Tuesday, 16 March 2021 07:47

The National Bank of Ethiopia’s New Directive on Retention and Utilization of Foreign Currency Earnings from Export and Inward Remittance (09 March 2021)

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The National Bank of Ethiopia Issued a New Directive (Directive No. FXD/70/2021, New Directive) governing the retention and utilization of foreign currency earnings from export and inward remittance. Previously the area was regulated by the Directive No. FXD/66/2020 (Old Directive).

The basic changes introduced by the New Directive are highlighted below:

  1. Retention Account “A” and Retention Account “B” has been eliminated: under the Old Directive Exporters of Goods and Services and Recipient of Inward Remittance (Beneficiaries)  were allowed to credit 30% of their foreign currency in Account A and hold for an indefinite time. 70% of the earning will be credited to Account B for 28 days only. The earnings were allowed to be utilised by the beneficiary for the importation of raw materials or other permitted items relating to the export business. Under the New Directive these two kinds of accounts are eliminated and only one Forex Retention Account is permitted.

  2. Mandatory Surrender is established: under the New Directive all the beneficiaries are required to surrender 30% of the foreign currency earning to the commercial banks. Previously there was no surrender requirements applicable to the Beneficiaries.

  3. The Amount of Proceeds to be Retained is reduced: the Beneficiaries are further required to sale 55% of the foreign currency earning to the bank immediately on the day of receipt at the prevailing buying exchange rate. The Beneficiaries can deposit 45% of the proceeds in retention account for an indefinite time. Note that this 45% shall be calculated once the 30% surrender is made on the total earnings.

  4. The requirements for utilization of the foreign currency has been changed: under the Old Directive the foreign exchange under retention accounts can only be used to finance direct business relating to the export and some other permitted payments. Under the New Directive the Beneficiaries are allowed to use the foreign exchange for the importation of goods and services without restriction as long as it has a business license to import these goods and services.

  5. A New Penalty is imposed on Banks: any bank that violates any provision of the directive is liable to pay 5,000 USD for each violation.

Disclaimer: This information is intended as a general overview and discussion of the subjects dealt with.  The information provided here was accurate as of the day it was posted; however, the law may have changed since that date.  This information is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation.  Mehrteab Leul & Associates is not responsible for any actions taken or not taken on the basis of this information.  Please refer to the full terms and conditions on our website. 

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Read 338 times Last modified on Saturday, 20 March 2021 08:08
Getu Shiferaw

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