foreign exchange guarantee permit to specific sector of companies
Ethiopian government allows currency exchange guarantees For foreign companies engaged in joint ventures with government or private companies on projects identified as key or strategic,
The approved foreign currency exchange guarantee is to enable foreign companies investing in key projects to withdraw their profits from the implementation of the project in foreign currency from Ethiopia, as well as to pay off the loans they have taken from foreign financial institutions for the projects they implement in Ethiopia without difficulty. The decision was passed by the National Bank of Ethiopia.
Deputy Governor of the National Bank Ato Faqadu explained the purpose of this currency exchange guarantee is when foreign companies entering Ethiopia agree to invest in sectors that the government deems to be of strategic importance and want to take their profits, as well as those who have taken loans from foreign financial institutions for their projects in Ethiopia are unable to obtain foreign currency in the country when it is time to repay them, the government will provide foreign currency to them.
He explained that under the current system, foreign companies engaged in various sectors in Ethiopia can take their profits in foreign currency, but when the companies want to convert their profits from silver into foreign currency, they are treated like any other foreign currency borrower.
According to the recent decision of the National Bank Board, only those foreign companies operating in Ethiopia who have agreed to develop a framework of government-to-government partnership and public-private partnership are allowed to obtain foreign currency guarantees for key developments identified by the government and of national interest.
Mr. Faqadu explained that the government will provide foreign currency to foreign companies so that they do not have difficulty in paying the capital obtained through loans from foreign financial institutions, including their annual profits, for investments in Ethiopia.
The deputy governor explained that apart from participating in selected strategic developments, companies that receive the currency exchange guarantee will also meet other requirements. For example, they must not be required to withdraw foreign currency within a few years of starting the development, they must be engaged in key projects that can earn foreign currency for the country, and they have entered into Ethiopia with an agreement with the Ministry of Finance or other government executive bodies.
What are the key projects given the currency exchange guarantees?
According to Mr. Fikadu among the key projects which needs the currency exchange guarantee power generation, mining, and infrastructure projects take the leading place.
Since the lack of foreign currency is affecting foreign companies interested in investing in Ethiopia, in addition to the government’s decision to provide foreign currency guarantees, the Minister of Finance, Ahmed Shide, stated in his report to the House of Representatives a few weeks ago that there are foreign companies that have openly submitted the same guarantee request.
Mr. Ahmed stated that one of the companies that openly submitted the request is the Abu Dhabi company called MASDAR. According to the agreement with the government, the company will enter Ethiopia to generate 500 megawatts of electricity from solar energy.
The agreement was signed in 2021 E.C It is known that the company called Masdar will come with the necessary financing for the project, build power transmission lines including the power plant project, and after the construction is completed, will manage the power plant for many years and sell the electricity produced from the power plant to the government.
The minister explained that the other company that intends to enter Ethiopia by signing a similar agreement with the government is AMEA Power.
The minister explained that the company is aiming to carry out a 300-megawatt electricity generation project using wind power in an area called Aisha in the Somali region.
Both companies have asked the government to give them a foreign currency exchange guarantee to repatriate the profits from the project and pay off the foreign loans they got for the project. According to the decision of the National Bank Board, they are expected to be the first companies to get foreign currency guarantees from the government.