This week PM Abiy Ahmed (PhD) called for people to stop hoarding money at home and to shun the black market when exchanging hard currency. And it seems working. Right after he announced that people flock to banks to exchange their foreign currency, some in support of the recent reform and some in fear of legal actions the government will take.
During a presser following the three day visit of Eritrean President Isayas Afeworqi, PM Abiy appreciated the public’s hospitality during the events and then used the occasion to discuss steps to improve the country’s foreign exchange situation.
Prime Minister Abiy addressed two major issues, local currency being kept out of banks and hard currency being traded on informal markets.
According to the financial law, banks have to report deposits greater than 200,000 birr to the Ethiopia Financial Intelligence Center.
PM Abiy called for banks to receive cash of any amount without any question and said the government would prosecute people who kept large amounts of cash at their homes.
“I think the PM wants to stop people from keeping millions of birr in their home safes or business offices,” one banker said.
“In my view keeping 100,000 birr at home isn’t that big of a deal but some people don’t use banks and keep millions of birr in their hands,” the banker continued.
“We are now receiving a large amount of hard currency so I advise anyone who has foreign currency in their hands to exchange it via the legal market to avoid further damage,” Abiy added.
He did not elaborate what he meant by damage.
The exchange rate on the black market has been volatile lately.
In the past few months it escalated rapidly up to 37 birr and then declined recently.
Currently a dollar is exchanged at banks for 27.3 birr and on the black market for 27.5 to 27.8 birr.
Hopes are that PM Abiy’s statements will help further alleviate the discontent between the informal market and the bank.
Market observers stated that about a week ago the parallel market rate dropped to 28.5 birr per USD from 37 birr.
Recently the PM which is very popular in every corner of the country, invited the Diaspora to remit money legally (through money transfer services) as opposed to using the black market, which has been observed to be one of the reasons for the hard currency shortage.
Other observers stated that the government has taken serious action and cut some of the strong networks in the contraband business chain which has reduced the appeal of trading currency illegally.