UAE And Ethiopia Forge Stronger Economic Links With New Currency Swap Deal

Khaled Mohamed Balama, Governor of the Central Bank of the UAE (CBUAE), and Mamo E. Mihretu, Governor of the National Bank of Ethiopia (NBE), have signed a bilateral currency swap agreement for the UAE Dirham and Ethiopian Birr.

The two parties also entered into two Memoranda of Understanding (MoU) to establish a framework for the use of local currencies in settling cross-border transactions and for linking their payment and messaging systems.

Under the first MoU, the CBUAE and the NBE will consolidate efforts to promote the use of their respective currencies in settling transactions between the UAE and Ethiopia. The MoU covers several measures that will facilitate the use of the two countries’ local currencies in the settlement of commercial transactions. It also encourages financial and banking cooperation through knowledge-sharing, ultimately supporting the development of their respective financial markets whilst facilitating bilateral trade and bolstering direct investment.

The agreement allows the CBUAE and the NBE to swap local currencies with a nominal value of up to AED 3 billion and ETB 46 billion. This supports financial and commercial cooperation between the UAE and Ethiopia by providing liquidity in local currencies to financial markets, enabling more effective settlement of cross-border transactions.

Both parties will cooperate under the second MoU in payment platform services and electronic switches by interlinking their instant payment systems, national card switches UAESWITCH and ETHSWITCH, and messaging systems according to each country's regulatory requirements. This includes cooperation in financial technology and central bank digital currencies.

Statements from Governors

Khaled Mohamed Balama, Governor of the CBUAE, said, "The bilateral currency swap agreement and the MoUs signed today reflect robust economic cooperation between the UAE and Ethiopia, specifically in trade and investment. Swapping currencies and utilising local currencies to settle cross-border transactions while enhancing cooperation in interlinking instant payment systems, electronic switches, and messaging systems will enhance economic prospects. This initiative will also pave the way for more joint business opportunities in financial sectors. We look forward to working closely with our partners in Ethiopia to enhance financial stability and achieve our mutual interests."

Mamo E. Mihretu, Governor of the NBE, stated, "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 its range of currencies to facilitate growing trade and investment transactions expected over coming years. Both agreements are a testament to our shared commitment to deepen our close bilateral partnership for sustainable development."

With inputs from WAM