The National Bank of Ethiopia recently issued a directive allowing Ethiopian residents and non-residents to open and operate foreign currency accounts in the country. The directive is one of many reforms in the country’s financial sector aimed at liberalizing the sector.

The move is expected to increase the flow of foreign currency into Ethiopia through formal channels, encourage saving and investments by Ethiopians abroad, boost the country’s foreign exchange reserves, and ease Ethiopia’s balance of payment problem.

Residents of Ethiopia, Ethiopian non residents, and non-residents of Ethiopian origin will now be able to open and operate foreign currency accounts in the country using the US dollar, Sterling pound or the Euro. Banks may accept deposits in other internationally accepted currencies such as Canadian dollar, Japanese Yen, Chinese Yuan, Saudi Riyal and Australian dollar and convert the money into either of the three listed currencies.

More than 5 million Ethiopians who live abroad will now be able to save and invest in their native land and thereby boost Ethiopia’s pool of foreign currency reserves.

Ethiopia has made several changes to improve its financial sector. In September, Ethiopia’s central bank issued new bank notes in an effort to minimize the flow of illicit funds within their financial system. The country is also working on permitting foreign banks to operate in its nascent banking industry.

According to the National Bank of Ethiopia, holders of the foreign currency accounts will only be permitted to withdraw the money in Ethiopian local currency, the birr, except in special outlined cases.