By DMR Law Firm
The National Bank of Ethiopia (NBE) has issued Directive No. FXD/04/2026, effective February 12, 2026, introducing sweeping reforms to the country’s foreign exchange (FX) regime. These amendments represent one of the most significant liberalization efforts in recent years and create substantial opportunities for businesses, investors, exporters, financial institutions, and individuals engaged in international transactions.
For clients of law firms—particularly those involved in foreign investment, international trade, financial services, and corporate structuring—this directive introduces critical legal and operational advantages while shifting certain compliance responsibilities to banks and account holders.
1. Major Liberalization: Banks Gain Expanded Approval Authority
One of the most important developments is the decentralization of approval authority from the NBE to commercial banks. Banks are now authorized to approve several transactions without prior NBE consent, including:
• Opening foreign currency accounts for foreign investors upon submission of basic documentation such as investment licenses and tax identification numbers.
• Approval of profit and dividend repatriation by foreign investors, subject to reporting requirements.
• Approval of external loans, supplier credits, and loan repayments, provided regulatory ratios are maintained.
Legal significance:
This change significantly reduces regulatory delays, enhances predictability, and improves Ethiopia’s attractiveness as a foreign investment destination. Law firms advising foreign investors can now structure transactions more efficiently with reduced bureaucratic intervention.
2. Full Retention of Export Earnings: Major Benefit for Service Exporters
Service exporters—including businesses in tourism, engineering, consulting, construction, telecom, and financial services—are now entitled to retain 100% of their foreign currency earnings indefinitely in FX accounts.
Client benefits:
• Improved liquidity management
• Greater flexibility in funding international operations
• Enhanced protection against currency depreciation
This reform is especially beneficial for Ethiopian companies earning foreign currency and multinational firms operating service centers in Ethiopia.
3. Introduction of Forward Exchange Contracts
Banks are now authorized to offer forward exchange rate agreements in addition to spot FX transactions.
Why this matters legally and commercially:
Forward contracts allow businesses to lock in exchange rates for future transactions, reducing foreign exchange risk exposure. This development enables more sophisticated financial planning and risk mitigation strategies—particularly important for:
• Importers and exporters
• Multinational corporations
• Infrastructure and long-term project developers
Law firms advising corporate clients can now incorporate FX hedging mechanisms into contractual structures.
4. Simplified FX Account Opening and Removal of Restrictions
The directive removes several longstanding barriers:
• No minimum foreign currency requirement for opening FX accounts.
• Profit-making institutions can open FX accounts if they receive foreign currency from legitimate sources such as grants or transfers.
• Foreign companies can open FX accounts without prior NBE approval.
Legal impact:
These changes broaden access to foreign currency banking services, enabling more businesses—including startups, NGOs, and investors—to participate in international commerce.
5. Simplified Profit Repatriation and Investment Flows
Foreign investors can now repatriate profits and dividends more efficiently through commercial banks.
Additionally, Ethiopian entities may now pursue outward investment on a case-by-case basis with NBE approval.
Why this benefits clients:
• Increases investor confidence in exit rights
• Reduces capital control risk
• Facilitates cross-border expansion by Ethiopian companies
This is a critical improvement for international investment structuring.
6. Removal of Currency Declaration and Transaction Restrictions
Several compliance burdens have been eased:
• Removal of declaration requirements for depositing amounts exceeding USD 10,000.
• Removal of declaration requirements for foreign currency exchange and deposits.
• Ability to make advance payments for medical and education services up to USD 20,000 without visa requirements.
Practical legal benefit:
Reduced documentation requirements improve transaction efficiency and lower compliance friction for businesses and individuals.
7. Expanded Personal and Corporate FX Usage Rights
Account holders may now use FX funds for foreign service payments for themselves, spouses, and children upon documentation.
Additionally, residents may remit up to USD 3,000 abroad for family support.
This enhances flexibility for both individuals and business owners managing international obligations.
8. Increased Role and Benefits for Forex Bureaus
Independent Forex Bureaus now benefit from:
• Partial or full release of previously required security deposits after operational periods.
