Ethiopia’s parliament on Tuesday (December 17) passed long-awaited legislation opening the country’s banking sector to foreign players. The government, which passed a bill in June, hopes it will attract foreign investment into one of Africa’s largest economies.
However, foreign ownership of banks will still be limited to 40%, according to a copy of the law reviewed by the US government Reuters.
The move is part of a broader push since Prime Minister Abiy Ahmed came to power in 2018 to liberalize the country’s economy. Currently, the only major player in the banking sector is the state-owned Commercial Bank of Ethiopia. Abiy’s efforts have been derailed by a two-year civil war, a destabilized currency and slow reforms.
While most lawmakers supported the law, some expressed reservations that local banks would not be able to compete if foreign actors were allowed into the country. Ethiopian Central Bank Governor Mamo Mihretu said more competition would help local lenders.
Ethiopia received a $3.4 billion bailout from the International Monetary Fund (IMF) last July after a squeeze on foreign exchange and persistent inflation. To receive the money, Ethiopia had to float its currency, causing the birr to lose almost a third of its value against the dollar.
The rescue package was aimed at boosting growth in the country’s private sector, which the IMF said would enable increased spending on health, education, investments and government programs.
“Ethiopia opens banking sector to foreign investment” was originally created and published by Investment Monitor, a brand owned by GlobalData.
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