Foreign companies contribute to black market money spike


More and more foreign companies are said to be now using the black market causing the price of foreign currency to rise even higher and the difference between the legal exchange rate at banks and the black market to be over 10 birr.
According to sources the rate changes every day on the black market. The current estimation is 45 birr per USD while it is about 35 birr at banks. One British Pound is 55.50 birr and one Euro is 50 birr.
In the past years for some time illegal foreign currency market rates went down closer to bank prices. Over the last few months they resembled a roller coaster but during the last couple of weeks they have skyrocketed again and now are much more different than the legal market.
Sources say that this is happening because there are many foreign companies investing in Ethiopia but not registered at the international level, attempting to obtain foreign currency.
These people said that at present, foreign industries investing in Ethiopia are dominant players in the black market. They often are producing just as much as local investors but have better access to hard currency through the suppliers’ credit scheme to import inputs than similar but locally owned businesses.
Experts explained that currently foreign companies are able to manage huge liquidity since their business is the dominant player in terms of production throughout the year and they have a lower production cost than those who get a smaller portion of LC for their businesses.
Experts said that these investors should wait a long period to wire their foreign currency via banks to their home country since the country is in hard currency crunch.
They said that sometimes the investor collects the foreign currency locally but mainly focuses on the remittances sent by diaspora for family here.
The long waiting at banks to transfer their money to home countries pushes foreign investors to become a major player in the illegal currency market, a sales person working with foreign company told Capital. “They are collecting the foreign currency illegally here,” he added. He expressed his speculation that the current increase in the rate of the parallel market may be related with this new and growing demand.