The National Bank of Ethiopia was established in 1963 by proclamation 206 of 1963 and began operation in January 1964. Prior to this proclamation, the Bank used to carry out dual activities, i.e. commercial banking and central banking. The proclamation raised the Bank's capital to Ethiopian dollars 10.0 million and granted broad administrative autonomy and juridical personality. Following the proclamation the National Bank of Ethiopia was entrusted with the following responsibilities.
» To regulate the supply, availability and cost of money and
credit.
» To manage and administer the country's international reserves.
» To license and supervise banks and hold commercial banks
reserves and lend money to them.
» To supervise loans of commercial banks and regulate interest
rates.
» To issue paper money and coins.
» To act as an agent of the Government.
» To fix and control the foreign exchange rates.
However, monetary and banking proclamation No. 99 of 1976 came
into force on September 1976 to shape the Bank's role adoring to
the socialist economic principle that the country adopted. Hen e
the Bank was allowed to participate actively in national
planning, specifically financial planning, in cooperation with
the concerned state organs. The Bank's supervisory area was also
increased to include other financial institutions such as
insurance institutions, credit cooperatives and
investment-oriented banks. Moreover the proclamation introduced
the new Ethiopian currency called 'birr' in place of the former
Ethiopia Dollar that eased to be legal tender thereafter.
The proclamation revised the Bank's relationship with
Government. It initially raised the legal limits of outstanding
government domestic borrowing to 25% of the actual ordinary
revenue of the government during the proceeding three budget
years as against the proclamation 206/1963, which set it to be
15%.
This proclamation was in force till the new proclamation issued
in 1994 to reorganize the Bank according to the market-based
economic policy so that it could foster monetary stability, a
sound financial system and such other credit and exchange
conditions as are conducive to the balanced growth of the
economy of the country. Accordingly the following are some of
the powers and duties vested in the Bank by proclamation
83/1994.
» Regulate the supply and availability of money & credit and applicable interest and other changes.
» Set limits on gold and foreign exchange assets which banks and other financial institutions authorized to deal in foreign exchange an hold in deposits.
» Set limits on the net foreign exchange position and on the terms and amount of external indebtedness of banks and other financial institutions.
»
Make short and long-term refinancing facilities available to
banks and other financial institutions.
Moreover, the proclamation has also raised the paid-up capital
of the Bank from Birr 30.0 million to Birr 50.0 million.