Commercial banks in Ethiopia have been ordered by the country's central bank not to approve letters of credit (L/Cs) for imports of 38 selected items as part of the government's efforts to shore up dwindling foreign reserves.

The National Bank of Ethiopia's (NBE's) L/C ban for imports such as alcoholic beverages, non-essential foodstuffs or items that are also produced domestically and some motor vehicles will continue indefinitely.

Foreign currency shortage

Ethiopia's finance ministry has ordered the NBE to stop approving L/Cs for the selected imported items. This means that commercial banks can no longer provide foreign currency for importers who request L/Cs for those items.

The NBE says it anticipates saving up to US$100 million annually as a result of the L/C ban, and will be able to concentrate Ethiopia's scarce foreign currency on imports of essentials such as medicine and basic commodities.

The central bank also anticipates that the ban on imports of products such as beer and fruit juice that are also made in Ethiopia will sharpen consumer appetite for domestically produced items.

Banned items

The ban applies to L/Cs for completely built motor vehicles, including motorcycles and three-wheel cars, although electric cars are exempt from the ban.

Processed food, beverages, whisky, household and office furniture, bottled water, fruits, carpets and cigarettes are amongst the other banned imports.

Imports of banned items for which L/Cs had already been approved before 17 October will not be affected by the ban.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.