- The UAE and Ethiopia established a bilateral currency swap agreement valued at up to $816.79 million.
- The agreement also includes frameworks for using local currencies for cross-border transactions and integrating payment and messaging systems.
- Under the MoU, the CBUAE and the NBE will also collaborate on payment platform services and electronic switches.
The central banks of the United Arab Emirates (UAE) and Ethiopia have formally established a bilateral currency swap agreement valued at up to 3 billion dirhams ($816.79 million).
Ethiopia and UAE sign $817 million currency swap deal to boost local currencies
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Both central banks also signed agreements to establish frameworks facilitating the use of local currencies for cross-border transactions and for integrating their payment and messaging systems.
Recall that Business Insider Africa reported that Egypt also struck a $1.4 billion local currency swap agreement with the UAE in 2023.
Under the terms of the agreement, the CBUAE and the NBE can exchange local currencies up to a nominal value of AED 3 billion and ETB 46 billion, according to Zawya a regional news platform.
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The development is to enhance financial and commercial cooperation between the UAE and Ethiopia by providing liquidity in local currencies to financial markets, thereby facilitating more efficient settlement of cross-border transactions.
What the Central Bank governors said:
According to Khaled Mohamed Balama, Governor of the CBUAE “Swapping the currencies of the two countries and utilising local currencies to settle cross-border transactions will enhance economic, trade, and investment prospects. We look forward to working closely with our partners in Ethiopia to enhance financial stability and achieve our mutual interests.”
His Excellency Mamo E. Mihretu, Governor of the NBE noted that UAE is one of Ethiopia’s largest trading partners as well as a significant source of foreign investment and development finance.
"The currency swap arrangement provides an important funding opportunity for Ethiopia and helps diversify the range of currencies at its disposal to facilitate the growing volume of trade and investment transactions expected over the coming years,” he said.
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Under the MoU, the CBUAE and the NBE will also collaborate on payment platform services and electronic switches. This includes linking their instant payment systems, UAESWITCH and ETHSWITCH, as well as messaging systems, while adhering to respective regulatory requirements.
Additionally, the cooperation extends to areas such as financial technology and central bank digital currencies, aiming to advance technological capabilities in financial transactions and infrastructure.
