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Cryptocurrency News Articles
Ethiopia, China Formalize Currency Swap Agreement Targeting Enhanced Trade Flexibility
Sep 20, 2024 at 06:05 am
This significant move, announced by Finance Minister Ahmed Shide, aims to enhance trade flexibility, attract foreign direct investment (FDI), alleviate foreign exchange shortages, and strengthen economic ties between the two nations.
Ethiopia and China have formalized a currency swap agreement, enabling trade between the Ethiopian Birr and the Chinese Yuan. This move is set to enhance trade flexibility, attract foreign direct investment (FDI), alleviate foreign exchange shortages, and strengthen economic ties between the two nations.
The agreement was announced by Finance Minister Ahmed Shide during Prime Minister Abiy Ahmed’s visit to China for the 2024 China-Africa Summit. A specific agreement on the currency swap was reached following discussions between the two leaders.
“The two national banks have committed to issuing directives for the cooperation,” Prime Minister Abiy stated in an interview with the Ethiopian Broadcasting Corporation.
This development comes following a July 2024 directive by the Ethiopian government to implement a market-based exchange rate system. This marked a significant shift in the country’s economic policy, with banks now permitted to buy and sell foreign currencies from/to their clients and among themselves at freely negotiated rates.
China is one of Ethiopia’s largest trading partners, with Ethiopia exporting oil seeds, flowers, coffee, and meat, while importing a wide range of goods from the world’s second-largest economy. The trade relationship has flourished over the years with Chinese exports to Ethiopia increasing from $254 million in 2001 to $4.07 billion in 2016.
Some notable developments include AliExpress, an online retail service owned by Alibaba Group, recently launching in the Ethiopian market.
The specific details of the currency swap are set to be finalized in upcoming discussions, however, the agreement has already been established. This new deal mirrors a similar bilateral currency swap signed with the United Arab Emirates in July 2024, valued at up to 46 billion birr (approximately $816.79 million).
The announcement came as Prime Minister Abiy was in China for the 2024 China-Africa Summit, where he met with Chinese President Xi Jinping. His delegation includes key ministers from various sectors. However, the Governor of the National Bank of Ethiopia, Mamo Mihretu, was not part of the team.
Abiy expressed gratitude for China’s ongoing support: “Ethiopia greatly appreciates China’s continued and multifaceted support. Despite facing various challenges, we are making significant strides in agriculture, manufacturing, industry, tourism, telecommunications, and other sectors.”
During his visit, Abiy also engaged with officials from the China Communications Construction Company (CCCC) responsible for major projects in Ethiopia, including the Sheger riverside development. An Ethio-China business exhibition is also scheduled as part of the summit’s activities.
In a broader context, Chinese President Xi Jinping pledged nearly $51 billion over the next three years to support infrastructure projects across Africa, aiming to create at least one million jobs.
The trade relationship between China and Africa reached a record high of $282 billion in 2023, marking a significant milestone in their modern partnership as they celebrate 70 years of diplomatic relations.
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As reported by BitKE in 2023, amid a severe shortage of hard currency, the central banks of Ethiopia and Nigeria undertook a swap of USD 100 million in blocked funds utilizing the revenues of Ethiopian Airlines from Nigeria and the earnings of Dangote Cement in Ethiopia.
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