The National Bank of Ethiopia issues an Amendment to the External Loan Suppliers’ Credit Law
The National Bank of Ethiopia recently issued several directives which have changed the course of regulation of foreign currency related transactions in Ethiopia. The latest addition to the foreign exchange regulation is the External Loan and Supplier’s Credit (As Amended) Directive No. FXD/82/2022 (hereinafter referred to as “New Directive”) which has entered into force on September 7, 2022.
This Directive, which repeals and replaces the previous External Loan and Suppliers’ Credit (As Amended) Directives No. FXD/76/2021, maintains the previous stipulations in terms of eligibility and requirements of external loan borrowers. However, the New Directive adds agricultural machines and/or input importers as well as Liquified Petroleum Gas importers to the list of eligible borrowers. Accordingly, these importers can now acquire suppliers’ credit, provided that they fulfil the requirements under the Directive.
Furthermore, the New Directive provides an important change to the interest rate benchmarks used to calculate interest for external loans and on which the All-in Cost ceilings depend on. Following the phasing out process of the London Interbank Offered Rate (LIBOR), the new Directive introduces the applicability of Secured Overnight Financing Rate (SOFR) for USD, Euro Short-Term Rate (ESTR) for EURO, and Sterling Overnight Interbank Average Rate (SONIA) for GBP loans.??