased it, which was also protested by banks.
As per the Committee’s decision the list of business that are eligible to accept payments in foreign currency has also been expanded to include airport telecom services, chartered private airlines, guest houses, specialized clinics & hospitals serving foreign clients, he indicated.
Previousely tour operators, hotels, the imigiration office, duty free shops and the postal service  were organizations allowed to accept foreign currency.

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