On 8 September, the National Bank of Ethiopia’s directive on offshore account opening and operations for strategic foreign direct investment projects, went into force.
It will allow investors in certain strategic projects, such as power plants and major infrastructure projects, to open offshore accounts. Large mining ventures and big investment initiatives including public-private partnerships, can also hold bank accounts outside the country, according to the bank’s directive. The directive stated that companies can use the accounts for foreign-currency payments for loans, insurance, contractors, warranty claims, maintenance and operation expenses. Recall that previously, only oil and gas companies were authorized to have such accounts. (Bloomberg)
The central bank is hoping to improve investments into the country. Foreign companies, that have often struggled to source foreign currency for their operations, will now be able to utilize these offshore accounts. This should boost foreign currency liquidity in Ethiopia and allow key investments to ramp up. Key to the directive is that the eligibility of the strategic FDI projects will be assessed by the bank’s executive management. The criteria will include the size of the project, employment opportunities, import substitution, foreign exchange inflows, technology transfer, and sector-specific impact.
