Despite private bank complaints over shortages, central bank officials suggest that utilisation is the issue, not supply
The Commercial Bank of Ethiopia (CBE) has announced that it has sufficient reserves of foreign currency, although some private banks still claim they have a shortage.
Officials of the Bank told journalists on Wednesday, March 27, 2013, that even if there is a sufficient amount of foreign currency, improper usage has created concerns about a scarcity.
“Most customers file their request in several branches of different banks and that is where the source of the shortage is,” said Mohammed Nuredin, vice president of trade services at CBE. “They are asking for more than they want.”
CBE has had one billion dollars in its reserves over the last three months, according to officials of the Bank.
CBE has reported that only 500 million dollars of total foreign currency have been utilised by customers, and there are no requests from customers that have not been answered by the Bank, said Mohammed.
Considering the country’s overall development activities, the bank is supplying adequate foreign currency, for both private and public sectors, according to CBE officials.
“Thus, the existing scarcity rumour is baseless,” Mohammed affirmed.
However, some private banks claim that there is still a shortage on their side, and the lag in getting the requested amount of foreign currency from the National Bank of Ethiopia (NBE) is becoming a serious problem.
“The number of customers that demand foreign currency is becoming a challenge for other areas of the bank,” commented one of the private bank presidents, who spoke to Fortune on the condition that he remains anonymous. “We have only received 50 million dollars in the last three months,” he added.
An official from the central bank, however, said that both the private and public banking sectors are supplied with adequate foreign currency. He added that they also have to generate their own foreign currency by focusing on export and remittance.
For the CBE, the export sector and remittances are the major source of foreign currency.
“Taking customers demand into consideration, CBE monitors and predicts the inflow and outflow of foreign currency every 15 days, so that it can meet customers’ demands,” Mohammed told Fortune.
In order to avoid the scenes of 2008, when the country was hit by a serious shortage of foreign currency, the CBE is expanding its branches in different parts of the country,” said Yesehak Mengesha, business development director of the CBE.
In the 2008/09 fiscal year, Ethiopia experienced foreign currency depletion, with its reserves falling below 112 million dollars; enough for about three weeks worth of imports.
By 2010/11, the reserve had grown to 2.7 billion dollars, showing a 700 million dollar increase from 2009/10. In December 2011, however, Ethiopia’s reserves reached a historic peak of 3.2 billion dollars. Such a huge reserve caused the government to undergo sterilisation, calling on all commercial banks to buy its foreign currency.
Sterilisation was also implemented for the purpose of reducing the galloping inflation, that had reached 41.3pc in August 2012, back down to single digits.
However, beginning from September 2012, the demand for foreign currency has increased in different branches of all the banks.
“It was a manmade shortage, which does not reflect the economy,” said Yeshak.
With a new branch, that opened on March 22 in West Shoa zone, Oromia region, the CBE now has 647 branches nationwide.
“Our branches are our bases where Ethiopians can send money to their families, in order to generate more foreign currency from different parts of the world, ,” said Yesak.
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