Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

ERITREA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article XIVYes.
Exchange Measures
Restrictions and/or multiple currency practicesInformation is not publicly available.
International security restrictionsNo.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Eritrea is the Eritrean nakfa.
Exchange rate structure
UnitaryA unified exchange rate of ERN 15 per $1 applies to all transactions.
Classification
Conventional pegged arrangementADs conducting transactions in the foreign exchange market are to apply the official exchange rate of ERN 15 per $1.
Exchange taxThe Bank of Eritrea (BE) prescribes a 0.5% commission on sales and a 0.25% commission on purchases of foreign exchange, except for banknote transactions. ADs are permitted, but not required, to levy an additional service charge of up to 0.25% for buying and 0.75% for selling foreign exchange on their own accounts.
Exchange subsidyNo.
Forward exchange marketNo.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirements
Use of foreign exchange among residentsSome transactions in foreign currency are allowed with the approval of the BE.
Payments arrangements
Regional arrangementsEritrea is a member of COMESA.
Clearing agreementsA clearing arrangement exists among the members of COMESA.
Administration of controlThe BE oversees all foreign exchange transactions of ADs. It may from time to time issue regulations, directives, and instructions on foreign exchange matters. The Ministry of Trade and Industry (MTI) regulates foreign investments and issues licenses for importers, exporters, and commercial agents. The Asmara Chamber of Commerce issues certificates of origin for exports.
Payments arrears
OfficialSome technical arrears have arisen in connection with loans from two governments.
PrivateThere are arrears on overdue bonds.
Controls on trade in gold (coins and/or bullion)
On domestic ownership and/or tradeAuthorization from the Ministry of Energy and Mines is required for the ownership or possession of gold or other precious metals or ores. Residents may own gold jewelry without restrictions.
On external tradeYes.
Controls on exports and imports of banknotesTravelers are required to declare their holdings of foreign currency on entry or exit.
On exportsYes.
On importsYes.
References to legal instruments and hyperlinksn.a.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyExporters can open a foreign currency deposit account with commercial banks. Persons or institutions that have opened a foreign currency deposit account may use their foreign currency deposits for international transactions or other uses acceptable to the bank by presenting convincing evidence.
Approval requiredYes.
Held abroadThe opening of these accounts is restricted to resident banks.
Accounts in domestic currency held abroadn.a.
Accounts in domestic currency convertible into foreign currencyNo.
References to legal instruments and hyperlinksLegal Notice No. 101/2005.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsThese accounts are available only to members of the diplomatic community; welfare organizations; nongovernmental organizations and their personnel; and joint ventures and other business firms that invest their capital, wholly or partially, in foreign exchange.
Convertible into foreign currencyYes.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsMost imports financed with official foreign exchange are effected under LCs or on a cash-against-documents basis.
Advance import depositsThese are required only for LC types of imports.
Documentation requirements for release of foreign exchange for importsImporters must obtain a permit from the MTI for each import shipment.
Preshipment inspectionYes.
Letters of creditYes.
Import licenses used as exchange licensesImport permits are required to obtain foreign exchange from commercial banks.
Import licenses and other nontariff measuresFranco valuta imports (imports that do not require official foreign exchange and are not aid-funded) are not allowed.
Negative listYes.
Open general licensesAll importers must have a valid trade license issued by the MTI. Each import shipment requires its own permit.
Import taxes and/or tariffsYes.
State import monopolyImports of military materials, weapons, armaments, and the like are conducted by the state.
References to legal instruments and hyperlinksn.a.
Exports and Export Proceeds
Repatriation requirementsAll export proceeds must be repatriated within 90 days of shipment; where justified, this deadline may be extended by 90 days.
Surrender requirements
Surrender to authorized dealersAll export proceeds must be surrendered to the ADs.
Financing requirementsExports may be made under LCs on an advance-payment or consignment basis.
Documentation requirementsAll exports require documentation. Certain commodities require clearance from specific government bodies (e.g., the Eritrean Institute of Standards). In particular, livestock and cereals require permission from the Ministry of Agriculture, and marine products require permission from the Ministry of Marine Resources.
Letters of creditYes.
GuaranteesYes.
Preshipment inspectionYes.
Export licensesExporters must be licensed by the MTI.
Without quotasYes.
Export taxesNo.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Payments for travel
Prior approvalYes.
Quantitative limitsYes.
Personal payments
Prior approvalYes.
Quantitative limitsYes.
Foreign workers’ wages
Prior approvalYes.
Quantitative limitsYes.
Credit card use abroadn.a.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Surrender requirements
Surrender to authorized dealersAll proceeds from invisible transactions must be surrendered to the ADs.
Restrictions on use of fundsYes.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsn.a.
Surrender requirementsn.a.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsn.a.
Purchase abroad by residentsADs may acquire securities with the approval of the BE.
Sale or issue abroad by residentsn.a.
Bonds or other debt securitiesn.a.
On money market instruments
Purchase locally by nonresidentsn.a.
Sale or issue locally by nonresidentsn.a.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsn.a.
On collective investment securitiesn.a.
Controls on derivatives and other instrumentsn.a.
Controls on credit operations
Commercial credits
By residents to nonresidentsn.a.
To residents from nonresidentsYes.
Financial credits
By residents to nonresidentsn.a.
To residents from nonresidentsADs may borrow abroad or overdraw their correspondent accounts abroad.
Guarantees, sureties, and financial backup facilitiesn.a.
Controls on direct investment
Outward direct investmentn.a.
Inward direct investmentDomestic retail and wholesale trade and import and commission agencies are open to foreign investors only when Eritrea has a bilateral agreement of reciprocity with the country of the investor; this latter condition may be waived by the government. Approved investments and their subsequent expansion are exempt from customs duties and sales tax for capital goods and spare parts associated with the investment. There are no exemptions from income tax.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsNo.
Controls on personal capital transactions
LoansControls apply to all these transactions.
Gifts, endowments, inheritances, and legaciesn.a.
Settlements of debts abroad by immigrantsn.a.
Transfer of assetsn.a.
Transfer of gambling and prize earningsn.a.
References to legal instruments and hyperlinksn.a.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Borrowing abroadCommercial banks may borrow abroad or overdraw their accounts.
Maintenance of accounts abroadCommercial banks may maintain correspondent accounts with their counterparts abroad.
Lending to nonresidents (financial or commercial credits)Yes.
Lending locally in foreign exchangeYes.
Purchase of locally issued securities denominated in foreign exchangeYes.
Differential treatment of deposit accounts in foreign exchange
Liquid asset requirementsn.a.
Differential treatment of deposit accounts held by nonresidentsn.a.
Open foreign exchange position limits
On resident assets and liabilitiesYes.
Provisions specific to institutional investorsn.a.
References to legal instruments and hyperlinksn.a.
Changes during 2006
No significant changes occurred in the exchange and trade system.

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