Ethiopia and China have formalized a currency swap agreement, enabling trade between the Ethiopian Birr and the Chinese Yuan. This significant move, announced by Finance Minister Ahmed Shide, aims to enhance trade flexibility, attract foreign direct investment (FDI), alleviate foreign exchange shortages, and strengthen economic ties between the two nations.
“The two national banks have committed to issuing directives for the cooperation,” Ethiopian Prime Minister, Abiy Ahmed, stated during an interview with the Ethiopian Broadcasting Corporation.
🇨🇳GLOBAL | The Chinese Yuan is the 4th Most Popular Currency for International Transactions as of July 2024
In 2023, #Yuan cross-border receipts and payments totaled 52.3 trillion Yuan ($7.2 trillion), an increase of 24.2% year-on-year.https://t.co/D7pKu51Lc7 pic.twitter.com/uvYicYRwku
— BitKE (@BitcoinKE) September 3, 2024
This development comes following a July 2024 directive by the Ethiopian government to implement a market-based exchange rate system marking a significant shift in the country’s economic policy. This meant banks were henceforth allowed to buy and sell foreign currencies from/to their clients and among themselves at freely negotiated rates.
🇪🇹REGULATION | Ethiopia Floats Exchange Rate in a Significant Policy Shift as it Intensifies Reforms Towards a Free Market Economy
According to a separate statement by Prime Minister of #Ethiopia, Abiy Ahmed, the new exchange rate system aims to align the Ethiopian currency… pic.twitter.com/q7i8aBqSzH
— BitKE (@BitcoinKE) July 29, 2024
China stands as one of Ethiopia’s largest trading partners, with Ethiopia exporting oil seeds, flowers, coffee, and meat, while importing a wide range of goods from the world’s second-largest economy. The trade relationship has flourished over the years with Chinese exports to Ethiopia soaring from $254 million in 2001 to $4.07 billion in 2016.
Additionally, notable developments include AliExpress, an online retail service owned by Alibaba Group, recently launching in the Ethiopian market.
While specific details of the currency swap are set to be finalized in upcoming discussions, the agreement has already been established. This new deal mirrors a similar bilateral currency swap signed with the United Arab Emirates in July 2024, valued at up to 46 billion birr (approximately $816.79 million).
The announcement came as Prime Minister, Abiy Ahmed, was in China for the 2024 China-Africa Summit, where he met with Chinese President Xi Jinping. His delegation includes key ministers from various sectors, though the Governor of the National Bank of Ethiopia, Mamo Mihretu, was not part of the team.
Abiy expressed gratitude for China’s ongoing support:
“Ethiopia greatly appreciates China’s continued and multifaceted support. Despite facing various challenges, we are making significant strides in agriculture, manufacturing, industry, tourism, telecommunications, and other sectors.”
During his visit, Abiy also engaged with officials from the China Communications Construction Company (CCCC) responsible for major projects in Ethiopia, including the Sheger riverside development. An Ethio-China business exhibition is scheduled as part of the summit’s activities.
In a broader context, Chinese President, Xi Jinping, pledged nearly $51 billion over the next three years to support infrastructure projects across Africa, aiming to create at least one million jobs.
The trade relationship between China and Africa reached a record high of $282 billion in 2023, marking a significant milestone in their modern partnership as they celebrate 70 years of diplomatic relations.
As reported by BitKE in 2023, amid a severe shortage of hard currency, the central banks of Ethiopia and Nigeria undertook a swap of USD 100 million in blocked funds utilizing the revenues of Ethiopian Airlines from Nigeria and the earnings of Dangote Cement in Ethiopia.
Ethiopian and Nigerian Central Banks Swap $100 Million Due to Foreign Exchange Shortages in Both Countries
The swap involved utilizing the revenues of Ethiopian Airlines from Nigeria and the earnings of Dangote Cement in Ethiopia. https://t.co/y8TMwsFMG1— Chad Mhako (@ChadMhako) July 18, 2023
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