Off-shore Account Opening and Operations for Strategic Foreign Direct Investment Projects Directive No. FXD/86/2023

The National Bank of Ethiopia (“NBE”) has enacted Directive No. FXD/86/2023 (Offshore Account Opening and Operations for Strategic Foreign Direct Investment (FDI) Projects) to allow certain strategic investment projects preferential treatment to Open Offshore accounts, to provide convertibility guarantees and to benefit from an increased debt-to-equity ratio. The preferential treatment will only extend to eligible PPP investments in power generation and infrastructure; large mining projects with substantial export earning potential and other FDI projects deemed strategic by the board of the NBE.

The offshore accounts are destined for settling limited but necessary payments. The Directive further allows an increased debt-to-equity ratio of 80:20 with a caveat that the board of the NBE could even consider special approval for a higher ratio. Also, the regime for the highly anticipated foreign currency convertibility guarantee has been introduced only for loan repayment and dividend repatriations for “strategic PPP projects in the energy and mining sector” although such convertibility guarantee will apply to the extent such repayments/repatriation do not take precedence over servicing of the nation’s sovereign debt and following proof that the investor has exhausted all means to purchase foreign exchange from banks.

While we aim to revisit in detail the practical application of this reform, it is not clear whether domestic investors are being intentionally excluded despite their potential to invest in strategic projects. In addition, the extent to which the convertibility guarantee will promote investment is dependent on its practicality as the nation’s priority to service sovereign loans could result in de-prioritization of private investor’s request for exercising their convertibility guarantee rights.?

#Ethiopia #NBE #FDI