Due to the increased demand for foreign currencies, the dollar exchange rate at the parallel market skyrocketed making the official and parallel markets to drift exponentially apart.
In some parts of the city where black market trading takes place, during the week, one US Dollar was selling between 90 to 92 birr. This in comparison to the normal exchange rate was night and day, with differences of 70 to 75 percent.
From Capital’s assessment of the market, importers who specially import cars are buying one dollar for up to 100 Ethiopian birr. With the rising demand of foreign currency, the exchange rate gap between the official and black market went up to 90 percent, on this occasion. The ripple effect was felt as the prices of cars in the country have risen in recent weeks.
According to the exchange rate on September 16, 2022, the official selling price of a dollar was 52.53 birr while it was between 90 and 92 birr in the parallel market.
“It is not something that can be stopped by controlling mechanism,” said Fikadu Digafe, vice governor of National Bank of Ethiopia indicating that there is also a gap between demand and supply.
The foreign exchange provided by the banks is decreasing significantly. In response to excess demand for foreign exchange in the official market, parallel markets for foreign exchange have gained traction. However, the emergence and existence of active parallel foreign exchange market creates several complications to policy makers in their attempt to regulate the external balance.
“We are working to stabilize the situation. NBE is doing an assessment to figure out what the real reason is,” said the vice governor, adding, “It all has to start from knowing the reason.”
It is widely thought that the surging inflation and a shortage of hard currency in Ethiopia are driving up the price of the US dollar on the black market.
According to experts controlling the illegal foreign exchange trade is challenging for the government.
Experts opine for the removing of brokers involved in the currency market through establishing a strong monitoring and controlling scheme, which could help achieve results in a short period of time.
Over the past ten years, the Ethiopian birr has depreciated significantly against the U.S. dollar, primarily through a series of controlled steps. Over the past years, everything has been changing so fast and exchange rates are rapidly fluctuating due to the political uncertainty in the country. The conflict in Northern Ethiopia and the instability in most parts of the country are among the factors that are said to have contributed to the skyrocketing exchange rate of foreign currency.
The government is struggling to control the black market currency exchange, with efforts being unsuccessful.
Two weeks ago, the central bank tried to tighten controls on birr and foreign currency use. Accordingly, foreign residents in Ethiopia who are entering the country from foreign countries had to convert all foreign currencies in their possession to an equivalent sum in birr, through authorized forex bureau. Preferably, such individuals could deposit the foreign currencies into their foreign currency accounts within 30 days of entering the country.
Returning foreign residents possessing foreign currencies above 4,000 dollars have to present a customs declaration, as per the government rule.
Moreover, according to the national bank directive amendment of retention and utilization of foreign currency no 79/2022, banks are required to surrender 70 percent of the foreign currency earnings from export of goods and services, similar to remittance and NGOs who ought to transfer to the national bank.
Exporters of goods and services and recipients of inward remittance get only 20 percent of their export earning in foreign currency after deducting 70 percent to the central bank. The remaining 10 percent is surrendered to the respective bank.
Normal Vs parallel exchange rates drift astronomically apart
Ethiopost stamps priority to mobile money
By Metasebia Teshome
Ethiopia Postal Service Enterprise shifts its plan to open its own postal bank to mobile money as its financial status is not enough to dive into the banking sector.
For the last two years, the only postal service provider in the country, Ethiopian Postal Service Enterprise (Ethiopost), has been in a process to establish its own bank with expectations to have all kinds of banking services. The Ethiopost was gearing to provide customers with access to banking service, including direct deposit, cards, and online bill payments.
Despite the enterprise starting its process to engage in the sector, in accordance with the National Bank of Ethiopia’s regulation and guidelines, as Asmare Yigezu, deputy CEO of the enterprise explained, there is no promising situation with regards to the opening of a postal bank. This was attributed to the National Bank’s changing requirements which have proved to be elusive for the enterprise.
“It is now difficult to establish a bank based on our potential and financial status since the service has been in a series of fall downs in the past. For the last two years, it has been approaching to a good condition and even breaking even,” the deputy CEO explains.
As sources indicate, Ethiopost has been through a series of losses over the past years as a result of low staff motive and capability, poor customer service, weak marketing and traditional and outdated processes and services. This has rendered the enterprise to become uncompetitive in service provision as well as hindered its financial standing.
Starting from May 2020, Ethiopost has been under reform, that aims to modernize its work as well as optimize its operation and quality of service which is the right step in terms of moving the enterprise forward to secure a firm financial standing in order to engage in new services including E-commerce and logistical financial services that offer competitive services as well as enhance the image of the service provider. Currently, the enterprise is focusing on updating itself by providing a wide range of E-commerce and various financial services.
“We are looking at certain options to expand our service including our plans to engage in the mobile money sector,” said Asmare, indicating that the enterprise is conducting its assessment on getting into the mobile money sector. “International partners are also showing their interest to work with us on the mobile money sector. We are also viewing the options of doing it independently,” he added.
In 2020, in order to blossom digital finance and to boost non-cash payments in the country, Ethiopia’s Central Bank regulations allow non-banks to offer basic financial services, potentially opening the door for companies mulling a play in the wireless market by adding mobile money to their portfolios. Following this, the state-owned telecom operator, Ethio Telecom launched Telebirr, the country’s first telecom mobile money service and if it is to push through, the postal service would have been the second governmental mobile money provider.
Given the rich history of the service provider that spans 128 years with close to 900 branches throughout the country, the foundation was and is still said to be ripe for business.
