AmendmentTrade

The Retention and Utilization of Export Earnings and Inward Remittances (Directive No. 67/2020)

National Bank Of Ethiopia67/2020

Summary

This directive amends previous regulations on the retention and utilization of export earnings and inward remittances, establishing new rules for foreign exchange retention accounts for eligible exporters and remittance recipients.

Who's affected

Eligible exporters of goods and services and recipients of inward remittances in Ethiopia.

Action required

Eligible exporters and remittance recipients should familiarize themselves with the new rules for opening, managing, and utilizing foreign exchange retention accounts as outlined in this directive.

Key points

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  • Amends Directives No. FXD /48 /2017 regarding export earnings and inward remittances.
  • Introduces 'Foreign Exchange Retention Account A' (30% indefinitely) and 'Foreign Exchange Retention Account B' (70% for 28 days).
  • Specifies eligible customers and authorized uses for funds in both accounts.
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    • Details specific goods and services that can be imported using funds from Account A.
    • Mandates monthly reporting by authorized banks to NBE.
    • Repeals Directives No. FXD /48/2017.

Requirements

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  • Banks are authorized to open foreign exchange retention accounts for eligible customers.
  • Foreign exchange retention accounts (Account A and Account B) can only be credited from export of goods and services and incoming transfers for inward remittance recipients.
  • Exporters and remittance recipients have the right to retain 30% in Account A indefinitely and 70% in Account B for up to 28 days.
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    • Funds in Account A and B can be used for specific business-related and current payments, including imports (with exceptions), loan settlements, and certain services.
    • Account A funds can be utilized for specific imports such as pharmaceuticals, agricultural inputs, chemicals, manufacturing inputs, motor oil, baby food, edible oil, wheat, sugar, construction machinery spare parts, and educational materials.
    • Authorized banks must send aggregate balances of foreign exchange held under retention accounts A and B to the NBE on a monthly basis.
    • Authorized banks must identify the foreign currency retention account number and type on permits and tickets when funds are utilized.

Rights and permissions

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  • Eligible customers have the right to retain 30% of their foreign exchange earnings in Account A for an indefinite period.
  • Eligible customers have the right to retain 70% of their foreign exchange earnings in Account B for up to 28 days.
  • Eligible customers are free to sell all or part of their account balances to a bank at a freely negotiating rate not exceeding the selling exchange rate of the day.
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    • Exporters of goods and services are entitled to utilize the balance in retention account A for specific import categories.
    • Recipients of inward remittances may use their foreign exchange retention account 'B' for only 28 days.

Restrictions

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  • Account B balances must be converted to local currency by the customer's bank after 28 days if not utilized.
  • The use of Account A and B funds is restricted to specific direct business-related and current payments.
  • Vehicles are excluded from import using retention account funds, except for specific spare parts mentioned.
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    • Balances in Account A can only be utilized for specific listed imports and payments.
    • Funds in retention accounts can only be credited when the recipient has given written authority.
    • Funds can be credited to retention accounts for merchants/entities licensed by NBE to collect card payments for goods and services they sell.

Penalties

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  • Any person who fails to comply with the provisions of this directive shall be punished in accordance with Article 26 of the National Bank of Ethiopia Establishment (as Amended) Proclamation No. 591/2008.

Objectives

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  • To incentivize eligible exporters of goods and services.
  • To provide a framework for the retention and utilization of foreign exchange earnings.
  • To allow for the opening and management of specific foreign exchange retention accounts (Account A and Account B).

Organizations

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  • National Bank of Ethiopia (NBE)

Legal references

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  • Article 27 (2) of the National Bank of Ethiopia establishment as amended Proclamation No. 591/2008
  • National Bank of Ethiopia Establishment (as Amended) Proclamation No. 591/2008, Article 26
Original sourcehttps://justice.gov.et/en/directives/the-retention-and-utilization-of-export-earnings-and-inward-remittances-directives-no-67-2020/
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