1. General Background
Based on its homegrown economic reform, the Ethiopian government has continued liberalising its financial institutions, particularly banks and financial markets, which include Forex. In July 2024, the National Bank of Ethiopia (NBE) replaced its fixed-rate-based foreign exchange with a floating exchange rate. After a year, the Ethiopian parliament enacted a historical law, Banking Business Proclamation No. 1360/2025, which allowed foreign entities to establish bank subsidiaries, open bank branches, and acquire shares in domestic banks. Furthermore, this week, the NBE enacted a new directive, Foreign Exchange Directive No. FXD/04/2026, which is aimed at amending ‘The Foreign Exchange Directive No. FXD/01/2024’. The directive is effective as of 12/02/2026. This measure by the NBE signals a further shift toward a fully liberalised market-based exchange regime, specifically targeting service exporters, individual account holders, and financial institutions.
2. What are the major amendments in the directive?
2.1. The removal of the conversion requirement
Under the previous directive, service exporters are forced to convert their foreign currency earnings immediately at the bank’s rate without any freedom of negotiation. The new rules give relaxation for all service exporters by entitling them to hold 100% of their export earnings in a forex retention account for indefinite periods.
2.2. No requirement for NBE’s approval to open a foreign currency account
This makes it easier for foreign companies to open a forex account upon presentation of an application letter, an investment permit issued by the Ethiopian Investment Commission, a passport, and a TIN certificate at a chosen bank without a separate NBE approval letter. In addition, any service exporters, NGOs, embassies, and individuals are no longer required to provide NBE’s letter of approval to open their foreign currency account. Instead, they can directly approach any commercial bank to open a forex retention account.
2.3. Forex retention accounts are also allowed for profit-making institutions
Banks are allowed to open current, saving and time deposit foreign exchange accounts for profit-making institutions as long as the account holders receive foreign currency from abroad in the form of grants/gifts and other forex sources. Accordingly, they are also entitled to retain it for an indefinite period and are not forced to convert.
2.4. Removal of minimum deposit
The previous requirement to have an initial USD 100 deposit to open a foreign currency account has been scrapped. The amount required for account opening is left for banks to decide.
2.5. Forward foreign exchange contract framework
Previously, banks needed the NBE’s approval to engage in such contracts. Under the new forex directive, banks may apply a forward exchange rate in addition to the existing spot transaction exchange rate, and transacting parties may choose the type of exchange rate. For transacting parties, this is much needed in the volatile forex market.
2.6. No visa/ticket is required for card loading
Banks are allowed to issue internationally recognised cards for all account holders and load foreign currency as per the account holder’s instruction, without a visa/ticket requirement.
2.7. Removal of the USD 10,000 declaration limit
Under the previous forex directive, one needed a customs declaration form to deposit or exchange cash amounts exceeding USD 10,000 at authorised dealers. Nevertheless, the new forex directive has scrapped the requirement.
2.8. No NBE’s approval requirement for dividend and profit repatriation
Banks are authorised to approve investors’ profits or dividends from recognised and registered foreign investments to remit net profit/dividend abroad without NBE’s intervention. But banks are required to report such transactions to NBE every month.
2.9. Outward investment and outward individual remittances are allowed upon NBE’s approval
This is a new law evolution in the Ethiopian context and a remarkable step in encouraging Ethiopian investment abroad. Outward investment by Ethiopian entities is allowed on a case-by-case basis. Resident Ethiopians are entitled to transfer foreign currency from banks up to USD 3,000 (three thousand USD) or its equivalent in other convertible currencies abroad for subsistence family support upon application, justifying the case(s).
Conclusion: These new changes to Ethiopia’s foreign exchange rules show a clear effort to modernise and improve the foreign exchange market. The amendments in the directive point toward a more open and business-friendly foreign exchange system, while still keeping proper oversight in place