Ethiopia has been taking a series of measures to tackle the shortage of foreign currency that it has been contending for the last couple of years. Now that the problem persists in spite of the actions experts suggest the implementation of more strict actions to curb it.
The economists and business analysts suggest that the government should avoid procurement of some items and limit the usage of the available hard currency.
Henok Zeru, a business management expert worked on a master’s degree thesis on Ethiopian foreign currency shortage three years ago. According to him the shortage of foreign currency of the country is a long-standing problem, but becoming worse during the past three to four years. Since 2016, the government applied three regulations to fix the foreign currency shortage that could not bear fruit.
Henok stated that government has to take all the necessary actions by decreasing unnecessary government imports, discouraging importation of items that could be produced locally.
For instance, serious implementation of enacted policies and regulations on the provision and allocation of commercial banks on the foreign currency should be regulated properly as there are some drawbacks on the way some banks apply them, he explained.
According to Henok the practices where exporters can use their 50 percent’s foreign currency earnings from their export for their inputs and raw materials import, but it changed the investors to use their foreign currency earning for importing other business to balance which lead for non-basic goods import.
So, Henok stated that applying proper rules and regulations on the ground practically, discouraging unnecessary imports, especially by the government institutions, improving the quality of locally producing products and promoting to the market.
Wasihun Belay, Senior Economy Analyst on his side stated that Ethiopia should identify its comparative advantages of forex sources and invest on that to diversify its sources.
According to the analyst during the 2018/19 fiscal year, the country’s import exceeded 17 billion USD. But according to the Ministry of Trade and Industry report of the year, the country’s export was 2.8 billion USD. He added that the remittance was also limited to four billion USD and other additional potential sources like the service sector were not as such effective in foreign currency earning.
Focusing on and supporting selective investment sectors, creating a conducive platform to attract foreign investors in the financial sector are also additional solutions to diversify and to institutionalize the foreign currency earnings. But, there is a wide gap in effectively using the available potential sources and investing in the comparative advantages which make the problem worse from time to time.
Approached by The Ethiopian Herald, Addis Ababa Chamber of Commerce and Sectoral Association Public Relation Head, Kassahun Mamo said curbing some of the mega projects that among other things the government should prioritize provision of scarce forex supply by private and government commercial banks are the sound measures and instrumental to tackle the crunch.
The Ethiopian Herald August 24/2019
BY DARGIE KAHSAY
