In a move to address its foreign exchange shortage, Ethiopia signed a significant currency swap agreement with the United Arab Emirates on Tuesday.
The deal, inked between the National Bank of Ethiopia (NBE) and the Central Bank of the UAE (CBUAE), allows for the exchange of Ethiopian Birr and Emirati Dirham, with a combined value of up to 3 billion dirhams (approximately $817 million) and 46 billion birr.
This agreement signifies a boost in economic cooperation between the two nations, particularly in trade and investment.
“The currency swap and the accompanying memorandums of understanding reflect the strong economic ties between the UAE and Ethiopia,” stated CBUAE Governor Khaled Mohamed Balama.
NBE Governor Mammo Mihretu emphasized the UAE’s critical role in Ethiopia’s economy, highlighting it as “a significant source of foreign investment and development finance.”
Beyond the currency swap, the partnership includes two memorandums of understanding.
These MoUs aim to promote the use of local currencies for cross-border transactions and facilitate the integration of payment systems and financial technology between the two countries.
Ethiopia’s decision comes amidst a documented foreign exchange shortage. With current reserves at a meagre $3.046 billion, the nation has been facing financial difficulties.
Talks with the International Monetary Fund (IMF) and the World Bank have stalled, further hindering efforts to restructure debt and secure additional funding for economic stabilization.
The IMF and World Bank have encouraged Ethiopia to enact economic reforms and improve fiscal management to overcome these challenges.
This currency swap deal with the UAE offers a potential path towards greater financial stability and could influence the ongoing negotiations with international financial institutions.
