National Bank of Ethiopia's Directive to Attract Foreign Investors in Multiple Sectors

The National Bank of Ethiopia (NBE) recently released a directive aimed at enticing strategic foreign investors to contribute to the country's important public services and increase foreign exchange inflows. The directive establishes favorable conditions and flexibility for selected cases, allowing offshore accounts to be opened, currency convertibility guarantees to be provided, and adjusted debt-to-equity ratios for strategic foreign investors.

Eligibility Criteria:
NBE's executive management has determined that eligible projects eligible for offshore accounts include power generation and infrastructure public-private partnership projects with significant capital requirements, large mining ventures with substantial export earnings potential, and other strategically important foreign direct investment (FDI) projects.

Offshore Accounts and Currency Convertibility:
For these FDI projects, offshore accounts allow for different types of payments, including external debt servicing, insurance, contractor payments, warranty claims in foreign currency, capital and investment expenses, as well as maintenance and operation expenses. It is important to note that the debt-to-equity ratio of foreign capital should not exceed 80:20. The currency convertibility guarantee solely applies to PPP energy and mining sectors, assuring loan repayment and dividend repatriation when all other means of acquiring foreign exchange have been exhausted.

Regulatory Framework for Offshore Accounts:
To ensure proper oversight of strategic FDI projects, the NBE has introduced regulations governing the opening and operation of offshore accounts. This regulatory framework is expected to encourage the development and implementation of PPP projects by shifting the currency convertibility risk to the government. Moreover, strategic infrastructure (PPP) projects and mining ventures will have the opportunity to establish and manage offshore accounts. The introduction of permits to own and operate offshore accounts is anticipated to attract more foreign investment to Ethiopia.

Summary:
To attract strategic foreign investors, the National Bank of Ethiopia has issued a directive that allows eligible projects to open offshore accounts and provides currency convertibility guarantees. The NBE also oversees and regulates offshore accounts for strategic FDI projects, aiming to boost foreign investment in Ethiopia.

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