Ethiopia has relaxed the country's foreign exchange directive, lifting several restrictions on access to and use of foreign exchange, through new measures that aim to further enhance the East African country's foreign exchange market after years of a strictly controlled environment.

The new measures include permits for service exporters to hold 100-percent of their export proceeds in foreign exchange retention accounts for indefinite periods. The new directive has also allowed outbound investment by Ethiopians, subject to case-by-case approval. Authorized banks were also granted permission to issue internationally recognized cards for all forex account holders that will be used by the customers to make outbound retail payments, including e-commerce.

The Ethiopian government has been implementing various targeted measures aimed at easing the country's long-standing foreign exchange shortage.

Ethiopia Overhauls Banking Sector, Foreign Currency Market

On 12 February 2026, the National Bank of Ethiopia (NBE) issued Directive No. FXD/04/2026, amending the foundational Foreign Exchange Directive No. FXD/01/2024. The directive was issued under Article 6(2), Article 6(17), and Article 39 of the National Bank of Ethiopia Establishment (Amended) Proclamation No. 1359/2025. It enters into force immediately.

This article provides a comprehensive analysis of the amendments and their practical implications for foreign investors, exporters, banks, and businesses operating in Ethiopia.

Key Amendments

1. Forward Exchange Transactions Now Permitted (Amendment 3.1)

What changed: Sub-article 4.1.4 of FXD/01/2024 is amended to allow banks to apply a forward exchange rate alongside the existing spot transaction exchange rate. Transacting parties are free to choose which rate type to use.

Practical impact: This is a critical development for businesses engaged in international trade. Forward contracts enable effective hedging against exchange rate volatility — a key concern since the shift to a market-based exchange rate in July 2024. Importers and exporters can now lock in future rates, giving them far greater certainty in financial planning and pricing.

2. 100% Export Proceeds Retention — Indefinitely (Amendment 3.2)

What changed: Sub-article 6.2 of FXD/01/2024 is amended so that any service exporter is entitled to hold 100 percent of their export proceeds in a foreign exchange retention account for an indefinite period.

Definition: The directive defines "service exports" broadly to include foreign exchange inflows from tourism, transportation, engineering, business services, financial services, telecommunications, employment services, construction, consulting, royalties, and any other related services generating foreign exchange (Article 2.2).

Practical impact: Exporters gain full control over their foreign currency earnings with no time pressure to convert or surrender. This substantially reduces exchange rate risk and improves cash flow management for internationally-oriented businesses.

3. International Payment Cards for All FX Account Holders (Amendment 3.3)

What changed: Sub-article 12.3.3(A) of FXD/01/2024 is amended to allow banks to issue internationally recognized cards for all account holders and load foreign currency per the account holder's instruction, without visa and ticket requirements.

Practical impact: Ethiopian businesses and individuals with foreign exchange accounts can now obtain international payment cards enabling e-commerce and overseas retail transactions — a long-awaited development for the country's growing digital economy.

4. Simplified FX Account Opening for FDI Companies (Amendment 3.4)

What changed: Sub-article 13.5.1 of FXD/01/2024 is amended so that foreign companies (FDI) can open a foreign currency account by presenting only an application letter, Foreign Investment License, and TIN Certificate at their chosen bank — without requiring NBE's approval letter.

Practical impact: This removes a significant bureaucratic bottleneck that frequently delayed the operational setup of foreign-invested entities. FDI companies can now open forex accounts directly at any authorized bank, accelerating their ability to commence operations.

5. Corporate Foreign Exchange Accounts Expanded (Amendment 3.5)

What changed: Sub-article 14.1 of FXD/01/2024 is amended to allow banks to open FX accounts for profit-making institutions in the form of current, savings, and time deposit accounts, provided the account holders receive foreign currency from abroad through grants, gifts, or other eligible sources (excluding export proceeds).

Practical impact: Previously restricted to specific categories, foreign exchange account access is now available to a much broader range of Ethiopian businesses, encouraging greater formalization of foreign currency holdings within the banking system.

6. Minimum FX Account Opening Requirement Removed (Amendment 3.6)

What changed: Sub-article 14.2.1(4) of FXD/01/2024 is removed — the minimum amount of foreign currency previously required for FX account opening is eliminated entirely.

Practical impact: The previous USD 100 minimum is gone. This lowers barriers to entry for individuals and smaller businesses wanting to maintain foreign currency accounts.

7. Customs Declaration Requirement Removed for Deposits (Amendment 3.7)

What changed: Sub-article 14.5.1(5) of FXD/01/2024 is amended to remove the requirement for cash notes declaration when an authorized dealer accepts, purchases, or deposits amounts exceeding USD 10,000 or equivalent.

Practical impact: This removes a significant administrative burden that previously discouraged diaspora visitors and returning residents from bringing foreign currency into the formal banking system.

8. FX Accounts Can Now Fund Family Expenses Abroad (Amendments 3.8 & 3.9)

What changed: Sub-articles 14.6.1(2) and 15.3.1 of FXD/01/2024 are amended to allow FX account holders to use funds for themselves, their spouse, and children for foreign service payments abroad, upon presentation of valid relationship documents and underlying invoices.

Practical impact: Families can now directly fund overseas education, healthcare, and other service costs from their foreign currency accounts without separate approval processes.

