Ethiopia-UAE to Trade in Domestic Currencies

In a move aimed at bolstering economic ties and facilitating smooth trade, the Central Bank of the UAE (CBUAE) and the National Bank of Ethiopia (NBE) have signed a bilateral currency swap agreement. This agreement allows for the exchange of up to AED 5 billion (approximately 46 billion Ethiopian Birr), facilitating easier cross-border transactions between the two nations.

Accompanying this agreement are two Memorandums of Understandings (MoUs). The first MoU focuses on promoting the use of UAE Dirham and Ethiopian Birr in settling bilateral transactions, thereby enhancing financial cooperation and knowledge-sharing to strengthen both countries’ financial markets. The second MoU aims to integrate payment platforms and electronic systems, such as UAE’s VAESWITCH and Ethiopia’s ETHSWITCH, to streamline payment processes and adhere to regulatory standards.

Governor Balama of CBUAE emphasized that these agreements underscore robust economic cooperation between the UAE and Ethiopia, aiming to boost trade and investment opportunities through currency swaps and improved payment systems. He highlighted the potential for expanded business collaborations in financial and banking sectors.

Governor Mamo of NBE highlighted the UAE’s role as one of Ethiopia’s leading trading partners and source of foreign investment. He noted the currency swap’s importance in diversifying Ethiopia’s currency reserves, which will support the increasing volume of trade and investment transactions anticipated in the future. Both central bankers reaffirmed their commitment to strengthening bilateral partnerships for sustainable development and mutual prosperity.

The signed agreements mark a significant step towards enhancing economic cooperation between the UAE and Ethiopia, paving the way for improved financial stability and expanded bilateral trade and investment opportunities in the foreseeable future.

Ethiopia, which is seeking to rebalance its trade deficit needs ways to mitigate its shortfall in available hard currency needed to import essential goods and bolster its ambitious economic growth plans. The country is currently in drawn-out negotiations with the IMF to facilitates a financial package for reconstruction and economic restructuring. In the meantime, moves to trade in local currency is providing a key lifeline for its growing economy.