UAE, Ethiopia sign currency swap agreement

The central banks of the UAE and Ethiopia have inked a bilateral currency swap agreement valued at up to Dhs3bn ($816.79 million).

Khaled Mohamed Balama, Governor of the Central Bank of the UAE (CBUAE), and Mamo Mihretu, Governor of the National Bank of Ethiopia (NBE), formalised the deal. The agreement permits the CBUAE and NBE to exchange local currencies up to a nominal value of Dhs3bnand ETB46bn.

Increase liquidity

This initiative aims to bolster financial and commercial ties between the UAE and Ethiopia by providing liquidity in local currencies to financial markets, facilitating more efficient and effective settlement of cross-border transactions, as detailed in their joint statement.

Additionally, the two central banks signed preliminary agreements to establish a framework for using local currencies in cross-border transactions and linking their payment and messaging systems.

Khaled Mohamed Balama highlighted that, “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.”

Mamo E. Mihretu emphasised that the UAE is one of Ethiopia’s largest trading partners and a major source of foreign investment and development finance. He remarked, “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.”

Under the deal, the CBUAE and NBE will also collaborate on payment platform services and electronic switches.

This includes integrating their instant payment systems, UAESWITCH and ETHSWITCH, as well as their messaging systems, while adhering to respective regulatory requirements.

Furthermore, the cooperation extends to financial technology and central bank digital currencies, aiming to enhance technological capabilities in financial transactions and infrastructure.

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