On 25 May 2026, the National Bank of Ethiopia issued Foreign Exchange Directive No. FXD/05/2026, amending the principal Foreign Exchange Directive No. FXD/01/2024. The amendment was issued pursuant to Article 6(2) and (17) and Article 39 of the NBE Establishment (Amended) Proclamation No. 1359/2025. It forms part of the NBE’s broader effort to relax foreign exchange administration, ease the burden of doing business and strengthen business confidence in Ethiopia’s ongoing foreign exchange reform.
This development should also be read alongside our earlier client insight on Foreign Exchange Directive No. FXD/04/2026. As discussed in that insight, FXD/04/2026 introduced a broader set of operational foreign ex change reforms, including changes relating to dividend repatriation, external borrowing, service-export earnings retention, bank-issued foreign exchange guarantees and forward exchange rate usage. FXD/05/2026 is materially narrower in scope. More specifically, the amendment decentralizes foreign exchange administration by delegating to commercial banks the authority to approve certain import-related payment modalities, namely letters of credit on acceptance and cash against documents on acceptance, without prior NBE approval. It also intro duces greater flexibility for importers holding foreign currency or retention accounts in relation to the timing of goods orders and shipment initiation.
Key Changes
- Bank Authorisation for Letters of Credit on Acceptance
Commercial banks are now authorised to approve letters of credit on acceptance for institutions holding foreign currency accounts, including retention account holders. Previously, such arrangements required NBE authorisation. A letter of credit on acceptance is a deferred payment instrument payable on a specified future date upon presentation of conforming documents. - Bank Authorisation for Cash Against Documents on Acceptance
Commercial banks are similarly authorised to approve cash against documents (CAD) on acceptance arrangements for institutions holding foreign currency accounts, including retention account holders, without prior NBE approval. Under such an arrangement, the exporter’s bank releases the shipping documents to the importer only after the importer has formally accepted a time draft or bill of exchange. - Pre-Approval Ordering and Shipment Initiation
Institutions holding foreign currency accounts, including retention account holders, may now order goods or initiate shipment before obtaining bank approval. Payment processing remains subject to the submission and verification of all required documents. This is a significant operational improvement for importers, as it removes the previous requirement to await bank approval before placing or initiating orders and aligns the treatment of retention account holders under both Annex 2 and Annex 6 of the Principal Directive.
