Coffee is still the major export-earner commodity and this budget year a huge amount of hard currency is derived from it. This is the highest-ever currency.
According to the information obtained from the Ethiopian Coffee and Tea Authority, during the last 6 months of this budget year, it was possible to earn 578 million US Dollar from coffee export.
The money obtained has exceeded the targeted plan to earn during the last six months or in the previous year. Approximately the amount is more than half a billion Dollar. The Authority announced that, in the half budget year 148,882 tons coffee was exported to foreign markets.
As compared to the previous year, the volume is surpassed by 57 thousand ton. It is understood that, in Ethiopia from 25 to 70 percent of export earning is derived from coffee export.
However, experience has showed that, in the past years the set plan of obtaining hard currency from coffee product was not met. As to the Authority Communication Director Alemayehu Sahilemariam Gebremedihn, the half budget year plan accomplishment is the most successful.
He further said that, in the past three years it was planned to obtain a billion Dollar annually from coffee export but it was in vain. However, in this budget year it is believed that more than a billion Dollar could be earned from the export and the achievement witnessed in the last six months also indicates this.
If the achievement witnessed in this half budget year continues in the second half budget year, Ethiopia in its coffee export history for the first time will earn more than a billion Dollar. Asked whether the price hike of coffee in the world market helped to achieve such result in the last 6 months, the Communication Director said that, the price hike in the world market has contribution to some extent but in general the result is attributed to the economic reform program that has been going on the last two years.
The government has planned to earn 1.2 billion US Dollar from coffee export in 2014 EC budget year. Among the factors for the soaring of coffee price in the international market are the high demand of the product, the surge of price and the debilitating effect of extreme weather condition on coffee products in Brazil and Colombia.
The Authority report also reveals that the increasing of the volume of coffee supply to the trade value chain contributes to the rise of the earned currency. Sahile Mariam further said that, the reform work implemented on vertical integration is also responsible for the recorded result. It is understood that the export trade is performed by the Ethiopian Commodity Exchange but currently, the increasing of export trade option further strengthens the trade and boost the income. In addition to rising export earnings, the reform work, benefit farmers a lot.
As the result, farmers have been motivated to boost product and supply to the market. Years ago, the low coffee price set by the brokers forced the coffee trade to find its way via smuggling to the neighboring countries market. However, currently as farmers earn better price from their products resuming the normal trend they have started to supply their products to the normal value chain. As the result, tremendous result could be registered.
The extreme whether condition which became a threat to the Brazil and Colombia coffee production created good opportunities to the Ethiopian coffee export to obtain better price. In the coming months the coffee price will continue to raise. Nevertheless, the confusion witnessed in the coffee trade recently created anxiety that the positive outcome might be deemed.
Some argue that, following the roomer aired by some segment of the society by defaming the role of Ethiopian Commodity Exchange reduced the supply of coffee products to the ECX.
In this regard, the reluctance showed by Oromiya regions’ coffee producers and association to supply products to the ECX forced some coffee suppliers to give up their supply to the institute and such situation might threat the booming coffee supply to the outside market.
While attending the meeting organized by the Oromiya region cooperative associations, the regions’ officials remarked on the business activities of the institute by notifying its’ weakness and in this cause some traders became hesitant to supply their products.
As a result, the reduction of coffee supply from the region might pose threat to the whole coffee trade value chain. In fact, currently the coffee supply coming from other regions has continued but from the Oromiya the volume has tumbled. The Ethiopian Commodity Exchange did not comment on the matter.
The existing law stipulates that export items such as coffee and oil seeds to be channeled to foreign market through ECX on the federal level but as mentioned above, the roomer might affect the value chain and pose problem. Some actors in the coffee trade value chain express their complaint that the ECX has some problems in its business performance.
Hence, suggest that exporting coffee is better to be conducted out of the institution system by directly exporting to foreign markets. Others also reflect different views in this regard by saying that leaving the ECX trade system further aggravates the problem.
In the 2013 EC budget year, Ethiopia earned 907 million US Dollar by exporting 248,311 tons of coffee to the outside market. At that time the rate of accomplishment was 80 percent, while the income was 77 percent. This budget year coffee export performance could be said a game changer which was not witnessed in the coffee export history.
Following the price hike of coffee in the international market, the recently introduced instruction by National Bank of Ethiopia which allowed commercial banks to provide 2 percent of their reserved money deposited in the National Bank of Ethiopia to the coffee suppliers and exporters further created enabling environment to boost the export business.
Hard currency is essential to support the nation economic development endeavor. Hence, garnering it by whatever means is essential. Boosting export is one of the mechanisms to obtain foreign currency. However, the exported commodities items are very few. Besides they are exported in their raw form with no value addition. This puts the nation in disadvantageous position in the world market competition.
Therefore, to boost the export volume and enhance the earning capacity diversifying the export items and adding value is essential.
Currently, the types of agricultural products export is increasing and among others, fruit and vegetables, oil seeds, live animals and coffee can be mentioned but instead of exporting them in their raw form exporting squeezed fruit, meat products, and fried coffee and edible oil enhances the nation’s competition capacity in the global market and increases the amount of the earned money.
In this regard, the role of the manufacturing sector is immense. The government in its home grown economic growth 10 years perspective plan gave emphasize for the expansion of manufacturing so that it can play a leading role in the economic performance.
The construction and expansion of industrial parks in various parts of the country also entails the sector’s potential. The recent parliament report of the Prime Minister Abiy Ahmed indicated that the export earning in this budget year is increased by 25 percent. All this indicated how the government pays high attention to the strengthening of export trade.
Processing raw agricultural products in the local manufacturing creates market for growers of agricultural products and job opportunities to thousands. In addition it serves to substitute import and boost export. This paves the way to the establishment of self-sustained economy.
BY ABEBE WOLDEGIORGIS
The Ethiopian Herald 24 February 2022
