A dozen banks see forex licenses suspended for under-invoicing
The National Bank of Ethiopia (NBE) has introduced a new system to monitor commercial banks on a daily basis as part of a broader set of financial reforms the country is undertaking, which includes the adoption of a free-floating exchange rate system.
The development was announced during a panel discussion organized at the Inter Luxury Hotel on August 16, 2024, under the theme ‘The Impact of Major Revisions to a Country’s Foreign Exchange System on the National Economy.’
The Addis Ababa Chamber of Commerce and Sectoral Association brought together prominent participants, including Abebayew Durefa, deputy head of the NBE Forex Monitoring and Reserve Management Directorate, and Getachew Teklemariam, coordinator for the African Financial Integrity and Accountability Program (AFIAP), to discuss the recent shift in the country’s financial system.
Abebayew described the decision to transition from a managed floating system to a free-floating system following an agreement with the IMF as a “bold decision” and a “major” milestone for the country. He noted that while many nations have attempted similar reforms, they often faced setbacks before eventually reaping the rewards.
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Government officials hope to see the free-floating system stabilize the market by automatically balancing supply and demand, while allowing the NBE greater autonomy in monetary policy by eliminating the need to actively determine the exchange rate.
Abebayew contends that the financial reform currently being implemented in Ethiopia is progressing as intended.
“With thorough preparation and integration, everything is on track so far,” he said, highlighting that many share this positive outlook. “This change is designed to let market forces determine the value of the Ethiopian birr, with the goal of reducing external imbalances and enhancing the economy’s competitiveness.”
He disclosed the implementation of a daily bank monitoring system comes at a critical time for Ethiopia’s economy. He hopes to see the system assist the NBE by providing real-time data on the financial health and activities of banks.
“Following the financial reform, a system has been developed that enables the NBE to monitor each bank’s daily financial transactions,” he said. “This new system allows us to track every foreign currency transaction they make, including the amounts bought and sold, in real time.”
Abebayew added the importance of timely intervention in maintaining financial stability and ensuring the effective implementation of the new exchange rate system. He confirmed that the monitoring system is already in place.
Following the decision to implement a daily bank monitoring system, Abebayew disclosed that his office has taken disciplinary action against 12 banks for engaging in under-invoicing practices.
“We have suspended the foreign exchange licenses of these twelve banks because they were using under-invoiced customs exchange rates,” he said.
Getachew explained that the NBE closely tracks the foreign currency supplied by banks to the market, monitoring the banks’ liabilities, credit, disbursed amounts, and remaining balances.
“They conduct their monitoring using real-time information provided directly by the banks,” he told The Reporter.
