For many businesses in Addis Abeba, last week ought to have been a time tempting even adults to believe there is something of a “Father Christmas” in their lives

For many businesses in Addis Abeba, last week ought to have been a time tempting even adults to believe there is something of a “Father Christmas” in their lives, quips gossip. Several of them were showered with “Christmas presents,” in a form of their wishes granted, claims gossip. As if to dispel the rumours and in an attempt to calm down the foreboding speculations in the market, the state-owned Commercial Bank of Ethiopia (CBE) granted literally all applications made for access to foreign exchange, which importers had placed with it and which had remained unapproved since May 2015, gossip observed.

It appears that somebody finally figured out how to play the game, rather following the rules of the market, claims gossip. Someone understood that many applications to open letters of credit (LC) are not actually based on real demand. Businesses, learning from experience how long it takes to process their applications, have developed a system of submitting their applications far in advance, irrespective of their current needs.

What would happen if the banks were to approve the applications of businesses all at once, unlike in the past where they discriminated on the basis of several factors?

Bekalu Zeleke, president of the CBE, dared last week to gamble on this, claims gossip. Beginning last Monday, a few days prior to the Ethiopian Ghenna, his management began to release foreign currency requests to the amount of two billion dollars, disclosed gossip. This included approvals for letters of credit requests placed by importers of medicines and pharmaceutical items worth 80 million dollars, gossip revealed.

As great as this news may sound on the surface, though, the “Christmas presents” actually caused the market to respond in a frantic mood, claims gossip. Many of the businesses, which were taken by surprise with the sudden green light, discovered that they did not have the Birr to start processing their imports. One importer, whose request was for 20 million dollars worth of imports, was seen running around town to access loans worth 126 million Br, an amount representing 30pc of the total value of the import necessary to open the LC, gossip disclosed.

For the whole of last week, CBE could not begin to process even 10pc of the total number of applications languishing with it, due to businesses’ inability to fulfil their commitments in Birr, claims gossip. Ironically, Birr has become the most after sought currency in Addis Abeba; its value against the dollar showed a sign of decline last week, dropping by 40 cents from the 24.80 Br demanded for a dollar sold in the parallel market the previous week, according to gossip.

However, gossip sees this may change soon with importers collecting all their cash in Birr and depositing it with the CBE, in their rush to access foreign currency. It looks like the administration of Prime Minister Hailemariam got a sigh of relief after the government of Saudi Arabia transferred one billion dollars few weeks ago, as a term deposit with the central bank, gossip revealed. It is very likely that the administration will end up using this fund to pay for wheat imports to boost its ability to overcome the ongoing drought, claims gossip.

In the most unlikely development that all applicants manage to access the ForEx they have asked for, CBE has received the nod from Teklewold Atnafu, governor of the National Bank of Ethiopia (NBE), to borrow from international banks at the market rate, gossip disclosed. Yet, not more than 30pc of the applicants are considered to have real and current needs to start processing their LCs right away, claims gossip.

Gossip finds it interesting to see how the private commercial banks will respond to the new reality in the market. Choked by dwindling deposit mobilization as it is, there will likely be a flight of cash to the CBE by importers who are desperate to take advantage of this golden opportunity; the signs are already there, says gossip.

Published on Jan 11,2016 [ Vol 16 ,No 819]



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