BY ABEBE WOLDEGIORGIS
Of late, due to the external forces intrigue and their proxy terrorist TPLF, conflict flared up in Tigray and the neighboring regions has been continued. To reverse the situation and to restore peace and stability the government already has taken various measures.
However, the terrorist, apart from engaging in its subversive activities, it also waged war to cripple the nation’s economy through money laundering, arm smuggling and illegal trade. As a result, the nation faced hard financial crunch. Banks are running shortage of hard currency. The rate of inflation is also in surge and the ordinary people unable to meet the basic needs.
The terrorist TPLF through its old network stretched in the country raised the exchange rate of foreign currency in the black market this again attracted people who have Dollar to change it into Birr with exaggerated price.
Recently, with the cooperation of the security forces, the federal police announced that it closed five international money transferring institutions which engaged in clandestine activities such as Express, Amelel, Jejeba, Tewekel and 24 online.
Police announced that the institutions with the support of gangs committed crime and were found guilty of sabotaging the nation’s economy.
According to experts, the exchange rate of Dollar with local currency in the black market is surpassing the formal market by 48 percent. In addition to these, illegal launderers provide more Birr to people who sell Dollar in the informal market.
Years back, the deference of exchange rate of Dollar against local currency between the legal and the black markets was only 2 Birr.
After the coming to power of Prime Minister Abiy Ahmed three years ago, the government obtained significant amount of foreign currency form donors and financial institutions in the form of loan and grant that brought some remedy for the shortage of hard currency and reduced the exchange rate difference between formal and informal market. But sooner than later, the exchange rate gap turned back to its former amount.
According to the Ministry of Trade and Industry, Ethiopia earned 3.2 billion Dollar from export trade during the recently completed budget year but the outbreak of the war in the northern part of the country over shadowed the value of the currency as a result of additional cost incurred on the nation’s imports.
The earning of the hard currency was boosted during the reported period mainly enhanced by the rising demand for mineral products in general and gold mines in particular in the international market.
According to the Ministry of Trade and Industry, the 2020/21 budget year’s plan accomplishment in the mining sector is 102 percent which significantly contributes to the total currency earnings and such achievement is not observed in other sectors.
The report from Ministry of Mines and Petroleum indicates that when compared to the previous budget year, the foreign currency earned in the already completed budget year surpassed by 600 million Dollar and the share of the mining sector is 475 million Dollar. Out of this gold plays a dominant role. The increase of the output of mining products and the rising of demand in foreign market is responsible for the boosting of garnering foreign currency.
However, the outbreak of the war in the northern part of the country hinged the earning of foreign currency because the conflict there hampered the production of soyabean and other oil seeds in that area, the report indicated.
But one thing that should be underlined is that out of the foreign currency available in the country, 78 percent of it is circulated in the informal market. The main reason for this is foreign currency inflow through remittance scheme in the formal banking system has been declining whereas the currency channeled through black market has been rising during the last one-year.
According to the crude information obtained from the Commercial Bank of Ethiopia and Oromia Cooperative Association Bank, with in only one year, the foreign currency inflow through formal channel in the form of remittance deducted by 20 percent.
Currently, 27 percent of deposited foreign currency in the banks comes from remittance. The prevalence of COVID-19 at the international level has also negatively affected the nation’s foreign currency earning capacity. Two years back, the nation drew more foreign currency through remittance than it earned from the total export which was 5.6 billion Dollar.
When the crisis is exacerbated making profit is unthinkable. With regard to foreign currency gaining from Foreign Direct Investment (FDI), Commissioner Lelise Neme of the Ethiopian Investment Commission announced that the nation
secured 3.9 billion Dollar from FDI during the 2020/21 budget year. The earning of 8 billion Dollar through privatizing partial service provision sector of Ethio-Telecom can be taken as a success story which has the capacity to recover the nation’s hard currency earnings.
But it is unknown whether it brings long lasting solution or not. Currently, the renowned western media with biased stance towards the conflict in northern Tigray are relentlessly working to damage Ethiopia’s image. As a result, some foreign investors who were eyeing business opportunities created in Ethiopia showed reluctance to come here.
Besides, the worrisome inflation witnessed in the urban centers attributed to shortage of foreign currency. This in turn coerces importers to import goods with a currency purchased from the black market with heighten exchange. Hence, when setting the price of goods provided to the local market, they ask inflated price that compensates what they spent to purchase the Dollar in the black market.
In order to curb this problem, the government of Ethiopia has taken various measures since long time ago to tackle illegal money transfer which induces shortage of hard currency in banks. Among others, it changed the Birr notes by new one to devaluate the money under circulation outside the banking channel. In such a way, illegal trade which used to facilitate arm smuggling could be drastically reduced.
Aiming to encourage Ethiopian Diaspora to send their remittance through the formal channel, the National Bank of Ethiopia (NBE) allowed them to deposit 30 percent of their money in hard currency and to utilize it whenever they need it. In addition to these, the National Bank of Ethiopia introduced various directives to incentivize Ethiopians and foreigners of Ethiopian origin living in Diaspora to establish Bank which enables them to deposit their money in hard currency account.
The Ethiopian Herald August 13/2021
