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Gov’t on brink of IMF agreement, sources disclose

National Bank Governor Mamo Mihretu has offered a rare pledge for ‘preferential treatment’ to Saudi Arabian nationals eyeing investments in Ethiopia.

The Governor made the pledge during a speech to a delegation of 79 Saudi investors and Chamber of Commerce representatives at the Addis Ababa Science and Technology Museum on June 5, 2024.

“The issue of currency convertibility and repatriation of income, profit, capital and investment proceeds is always on the minds of foreign investors planning to come to Ethiopia. We are acutely aware that currency convertibility is an issue,” said Mamo.

The Governor pitched the option of off-shore accounts to the investors, which would allow them to deposit forex into their own accounts for use in projects and investments in Ethiopia.

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“But if Saudi investors engage in strategic investment areas in Ethiopia, we will provide special preferential treatment. We will provide currency convertibility guarantees for such Saudi investors. The NBE and Ministry of Finance will work together to provide the guarantee. We value our relationship with Saudi,” said Mamo.

He reassured investors that Ethiopia’s forex woes would be resolved “very soon.”

“The foreign currency shortage should not be an issue to delay your investments in Ethiopia. We are reforming our forex regime. Very soon you will witness fundamental changes in Ethiopia’s economy in a way that is convenient for the private sector,” Mamo said.

However, the Governor did not detail what kind of reform is in the pipeline for the forex regime.

According to The Reporter’s sources, the Ethiopian government has reached a consensus with the IMF to devalue the birr on a scale that would bridge the gap between the official and parallel market exchange rates. However, the sources claim implementation is facing delays due to considerations of the adverse impacts a devaluation of that scale would entail, particularly on the liabilities of the state-owned Commercial Bank of Ethiopia (CBE).

Though investment legislation permits repatriation in foreign currency for investors, forex scarcities mean that foreign investors often face waits of more than a year to repatriate capital gains. Several foreign investors have previously requested the government to provide guarantees for repatriation, but the privilege has rarely been extended.

Mamo also stated that the cabinet is expected to approve draft legislation that would permit foreigners to invest in the Ethiopian financial sector.

“Saudi banks can come to Ethiopia, and support Saudi businesses in Ethiopia,” the governor said, characterizing the Ethiopian economy as the largest “by far” in Sub-Saharan Africa.

There are already around 200 Saudi investors operating in Ethiopia, according to Fitsum Assefa (PhD), minister of Planning and Development, who also addressed the delegation at the Science Museum.

Most of the attendees are interested in investing in agricultural projects in Ethiopia, as well as in the textile and garment industries.

“We are considering supplying steel to Ethiopia. Gradually we plan to open a steel factory in Ethiopia. We have done feasibility studies in Ethiopia for the last two years. The steel demand in Ethiopia is huge. With 120 million people, Ethiopia has a huge market,” said Yasin Malabas, one of the delegates who manages a steel factory in Saudi.

“Ethiopia is very attractive for business. We are considering the mining, tourism, agriculture, oil and human resource areas for investment. We are also planning to increase the flight frequency between Ethiopian and Saudi cities. I hope soon Saudi investors will invest in oil in Ethiopia,” said a representative of the Saudi Chamber.

Hanna Arayaselassie, recently appointed head of the Ethiopian Investment Commission, also briefed the investors before a tour of the Adwa Museum and the Chaka Project.

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