Saturday, July 13, 2024

Black market rate back on rise, contraband cash increases


The black market exchange rate has rebounded and is now going up after a decline to near bank rates during the last month.
Starting June 30 after some major actions taken by Prime Minister Abiy Ahmed (PhD) the exchange rate on the black market slightly decreased from its record 36 percent difference with the bank rate, which is currently around 27.5 birr to one USD. After the PM’s announcement that the government would take actions against illegal trading and pleas for the public to exchange money in banks, trading on the black market almost disappeared temporarily.
Dealers at the illegal market told Capital that the rate is now reviving. They say it is now around 32 birr per one USD which is almost 17.2 percent higher from the legal market or about a 4.7 birr difference. Illegal exchange dealers, who refused to be named, said they don’t make decisions about the exchange rate.
“We raise the rate based on the recommendation from secondary collectors who take orders from tertiary collectors,” the dealers told Capital.
“Based on the orders from final collectors we come up with a rate and it has now reached to about 32 birr,” they said.
In Addis the major primary hard currency collection centers are located around Beherawi (Gandhi), American Gibi (Merkato), Bole and Bole Michael.
The business is highly based on trust.
According to experts the rate went down because of the crackdown on the contraband business which was occurring in the eastern part of the country. Most foreign currency travels out of Ethiopia’s eastern border but some flies out of the airport. Often legal importers use the illegal collected hard currency to import products when they have a hard time getting currency legally, according to experts.
The current increase indicates that to some extent new contraband routes  are being opened and at the same time illegal traders have figured out how to get around check points at the border or the airport, experts said.
“At the same time the hard currency shortage has not improved so things will return to business as usual and we will see similar trends that occurred before July,” experts said. The government will continue to try and stop illegal trading even though it may be difficult to fully cut, according to experts.
Before the government devaluated the birr by 15 percent on October 11, 2017 the black market rate stood around 27 birr for a USD. Immediately after the devaluation, however, it escalated to 33 birr. For a long time it was about 25 percent higher than the legal market. However, in the past few months the parallel market frequently increased and the gap with the bank rate widened up to 36 percent and stood the FDI also buy hard currency from the black market.
When the PM announced that his government would take action against the illegal business more people exchanged with local banks and over USD 100 million was collected in the past few weeks. On the other hand at the airport and Somali border region there has been a large amount of illegally transported hard currency.  For instance according to recent reports a significant amount of foreign and local currency was confiscated at the Bole Airport.

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