The Council of Ministers in Ethiopia has approved two crucial draft proclamations as part of the National Bank of Ethiopia’s (NBE) economic reform agenda. Under the new Banking Business Proclamation, foreign banks can now invest in the Ethiopian banking sector by opening subsidiaries, branches, or investing in existing domestic banks. This move is set to enhance competition, improve service delivery, and stimulate economic growth in the country.
Additionally, the new regulations empower the NBE to enforce prompt corrective measures on troubled banks and handle failed banks, ensuring protection for customers and stability in the financial sector. The introduction of a regulatory sandbox framework will also foster innovation by incorporating new and advanced financial services into Ethiopia’s market.
“The approval of these legislations marks a significant milestone in strengthening the foundation of our economy and enhancing the transparency, accountability, and governance of the National Bank of Ethiopia,” noted the NBE in a statement.
Furthermore, the NBE’s proclamation establishes a Monetary Policy Committee and a National Financial Stability Committee to ensure effective monetary policies and maintain the stability of the financial sector. The proclamation also includes provisions for consumer protection and introduces the concept of Central Bank Digital Currency (CBDC), signaling Ethiopia’s commitment to modernize its financial infrastructure.
Over the past two years, Ethiopia has been gradually opening its core industries to foreign investment, including the telecommunications sector, which has seen companies like Safaricom establishing operations in the country. These reforms are aimed at creating job opportunities, stimulating economic growth, and enhancing competitiveness in Ethiopia, a nation with a population exceeding 129 million people.
The draft proclamations will now be referred to the House of Peoples Representatives for review, comment, and final ratification. This represents a critical step towards advancing Ethiopia’s economic reforms and paving the way for a more inclusive and robust financial sector.
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