Ethiopia’s financial services sector is currently dominated by bank-led financial services. According to the National Bank directive No SBB/78/2021 the minimum paid up capital required to obtain a banking business license is 5 billion birr which shall be fully paid in cash and deposited in a bank in the name. Owning a business in Ethiopia as a non-citizen is hard, and until recently, even foreigners of Ethiopian descent were not allowed to invest in the country’s banking system.
Tweaking construction industry policy proves vital for progress
Revising a decade old construction industry policy is pin pointed as pivotal to stabilize the market in the right direction for a transformative sector development.
At a panel discussion hosted by the Addis Chamber under the title ‘construction sector’s contribution for national economy: challenges and opportunities’, Wondimu Seta, State Minister of Urban and Infrastructure (MoUI), said that the government is working to revise the construction policy that was ratified in 2013.
“The policy needs to be timely, up to date and renewed to encompass stakeholders like actors in the private sector to have inputs unlike past experiences,” he said.
The State Minister pointed out that the construction sector was booming in the past but the failure to match that with support on the supply end has led it to face a myriad of challenges at the current stage.
He opined that the revision of the policy which was last ratified about a decade ago ought to be tweaked in order to propel the development sector forward.
“Lack of a transformative policy has back peddled development, while other challenges such the global pandemic, hard currency shortage and local conflict have also backtracked the construction industry,” Wondimu explained.
Now MoUI has set short, medium and long term solutions to tackle the problem, “Of course the entire actors, including; contractors, consultants, material suppliers, financers, relevant offices and project owners have to come to the table to provide a holistic solution.”
“To do that we are working to establish a construction industry federation that will include professional associations, contractors and consultants, manufacturers and suppliers and other construction industry actors who will create cooperation, and discuss the issues plaguing the sector in order to come up with solutions to mitigate the same,” elaborated the State Minister.
Previously, there was a construction industry council which had only periodic meetings rather than identifying problems and providing solutions.
The platform was noted to have discussions about the sector as opposed to having a dedicated and detailed studies and solutions in order to come up with policy alternatives for the betterment of the construction industry. “It was not working towards solving the sector problems. Thus we now need a strong and institutionalized entity that shall transform the sector,” Wondimu underlined.
According to the State Minister, like other pillars in the economy, the construction sector needs adequate finance like; bridge financing, project finance, working capital, and others including facilitating a fund for those who demand to invest in the sector without having an alternative to get a required finance, “As a result the government has given attention to the construction sector with regards to access to the required finance.”
The opening up of the financial sector for foreign actors in this regard is expected to come up with huge capacity mainly for the housing finance, which is believed to transform the construction sector in general.
Expanding the sector manufacturing sector is also the other pillar that the government is looking to strengthen in the construction sector.
“As we give attention for the production of household consumers’ commodities, the construction sector needs similar focus. Unless otherwise we shall invest on the manufacturing sector for construction input production so as not to be import dependant, that may derail our transformation in the sector,” he said.
Using modern technology and human capital development in the construction sector have also been stated as crucial to improve productivity.
Regarding equipped contractors with modern technology machinery, a lease financing scheme is said to be introduced.
Championing for a vaccinated Africa
There is a need to continue campaigns for Africa leaders to address bottlenecks and encourage the population to get vaccinated as Africa is experiencing low daily vaccination, a pan African initiative stresses.
On Friday September 16, 2022 international NGOs in partnership with African Union Commission held an event at Radisson Blue hotel Addis Ababa to build momentum around and enhance youth ownership of the Bingwa Initiative and discuss the broader economic crises.
Though the number of new cases of Covid-19 has drastically dropped across the continent, the virus still has significant risk to people’s lives. As of the end of August 2022, only 28 percent of the African population received the first dose of Covid-19 vaccine and about 22 percent are fully vaccinated while the global rate is 62 percent. From the total 623.6 million vaccine doses Africa CDC has received only 68 percent have been utilized across the continent.
The event aimed to raise awareness about the importance of getting vaccinated, increase vaccination coverage in the continent, build momentum and coalition of young people championing the vaccination campaign and also increase the drumbeat of voices of global health leaders CSOs and citizens to have stronger voices in the pandemic response.
As researches suggested that barriers to vaccination uptake include; storage and distribution challenge, pandemic apathy, vaccine hesitancy, lack of awareness or accessibility issues in the rural areas and diminished sense of urgency around vaccination where fatality rate are low
As indicated on the event, in addition to the pandemic, the Russia invasion of Ukraine is adding to the aftershocks of the pandemic as economic growth has slowed down globally while inflation has soared, sparking fears of imminent stagflation.
Motivated by President Cyril Ramaphosa, who called for innovative ways to scale up vaccinations across the continent, an African Union public-private-youth initiative co-led by Africa CDC and the Women, Gender and Youth Directorate through the Youth Division has been conceptualized under the name “AU COVID-19 Vaccination Bingwa Initiative”. The initiative seeks to establish a network of COVID-19 vaccination youth champions across the continent to accelerate the uptake of COVID-19 vaccination in Africa.
The initiative is co-sponsored and jointly implemented by the Africa Centres for Disease Control and Prevention (Africa CDC) and the Youth Division (YD) of the African Union Commission, and seeks to leverage the comparative advantage of two key AU initiatives: Saving Lives and Livelihood (SLL) and 1 Million Next Level initiatives of the African Union Commission.
Participants from AU, INGOs, youth residing in Ethiopia, government authorities, attended the event.
