Ethiopia sets cash holding limit to prevent 'hoarding'

ADDIS ABABA, Ethiopia

Ethiopia on Tuesday set a limit on the amount of cash a firm or individual could hold at any given time, blaming liquidity "hoarding" for placing undue pressure on the country's economy.

In a statement, National Bank Governor Yinager Dessie announced the limit of 1.5 million Ethiopian birr ($42,400), saying that the government had "come to the realization that hoarding cash is significantly harming the economy," without specifying the amount of liquidity thought to have been accumulated.

"When the nature of their business compels them to possess a certain amount of money, companies can have in their possession not more than 1.5 million birr," he said, adding that non-compliance with this measure would entail unspecified penalties.

Experts estimate that the amount of cash circulating informally in Ethiopia was more than that under circulation via banks.

According to Yinager, Ethiopia is trying to expand digital cash flow services such as ATMs, Point of Sales (PoS) and Switch Operators in a bid to maximize the amount of formal transactions.

The Central Bank is prepared to license prospective operators of these e-banking services, he added.

- Reprinted banknotes

Meanwhile, the country's economy also lost millions each year to reprint banknotes that had been damaged or vandalized, said Yinager.

He urged people not to write on or tear banknotes, as this could damage the security features imprinted on them.