• Authorization to provide FX for visa, immigration, and licensing fees locally.
This will improve access to foreign currency and expand Ethiopia’s FX market infrastructure.
Legal and Strategic Implications for Law Firm Clients
Overall, Directive FXD/04/2026 represents a shift toward a more liberal, market-oriented foreign exchange regime. Clients should consider the following strategic opportunities:
Key advantages:
• Faster foreign investment structuring and profit repatriation
• Improved ability to hedge currency risk
• Increased foreign currency liquidity and retention flexibility
• Reduced regulatory delays and administrative burdens
• Expanded opportunities for outbound investment
Legal advisory considerations:
• Ensure compliance with bank reporting and documentation requirements
• Structure FX accounts and investments strategically under the new rules
• Incorporate forward exchange protections into commercial contracts
• Review existing investment structures for optimization under the new directive
Conclusion
Directive FXD/04/2026 marks a major milestone in Ethiopia’s financial liberalization. By empowering banks, expanding FX account access, enabling forward exchange contracts, and facilitating foreign investment and repatriation, the directive creates a more predictable and business-friendly foreign exchange environment.
For clients of law firms—particularly foreign investors, exporters, financial institutions, and multinational corporations—these reforms significantly improve operational flexibility, legal certainty, and investment security.
Early legal review and strategic restructuring under the new framework will allow clients to fully benefit from these reforms while maintaining regulatory compliance.
For any inquiries, you may contact us at info@dmethiolawyers.com
By DMR Law Firm
On 9 September 2024, Ethiopia enacted Proclamation No. 1333/2024 – the Federal Public Procurement and Property Administration Proclamation, published in the Federal Negarit Gazette No. 66. The new law repeals and replaces the former Proclamation No. 649/2009, introducing significant reforms aimed at addressing long-standing gaps in public procurement and property administration .
Key Objectives of the New Proclamation
The Proclamation was adopted to:
• Address substantive and implementation weaknesses identified under the previous legal framework;
• Enhance transparency, accessibility, and accountability in public procurement and property administration; and
• Clearly define administrative responsibility and consequences arising from violations of procurement and property management rules .
Expanded Scope of Application
One of the most notable changes is the expanded scope of application. The Proclamation now expressly applies not only to federal government organs and institutions, but also to federal government-owned public enterprises. This extension brings state-owned enterprises fully within the public procurement compliance regime, significantly increasing regulatory oversight of their purchasing and property disposal activities .
Clarified Procurement Framework
The Proclamation provides detailed definitions and rules governing:
• Procurement of goods, works, consultancy services, and non-consultancy services;
• Strategic and centralized procurement mechanisms;
• Framework agreements and turnkey procurement; and
• Contract administration and life-cycle cost analysis.
These provisions aim to standardize procurement practices across federal entities and improve value for money in the use of public funds .
Strengthened Oversight, Accountability, and Remedies
The law reinforces oversight by re-establishing the Federal Public Procurement and Property Authority and a specialized Procurement Appeals Board. It introduces clearer procedures for complaints and appeals by bidders and candidates, as well as administrative measures against suppliers or bidders that violate procurement rules or prejudice public interest .
Practical Implications for Clients
For contractors, suppliers, consultants, and public enterprises, the new Proclamation means:
• Stricter compliance requirements and closer scrutiny of procurement conduct;
• Greater reliance on standardized bidding documents and electronic procurement systems;
• Expanded opportunities to challenge unlawful procurement decisions through structured complaint and appeal mechanisms; and
• Increased exposure to administrative sanctions for non-compliance.
Conclusion
Proclamation No. 1333/2024 represents a major step in modernizing Ethiopia’s public procurement and property administration regime. Businesses engaging with federal institutions and government-owned enterprises should review their procurement strategies and compliance frameworks to align with the new legal requirements.
Our firm continues to monitor developments and implementing directives under this Proclamation and is available to advise clients on compliance, bidding strategies, and dispute resolution arising from public procurement processes.
