Ethiopia bans CAD payments for exports to Egypt

The National Bank of Ethiopia (NBE) has taken decisive action to protect the nation’s dwindling foreign exchange reserves by banning the use of Cash Against Documents (CAD) as a payment method for exports to Egypt. The directive, issued on May 8, 2025, comes amid mounting concerns over exporters’ repeated failures to repatriate foreign currency earnings, a critical issue for Ethiopia’s import-dependent economy.Under the new directive, all Ethiopian exporters shipping coffee and other products to Egypt must now use advance payment or Letters of Credit (LC) instead of CAD.

These alternative payment methods are considered more reliable in ensuring that foreign currency enters Ethiopia’s financial system promptly.CAD, a common international trade payment system, allows importers to pay only after receiving shipping documents, providing flexibility for buyers but sometimes delaying or jeopardizing the inflow of foreign currency for the exporting country. According to the NBE, Ethiopian exporters using CAD for shipments to Egypt have consistently failed to deposit their foreign currency earnings in domestic banks within the required timeframe, depriving the country of much-needed reserves.

The central bank’s move comes as Ethiopia faces persistent foreign currency shortages and ongoing market volatility. Recent reforms aimed at liberalizing the foreign exchange market and boosting reserves have been partially reversed in response to the crisis. The NBE has instructed all customs offices to strictly enforce the ban, while the Ethiopian Customs Commission will monitor compliance and report violations directly to the central bank. Exporters who fail to comply risk shipment delays or even confiscation of goods.Ethiopia is a major exporter of agricultural products to Egypt, with coffee, oilseeds, and pulses among the top commodities.

Many traders had preferred CAD for its convenience, but the NBE argues that the system has failed to deliver timely and reliable foreign currency inflows. “This decision is necessary to protect Ethiopia’s economic interests,” said Tsegaye Ayalew, a financial sector expert with over 15 years of experience. He explained that delays in CAD transactions have not only hurt government revenues but also caused significant losses for exporters.While the move is expected to strengthen Ethiopia’s foreign exchange position, it could complicate trade relations with Egyptian importers, who may be reluctant to shift to advance payment or LC, as these require funds to be deposited before goods are received. However, experts believe the directive aligns with broader efforts to stabilize the economy and could help boost reserves if implemented effectively.

The NBE’s clampdown on CAD is not unprecedented. Similar restrictions have previously been imposed on exports to Sudan and Somalia after authorities identified discrepancies between the value of exported goods and the foreign currency repatriated. The central bank has also tightened controls on foreign currency retention and utilization for exporters in recent years, further underscoring the urgency of safeguarding reserves

[ad_1]

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}

[ad_2]