Flotation bolstering export, increasing remittances
ADDIS ABABA – The National Bank of Ethiopia (NBE) has called on Diaspora communities to harness opportunities created by macroeconomic reform measures.
The NBE Governor Mamo Mihretu discussed with stakeholders on recent macroeconomic reforms and financial restructuring initiatives to modernize banking sector at the Ethiopian Embassy in Washington.
Speaking at the occasion, Governor Mamo urged members of Diasporas to exploit macroeconomic reform opportunities to benefit themselves and their original homeland. He elaborated the economic reform measures and created new opportunities for participants. The measures have been taken to mitigate inflationary pressures and currency depreciation.
The implementation market based foreign currency flotation has been bolstering export and increasing remittances. “The NBE’s ultimate goal is to instill trust in our banking institutions by building the right incentive mechanism for a healthy financial architecture, one that centers economic development and growth.”
According to the Governor, in a bid to enhance transparency and competitiveness, the NBE recently implemented a 2% cap on bank fees for foreign exchange transactions. Furthermore, to diversify the market, it has licensed five new Independent Foreign Exchange Bureaus, including Dugda Fidelity Investment PLC and Global Independent Foreign Exchange Bureau.
While the Ethiopian banking sector shows signs of recovery, with restructured debt and improved capital adequacy, loan portfolios remain constrained, primarily serving a limited clientele.
Ethiopia is also considering the entry of foreign retail banks into its previously closed market, a move that could disrupt the landscape for domestic banks that have historically faced little competition due to stringent regulations. “The layers of strict regulation meant there was little incentive to innovate for banks,” he added.
The recent reforms aim to reduce bureaucratic obstacles and enhance the overall banking environment, though many local banks may struggle to compete against foreign entrants without adequate capitalization.
Legislation is on the horizon to encourage bank mergers, aiming to centralize capital and strengthen the sector in anticipation of increased competition. Pooling resources will be a matter of survival even for the biggest of the current institutions, he noted.
BY TSEGAYE TILAHUN
THE ETHIOPIAN HERALD THURSDAY 24 OCTOBER 2024
