Remittance decreases by 80 percent
Ethiopian gold export shrinks as both foreign and local residents get in on the illegal gold trade. As the National bank authorities claim, Chinese residents in Ethiopia have also played a hand in the smuggling of gold in the country.
In a report presented to the House of Peoples’ Representatives for the Plan Budget and Finance standing committee with regards to the first quarter performance of the National Bank of Ethiopia (NBE), Yinager Dessie (PhD), governor of the bank, indicated that, “It is becoming hard for the national bank to control the situation. In addition to Ethiopians, the Chinese are also engaged in the illegal trade.”
As the governor indicated, NBE is buying gold from producers and suppliers 35% greater than the global gold purchasing rate while expansion of illegal gold producers in gold producing areas has shriveled the gold which flows to the central bank.
“We have started to closely follow the matter with regional authorities and city administrations and things have been showing progress in the past three weeks,” said the governor adding, “Recently, in Oromia region around Shakiso, our cooperation with local authorities has led us to detain Chinese suspects engaged in illegal gold trading.”
Oromia, South West and Benishangul-Gumuz regions are known as the highest gold producing areas.Ethiopia has earned more than 560 million U.S. dollars in revenue from gold exports during the last Ethiopian 2021/2022 fiscal year.
In the first quarter of the current fiscal year as the governor indicated the country has earned 977 million dollars from export while it has paid 3.6 billion dollar to import, oil which takes the major share followed by capital goods.
“To fulfill the trade deficit, we have been doing a lot, however it will be difficult to continue, and thus we need to improve supply and export in the coming months,” the governor underscored.
Flower and coffee have now taken the larger piece of the pie for the export earnings. The agriculture sector mainly coffee export has been dominant earning USD 426 million contributing to the biggest share for the total export value. As the governor indicated export of leather products, pulse and oil seeds, textile and gold has shown decrease compared to last year.
“Even though the government is working by establishing a string committee under the Prime Minister’s office to follow up and increase export, it is not showing improvements as it is expected,” explained the governor.
In recent times Gold, hard currency notes, coffee, live animals, oilseeds and even grains are being smuggled out of Ethiopia to neighboring countries, at higher rates. Once these items are smuggled out of Ethiopia and sold, the forex is then used for import under the Franco Valuta scheme.
“Improving the export will improve forex earning,” the governor stressed.
In related news, loan, grants and remittance in the first quarter showed Ethiopia getting 1.7 billion dollar. From these as indicated on the report, the country has earned only 217 million dollar in private remittance in the first quarter of the fiscal year. Last year at a similar period, the country earned around 1 billion dollar in remittance, which is a decrease of 80 percent.
“Remittance and both grant and loan flow to Ethiopia decreased in the stated period even when compared to last year due to the current situation (war in the north) of the of the country,” the governor cited.
“We expect things to improve following the peace agreement, which will stop the war in the north,” expressed Yinager.
As one source of forex for Ethiopia in 2021/22 fiscal year, Ethiopians living abroad sent 4.2 billion US dollars in remittance.
Ethiopia’s total hard currency earnings in 2021/22 in the fiscal year were close to $22.7 billion. Main sources of Ethiopia’s forex inflows in 2021-22 were service receipts which is about $6.2billion, remittances $5.3 billion, FDI $3.3 billion, loans $1.1bn, counting both Government plus state owned enterprises borrowing and grants $1 billion. Exports contribution is not more than 20 percent gross foreign currency earnings.