UAE Signs $817 Million Currency Swap Deal with Ethiopia

The United Arab Emirates (UAE) and Ethiopia have signed a bilateral currency swap of up to 3 billion dirhams ($817 million), according to reports.

According to the announcement during the week, the parties hope to enhance financial and commercial cooperation by facilitating a wider use of local currencies in cross-border transactions and through the interconnection of their respective payment systems.

The agreement was signed by the Governor of the Central Bank of UAE, Khaled Mohamed Balama, and the Governor of the National Bank of Ethiopia (NBE), Mamo E. Mihretu.

According to Balama, “Swapping the currencies of the two countries and utilising local currencies to settle cross-border transactions will enhance economic, trade, and investment prospects. We look forward to working closely with our partners in Ethiopia to enhance financial stability and achieve our mutual interests.”

Mihretu said the agreement was important because the UAE is one of the major trading partners and sources of foreign investment for Ethiopia. “The currency swap arrangement provides an important funding opportunity for Ethiopia and helps diversify the range of currencies at its disposal to facilitate the growing volume of trade and investment transactions expected over the coming years,” he said.

With the currency swap accord, the two central banks entered preliminary agreements that established a framework on the usage of local currencies in the settlement of cross-border transactions and linking both their payment and messaging systems.

This comprises an integration of their instant payment systems, UAESWITCH and ETHSWITCH, and collaborative efforts in payment platform services with electronic switches.

The agreement also extends to cooperation on financial technology and central bank digital currencies, with the objective of following up on enhanced technological prowess in financial transactions and infrastructure.

This is expected to spur economic, trade, and investment activities between the UAE and Ethiopia, paving the way for the strengthening of financial stability in both countries. The exchange rate at the time of the agreement was $1 to 3.6729 UAE dirham.

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