Ministry of Finance Pulls Back Franco Valuta Permits

Nearly a week after Prime Minister Abiy Ahmed (PhD) signaled pending changes to the Franco Valuta scheme, a letter by Finance Minister Ahmed Shide has effectively ended the arrangement. The scheme, which allows the import of items outside of the local banking system, had received a full greenlight just two months back following Ethiopia’s macroeconomic overhaul.

The Finance Minister’s letter addressed to the Ethiopian Customs Commission and the National Bank of Ethiopia (NBE) indicates the need to shift to a more sustainable system to facilitate imports. It suggests that Franco Valuta arrangement had served its purpose in alleviating the potential fallout from Ethiopia’s adoption of a market-based exchange rate policy in late July.

Ethiopia’s banks are currently capable of mobilizing adequate foreign exchange to facilitate imports through the formal banking system, according to the letter. This sentiment echoes statements by PM Abiy, who suggested that Ethiopia’s banks had purchased 652 million dollars while selling around 1 billion dollars after the reforms.

Importers who have currently made purchases through the Franco Valuta scheme have two weeks to finish customs procedures and bring in their products. No new permits will be given hereafter.

The Franco Valuta arrangement has been going through shifting legislative treatment throughout depending on the country’s FX needs on several occasions.