International banks and investors can apply for a licence to operate in Ethiopia immediately, according to a central bank statement, capping the government's drive to attract more overseas investment into the domestic banking sector.

The East African nation, which struck a four-year $3.4 billion programme agreement with the International Monetary Fund last July, is undergoing a major reform push, which includes flotation of its birr currency and efforts to complete an $8.4 billion debt restructuring with its official creditors.

In December, parliament approved a long-awaited law to allow foreign banks to establish subsidiaries, open branches or representative offices, and buy shares in local banks.

Investment cap

"NBE (National Bank of Ethiopia) is very pleased to declare that the Ethiopian banking sector is hereby open for foreign participation and that applications by foreign banks and investors can be submitted to NBE from today onwards," the central bank said late on Wednesday.

Ownership of local banks by foreign strategic investors will be capped at 40%, it said in a separate directive.

Ethiopia opened up its telecoms sector to foreign investors in 2022 after a consortium led by Kenya's Safaricom launched the first foreign network in the country.

The banking sector is currently dominated by the state-owned Commercial Bank of Ethiopia, which is the biggest bank by assets and deposits.