Ethiopia is facing foreign currency shortage

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Abbay Media News
Shiberu Tamerat

The head of the National Bank of Ethiopia (NBE) Mr. Tekelewolde Atnafu, said the amount of foreign reserve in the nation’s coffers is only enough for three months of imports. Businesses that rely on import of both goods and services are experiencing long waiting times, some waiting longer than six months to receive the needed foreign currency to run their businesses. In his report to parliament, Wednesday, May the 3rd, Mr. Atnafu said, currently foreign reserves have dropped to a level only enough for 2.3 months of imports.

In his report to the finance committee of parliament, Mr. Atnafu added, Ethiopia’s widening trade deficit owing to the shortage of forex. The drop in the export of goods in the past three to four years along with financial problems the country is facing is contributing to the shortfall of foreign currency reserve.

News media outlets inside the country are reporting, Ethiopia imported 11.5 billion dollar worth of goods while at the same time was only able to earn 2 billion dollars from export in the past nine months. Although Ethiopia earned 2 billion dollars from export the past nine months, the same report indicated Ethiopians overseas sent over 2.4 billion dollars home in the past 6 months alone.

World Bank and other financial institutions around the world are recommending financial reforms to curb the current forex woes the country is facing and are recommending devaluing the birr (Ethiopian currency, ETB) against the US dollar. However, government officials are reluctant to drop the ETB from its current rate against the dollar. In the black-market one US dollar is sold for over 26 ETB, while officially one dollar is sold for 22.86 ETB.

On average most African countries have foreign currency reserve of about four months worth. Given the size of its population and the economic activities inside the country, Ethiopia’s current level of foreign currency reserve is considered very low. Previous reports have shown that Ethiopia’s foreign currency reserve including gold in December 2015 to be about 3.5 billion dollars. However, the National Bank of Ethiopia has refrained from declaring the current amount of foreign reserve. In order to combat the current shortfall in forex, the National Bank of Ethiopia has put some measures in place. Recently travelers going abroad or visitors coming in to Ethiopia are required to officially declare the amount of foreign currency they have including pieces of jewelry in their possessions. Mr. Atnafu emphasized high priority projects are not affected by the recent shortage of foreign currency that Ethiopia is facing.