9. Banks Can Approve Profit/Dividend Repatriation (Amendment 3.10)

What changed: Sub-article 16.3.1 of FXD/01/2024 is amended so that banks are authorized to approve investor profits or dividends from recognized and registered foreign investments for remittance abroad. The customer must provide an undertaking that the amount does not exceed total profit and dividends earned. Banks must report such transactions to NBE monthly.

Practical impact: This is excellent news for foreign investors — profit repatriation approval is now handled at the bank level rather than requiring NBE involvement, significantly reducing processing times for dividend transfers.

10. External Loans and Suppliers' Credit — Bank-Level Approval (Amendment 3.11)

What changed: External loans (in cash and in kind) and suppliers' credit requests, including both approval and repayment, are now handled by banks without requiring NBE's approval, subject to adherence to Articles 17 and 18 of FXD/01/2024. Companies must sign an undertaking regarding debt-equity ratio compliance. Banks report monthly to NBE.

Practical impact: Faster processing of external financing arrangements. Companies seeking foreign-sourced credit facilities no longer face the delay of central bank approval for each transaction.

11. Private Foreign Exchange Loan Guarantees (Amendment 3.12)

What changed: Sub-article 18.5 of FXD/01/2024 is amended to allow banks to offer private foreign exchange loan guarantees up to 10% of the bank's total capital. Such guarantees are treated as loans and subject to the single borrower limit directive.

12. Customs Declaration Removed for Border Entry (Amendment 3.13)

What changed: Sub-articles 22.7 and 22.8 of FXD/01/2024 are amended to remove the customs declaration requirement for foreign currency exceeding USD 10,000 needed for FX exchange at forex bureaus, depositing to FX accounts, and border entry.

13. Advance Export Payment Rules Relaxed (Amendment 3.14)

What changed: Annex 1, sub-article 1.3.3 of FXD/01/2024 is amended in two key ways:

(a) Exporters can now receive foreign currency from any party abroad as advance payment, provided there is an agreement specifying the sender is paying on behalf of the buyer.

(b) Foreign currency receipts qualify as advance payments if marked as "Advance payment for future export/import" or if they state the commodity type, invoice number, or contract number — though the latter requires NBE approval.

14. Medical and Education Advance Payments up to USD 20,000 (Amendment 3.15)

What changed: Annex 3, articles 9 and 10 of FXD/01/2024 are amended to allow banks to approve service payments up to USD 20,000 per case for medical and education services as advance payments, without visa and ticket requirements. Only the foreign entity's proof of letter/payment request and customer application are needed.

15. Forex Bureaus Can Sell FX for Local Fees (Amendment 3.16)

What changed: Annex 4, article 6 of FXD/01/2024 is amended to allow forex bureaus (including independent ones) to provide foreign currency cash notes for visa fees, immigration fees, and license fees locally, upon presentation of payment evidence.

16. Security Deposit Release for Independent Forex Bureaus (Amendment 3.17)

What changed: Annex 5, sub-article 2.3 is amended: The NBE security deposit of Birr 30 million shall be fully released to IFBs after one year of operation. Those operational for at least six months receive release of Birr 15 million (half).

17. Increased Cash Holding Limit for IFBs (Amendment 3.18)

What changed: Sub-article 22.1.4 is amended to raise the FX cash holding limit of Independent Forex Bureaus from 10% to 25% of their paid-up capital at month-end. Excess must be sold to banks within five working days.

18. Import Application Validity Extended (Amendment 3.19)

What changed: Annex 2, sub-article 1.15 is amended: Import applications are now valid for 120 calendar days from date of issue, with banks authorized to extend validity for good cause.

19. Outward Investment Permitted (Article 4)

What changed: Outward investment by Ethiopian entities is now allowed on a case-by-case basis upon NBE approval.

Practical impact: While requiring individual approval, this represents a fundamental policy shift. Ethiopian businesses can now invest abroad for the first time — opening possibilities for international expansion, portfolio diversification, and cross-border partnerships.

20. Individual Outward Remittances (Article 5)

What changed: Resident Ethiopians may transfer up to USD 3,000 (or equivalent) abroad for subsistence family support, upon application with justification.

Strategic Significance

Directive FXD/04/2026 represents a continuation and acceleration of Ethiopia's macroeconomic reform program launched in July 2024. The reforms signal the government's commitment to three key objectives:

Deepening financial sector liberalization: By expanding permissible foreign currency transactions, introducing forward contracts, and delegating approvals to commercial banks, the NBE is creating an environment more conducive to international business.

Encouraging formal foreign currency flows: Removing minimum deposit requirements, eliminating customs declaration burdens, and expanding account access are designed to channel foreign currency into the formal banking system — directly supporting the market-based exchange rate regime.

Positioning Ethiopia for further capital account opening: The introduction of outbound investment and forward exchange capabilities brings Ethiopia closer to practices standard in more developed financial markets.

Businesses operating in Ethiopia should consider the following immediate steps:

• Review existing FX arrangements — Current account structures and foreign currency management practices should be reviewed against the new flexibilities. Opportunities may exist to optimize treasury operations.

• Engage banking partners early — Banks will need time to operationalize these changes. Engage your relationship managers now to understand implementation timelines for forward contracts, international cards, and streamlined account opening.

• Exporters should assess retention strategies — With 100% indefinite retention now available, service exporters should reassess their foreign currency management approach.

• FDI companies should act on simplified procedures — If your foreign-invested entity has been waiting on NBE approval for an FX account, you can now proceed directly with your bank.

• Monitor for implementing guidance — Banks and the NBE may issue operational circulars providing additional detail on procedures and documentation requirements.