The Ethiopian Capital Market Authority is finalising a landmark regulatory instrument that would, for the first time, permit foreign portfolio investment in Ethiopian securities. The draft Foreign Portfolio Investment Regulation (the "Draft Regulation") is currently under review by the Council of Ministers and has been described by officials as a critical component of Ethiopia's financial liberalisation agenda. The Draft Regulation is issued pursuant to Article 108(1) of the Capital Market Proclamation No. 1248/2021, which empowers the Council of Ministers to issue regulations for the proper implementation of the Proclamation.
The instrument, if adopted in its current form, would establish a comprehensive legal framework governing the entry, operation, and exit of foreign portfolio investors in Ethiopia. It would permit foreign nationals and foreign entities to invest in shares, debt securities, money market instruments, collective investment schemes, and derivatives traded on licensed Ethiopian exchanges, subject to registration, custodianship, investment limits, holding periods, and reporting requirements. The Draft Regulation also allocates regulatory responsibility between the Ethiopian Capital Market Authority and the National Bank of Ethiopia, establishes a coordination committee, and creates a supervisory architecture for systemic risk monitoring. This update examines the principal features of the Draft Regulation and their implications for investors, intermediaries, and the wider market.
The Draft Regulation is expressed to be issued under Article 108(1) of the Capital Market Proclamation No. 1248/2021. Its stated objectives are to deepen financial markets, enhance liquidity, bridge the domestic savings-investment gap, and integrate Ethiopia into the global capital market ecosystem, while balancing capital mobility with financial stability, investor protection, and macroprudential oversight. The Draft Regulation applies to all foreign portfolio investment carried out in Ethiopia, and it defines foreign portfolio investment as a cross-border investment in securities by a foreign portfolio investor. Please read the full details in the attachment.