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Country Commercial Guides for FY 2000: Ethiopia Report prepared by U.S. Embassy Addis Ababa, released July, 1999 Note*

CHAPTER VIII. TRADE AND PROJECT FINANCING

A. BANKING SYSTEM:

In line with its new economic policies, the Government of Ethiopia allowed the establishment of private banks and insurance companies in 1994, but prohibited foreign ownership of such companies. The first private bank -- Awash International -- started operations in late 1994 and now has six branches in Addis Ababa and two in the Oromiya Regional State. Five additional private banks have started operations since then. Dashen Bank now has five branches in Addis Ababa and seven in regional capitals. The Bank of Abyssinia opened a second branch in Addis Ababa in early 1997. Wegagen Bank started operating five branches in Addis Ababa in June 1997. The two newest private banks to being operating are NIB International and United Bank. Ethiopia now has seven private insurance companies -- United, Africa, Nile, Nyala, Awash, National, and Global -- which opened for business from 1994-1997.

The Commercial Bank of Ethiopia (CBE) operates 167 branches, with total assets of over $3 billion as of July 1996. It also holds over $1.5 billion on deposit. Ethiopia's banking system is conservative, and generally regarded to be sound.

The National Bank of Ethiopia (NBE) will continue to foster monetary stability and a sound financial system, maintaining credit and exchange conditions conducive to the balanced growth of the economy. The NBE may engage with banks and other financial institutions in the discount, rediscount, purchase, or sale, as the case may be, of duly signed and endorsed bills of exchange, promissory notes, acceptances, and other credit instruments with maturities of not more than 180 days from the date of their discount, rediscount, or acquisition by the bank. The bank may buy, sell, and hold foreign currency notes and coins and such documents and instruments, including telegraphic transfers, as are customarily employed in international payments or transfers of funds.

B. FOREIGN EXCHANGE CONTROLS:

All transactions in foreign exchange must be carried out through authorized dealers under the control of the National Bank. All payments abroad require licenses issued by the Controller of Exchange. All exports are licensed by the Controller to ensure the surrender of foreign exchange proceeds, and shipments require permits issued by that office.

C. GENERAL AVAILABILITY OF FINANCING:

The Ethiopian government relies on grants and external borrowing on highly concessionary terms to finance the external current account deficit; this will necessitate efforts to strengthen the government's capacity to meet donors' documentation and other requirements in order to ensure timely and expeditious disbursements. An effort will also be made to improve debt management by strengthening debt monitoring and analytic capability.

D. HOW TO FINANCE EXPORTS/METHODS OF PAYMENT:

Despite its thrust to attract foreign investment, Ethiopia will continue to depend on the international donor community for concessional financing.

E. TYPES OF AVAILABLE EXPORT FINANCING:

Ethiopia is currently "off cover" for the services of the Export-Import (ExIm) Bank of the United States. Further macroeconomic progress may eventually result in higher credit risk ratings, leading to access to ExIm Bank financing.

F. AVAILABILITY OF PROJECT FINANCING

Although the local private banks have additional capital to lend, they often require a large percentage of any loan in collateral, which must usually consist of cash or durable capital. The National Bank must approve loans from overseas institutions that require hard currency debt repayments. Project capital is available for many projects in roads, energy, health and education from the International Development Association of the World Bank or the African Development Bank. The International Finance Corporation provides some equity financing for private sector projects.

G. TYPES OF PROJECTS:

A list of the new and existing projects funded by major financial institutions like the International Development Association (IDA) and the World Bank includes:

1. Project: Livestock Resource Development
   Project Size: 3 million USD
   Implementing Agency: Ministry of Agriculture

2. Project: Crop Development
   Project Size: 10 million USD
   Implementing Agency: Ministry of Agriculture

3. Project: Road Sector III
   Project Size: 300 million USD
   Implementing Agency: Ethiopian Roads Authority
   Projective Objectives: The project will support the government's road sector development program components which includes (a) rehabilitation, upgrading, strengthening and maintenance of trunk and major link roads and rural roads and (b) institutional strengthening and capacity building for the Ethiopian Roads Authority.

4. Project: Geological Surveys
   Project Size: 2.4 million USD
   Implementing Agency: Ministry of Mines and Energy

5. Project: Energy Sector
   Project Size: 200.0 million USD
   Implementing Agency: Ethiopian Electric Power Corporation
   (EEPCO)
   Projective Objectives: To meet the growing domestic demand for electricity and export of energy by expanding transmission and generation capacity.

6. Project: Power Generation Project Size: 150.0 million USD Implementing Agency: Ministry of Mines/Energy (MME) Projective Objectives: Project will facilitate the installation of gas turbines (about 80MW) and rehabilitate electricity distribution in Addis Ababa.

G. BANKS WITH CORRESPONDENT U.S. BANKING ARRANGEMENTS: Currently, the following are Ethiopian banks with correspondent relationships with U.S. banks:

Commercial Bank of Ethiopia
P.O. Box 255
Addis Ababa, Ethiopia
Tel: 251-1-515-004
Fax: 251-1-514-522

Awash International Bank
P.O. Box 12638
Addis Ababa, Ethiopia
Tel: 251-1-612-919
Fax: 251-1-653-685

Bank of Abyssinia
P.O Box 12947
Addis Ababa, Ethiopia
Tel:  251-1-514-752
Fax:  251-1-514-754

Dashen National Bank
P.O. Box 12752
Addis Ababa, Ethiopia
Tel:  251-1-654-073, 251-1-650-286
Fax:  251-1-653-037 

Wegagen Bank
P.O. Box 1018
Addis Ababa, Ethiopia
Tel:  251-1-655015
Fax:  251-1-654870