Bankers blasts greedy private sector actors

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The COVID-19 pandemic significantly affects the Ethiopian economy like others since the case is a global problem.
Experts said that the country’s economy has been affected by the virus since the first case was reported in mid-March in Ethiopia.
They said that meanwhile the first case in Ethiopia is reported in the country about two months ago the economic effect was experienced before that since the country is directly related with global actors.
For instance Tamirat Wondyrad, a project engineer at the industrial scale bakery, Sheger Bread Factory, recently told Capital that the factory that is now in the last stage of commissioning has been affected because of the outbreak of the virus.
“The coronavirus affects our activity,” Tamirat says, adding “the transformer that will be planted at the factory with a capacity to bake 80,000 million loaves of bread per hour, was procured from Wuhan, a Chinese city that the first case of COVID-19 reported.”
“Most of other works are finalized, while the bakery that consume over 5MW needs sustainable power supply. However the transformer is delayed because of the pandemic,” Tamirat told Capital.
He added that the number of workers at the project site located at Qality has reduced to keep the social distancing that has also affects the activity.
Similar effects have been observed in other areas. Recently the hotel association in the capital city stated that its member’s hotel occupancy rate has dropped to 2 percent that contributed to millions of dollars loss in the hospitality industry.
The hospitality industry challenge is similar for the tourism sector, while the effect in the horticulture industry is much higher.
Tewodros Zewdie, Executive Director of the Ethiopian Horticulture Producer Exporters Association, told Capital that the pandemic is a disaster for fresh flower sector.
He said that it has damaged the sector heavily as companies are unable to run their usual export.
The government also immediately came to action particularly for the horticulture sector that followed by hospitality and tourism sector.
It lifted some kind of taxes for selected sectors. Laeke Ayalew, Minister of Revenue, said that the government revenue mainly from import export sector would be dropped because of the virus effect.
It has cut several expenses for the sector to keep their employees and bypass the disaster. At the same time financial institutions are taking initiatives by themselves and are also forced by the central bank, National Bank of Ethiopia (NBE) to be part of the mitigation plan.
But they are not comfortable by the private sector who demand more measures from the private banks.
“We understand businesses are highly affected by the outbreak, but they are operational for almost eight months of the budget year until the outbreak was reported in Ethiopia,” a banker told Capital.
“For instance the peak season for the hospitality industry, which has several incentives by the government, has passed before the outbreak but they did not consider that and exaggerated and claimed that they are on bad condition to pay salaries and other expenses,” observers said.
A bank president stated that it is relevant expecting more from banks by the government but the private sector is demanding extraordinary measures.
“If you see the manufacturing industry that was highly affected by several factors like power shortage and lack of adequate input access or foreign currency to import raw material before this crises, but it did not get such kind of support,” the bank president said. He added that the manufacturing industry is similarly heavily in debt even more than the hospitality sector that demands high relief because of COVID-19.
According to the bank president, at the same time the manufacturing industry is also affected by the virus.
“Now some private sectors are making their profit private and socialize their losses,” a banker criticized the behavior.
Recently the private sector claimed that it did not get finance from banks, meanwhile the government provided private banks 15 billion birr to keep their liquidity in good condition.
“Such as recently the private industry claimed for NBE that it did not get additional finance from banks, even though the government injected 15 billion birr. This indicates how some private sector actors demand using the opportunity to abuse the system. Even some of them expected a debt cancelation, which is amazing,” the bank president said.
Few weeks ago on their virtual conference with central bank officials the bank leaders expressed their disappointment that the private sector is misunderstand the government’s initiative.
“I don’t mind the interest of the government who demands more action from banks as they are better than other economic actors but the savage behaviors from some private sector actors is very disappointing,” another bank president told Capital.
“Some of the customers for example are demanding a three year extension for loan settlement. The problem might be solved in the coming six months or it will be extended if the case is continued, but it is strange to demand such incentives as of today on public money,” a banker expressed his disappointment.
“The case is in early stage but the private sector actors exaggerated the challenge they faced after they operated almost for two third of the budget year,” he added.
At the same time the government is highly responsible to control the health of the banking industry, according to finance sector experts, since they are expected to continue on their profitability for the health of the country and the overall economy of the country.
It may be a time to go on the breakeven level for these few months but it is not similar for banks like other sector. “We might be working for 8 months of the year but if the effect will continue we would not declare dividend even if the banks registered profit,” another bank president told Capital.
“We would see the impact of the current effect in the coming year. If the problem continues and the default rate increased we will use the dividend as compensation for the loss that is why we said the profitability of banks is crucial for the country’s economy,” he added.
Bankers said that even though the government put pressure on banks it is acceptable. “It is a behavior of poor country and government. Since it does not have a capacity it is looking on the better actors of the economy.”