ADDIS ABABA – Ethiopia’s recent economic reforms including the forex retention policy amendment that increased exporters’ forex retention from 40 to 50% would boost export and stabilize the economy, a businessperson said.
Fairfax Africa Fund,Global Chairman,Zemedeneh Negatu stated that the recent policy change by the National Bank of Ethiopia allowing exporters to retain 50 percent of their forex earnings is timely and vital to increase export and stabilize the economy.
In an interview with CGTN, Zemedeneh described the new policy as positive and encouraging to exporters and manufacturers.
“It is very significant for exporters like us and others who need to retain the hard currency to purchase raw materials, spare parts and things like that,” he expressed.
Exporters can now retain the 50 percent retention indefinitely, the Chairman noted, recalling that it had to be converted immediately within a month which doesn’t give the exporters flexibility in planning purchases or for any purpose they want to use the forex in the past.
“This is a very big positive step by the central bank.” It will encourage exporters to export more and helps them to be able to plan smartly so that their businesses will operate in a sustainable basis without having shortages of foreign exchanges, Zemedeneh indicated.
Regarding the country’s floating exchange rate, the Businessman underlined that for the first time in 50 years, the central bank adapted a policy which allows the market to determine the exchange rate. Since then, the huge gap that had been between the parallel market and the official rate, which was distorting the economy, is now being reduced very significantly.
Operating through the formal market is the prime objective of the policy shift, he mentioned.
According to Zemedeneh, the indicators are showing that currently more of the foreign exchange is coming through the formal channel that means more forex is available to exporters and manufacturers – those who are actually adding value to the economy.
Therefore, he said the shift helps to stabilize the foreign exchange market and the economy in general.
One of the benefits of the reform is that the IMF and the World Bank provided a 20 billion USD loan to Ethiopia as part of the reform last July, which was the largest disbursement by these two institutions to any African country except for Egypt, according to the Chairman.
BY STAFF REPORTER
THE ETHIOPIAN HERALD TUESDAY 19 NOVEMBER 2024
