Forex Crunch Hits Medicine Supplies Hard

Though forex crunch has been the major challenge of the nation for the past couple of years, the shortage has become chronic starting last October, subsequent to the announcement of the 15pc Birr devaluation. This had a major effect on the nation's pharmaceutical and medical equipment supplies. It has become very hard to get vital drugs such as Insulin, and drugs for hypertension in the market, reports FASIKA TADESSE, FORTUNE STAFF WRITER.

There was no tougher time than this for the Ethiopian Somali Regional State Health Bureau, which treats 30,000 people with eye disorders annually.

The Bureau has a campaign in the area to treat people with eye infections, glaucoma and performs surgery on people with eye diseases, as the region is highly affected by eye infections due to the lack of water, the dusty environment and the frequent droughts in the area.

According to the report of the Ethiopian Journal of Health Development, the regional state has a 22.6pc active trachoma prevalence rate. As a result, huge numbers of people receive medical treatments through the campaign.

The Bureau needs to get medicines, such as eye drops and artificial human lenses, disposable medical equipment and surgical equipment to treat these individuals. From its annual budget, the regional state spends close to 40 million Br to procure pharmaceutical products and medical equipment, of which one-fourth is used for eye care and treatment.

And here lies the recent challenge faced by the Regional State’s Health Bureau.

Since the beginning of the current Ethiopian year, the shortage of pharmaceutical products and medical equipment supplies has severely hampered the Bureau’s work.

“We have approached almost all of our suppliers,” said Ahmed B., representative of the Bureau. “None of them could supply us, stating they have no stock,” he added.

As an option, the Bureau attempted to approach suppliers in a restrictive bid to acquire the supplies, which, again, bore no fruit.

The last resort of the region was approaching the Pharmaceuticals Fund & Supply Agency (PFSA), a federal body which was established in 2007 to sustainably supply pharmaceuticals to the public. It procures the products and distributes them to hospitals and regional bureaus, representing 70pc of domestic procurement demand.

Two months have now passed since the Bureau approached the PFSA to get the required pharmaceutical products but has yet to receive any. The Bureau’s operations remain stuck.

The region’s challenges are not the only ones in the nation, which imports 80pc of its medical equipment and pharmaceutical supplies. Less than 20pc of local pharmaceutical demand is serviced by nine operational manufacturers in the country.

Total demand is estimated to stand between 400 million dollars and 500 million dollars a year, according to Asoko Insight, a company which conducts market research in sub-Saharan Africa.

Wherefore the 200 importers of pharmaceutical and disposable medical products along with the PFSA struggle to meet the demand, which has been growing for the last five years, with a 25pc growth rate a year alongside import demand.

However, they were not able to meet this demand recently due to the chronic foreign currency shortage in the country. Though the challenge was recurrent in the past three years, it has become severe in the last couple of months.

Data from the International Monetary Fund (IMF) demonstrates this. In its report published in January 2018, the IMF signalled that the forex problem is far from being resolved, indicating that the international currency reserve has dwindled to the level of only being able to cover 1.8 months of the import bill of the nation.

Moreover, export revenue could not even balance the trade deficit as the country only earned 1.23 billion dollars from exports in the first half of the current fiscal year.

At the end of the day, it becomes very challenging for the importers to open letters of credit (LC) to import items, particularly pharmaceutical products and medical equipment.

One of the companies which bore the brunt of this issue is Baro Pharmaceuticals Plc, a company which has imported pharmaceutical and medical supplies worth 30 million Br annually for the past seven years.

“It has been seven months since we got a satisfactory amount of foreign currency to import the supplies,” said Demeke Ado, general manager of the Company.

The Company requires up to 150,000 Euros to procure and import one batch of products from its suppliers in Spain and Italy. But for the past several months, it received 15,000 dollars a couple of times, which enabled it to import only a portion of its regular supply.

“We have applied to around 12 banks to get foreign currency,” Worku said. He has not been able to conduct any transactions for the past two months, leaving 12 employees idle. “No one has responded to us yet.”

Due to this, the shelves of many drug stores in the city have remained empty for the past four months and, more importantly, for the past month. Most notably, insulin, omeprazole, medicines for hypertension, eye care medicines, glucose, and syringes are in short supply in the market.

“We receive almost 20 people a day asking us for medicines that we do not have,” Letay Hailu, senior pharmacist at Roze Drugstore, which is located close to Ghion Hotel, told Fortune. The store has been in business for the past 20 years, supplying human drugs, situated within walking distance from Gandhi Memorial and Zewditu hospitals.

The last time the store got Insulin from wholesalers was four months ago, according to Letay. And now the stock of the store, which sells over 1,000 types of drugs, started getting depleted. However, products supplied by local manufacturers are available.

Therefore, it is worrisome for people who regularly take drugs for chronic illnesses as the 304 pharmacies and the 250 drug shops across the city cannot provide the supplies.

As a means of escaping this shortage, patients and individuals who are in need of medical supplies are buying the medicines on the black market, from drug stores that stock rare medicines.

“We are getting the supplies from the parallel market for almost double the price,” said a person who has recently purchased medicine from these dealers. “Since getting the medicine is a must, I pay 180 Br for medicine which I had been buying for 98 Br,” he told Fortune.

The situation will be worse if things continue in this manner, according to Tsegaye Haileyesus, a pharmaceutical products importer for the past decade and a representative of the Ethiopian Pharmaceutical Products Importers.

He explains that most of the pharmaceutical products and medical equipment importers stock the supplies for no more than six months and that they can run out of stock in a short time.

“As the shortage was recurring for the past four years, existing stocks could be depleted within the coming two months, and things could get worse,” he told Fortune.

Though the shortage started to be seen in August 2017, the situation has seriously deteriorated since October 2017. The latter month also saw the devaluation of the Ethiopian Birr by 15pc against the basket of major foreign currencies.

The devaluation was followed by a couple of directives issued by the National Bank of Ethiopia (NBE), including ordering private banks to transfer 30pc of their forex earnings to the accounts of the Central Bank and allowing exporters to retain 30pc of the forex they generate, up from 10pc.

The NBE also increased the list of items which are prioritized for foreign currency allocation. Petroleum, agricultural machines, fertiliser, medicines and supplement food for babies were the items which received priority. Now, stationery supplies, such as expertise books, are also added to the list, narrowing the chance of getting foreign currency to the other items.

“The new changes almost blocked us from allocating forex to importers, unlike in previous days,” said a senior executive at one of the mid-sized banks. “Almost 60pc of foreign currency coming to the commercial banks is sent to the Central Bank in the form of NBE transfers and exporters’ retention account.”

However, Yohannes Ayalew (PhD), chief economist and vice governor of the central bank, claims that enough amounts of medicine are entering the country.

“The shortage might be caused by other issues, not by forex shortage,” he argues. “The item is on the top of the priority list of getting forex allocation.”

But Yohannes’s word goes against the word of the importers and private banks, who claim that they are still waiting to open an LC.

“I have applied to almost all the banks including the Commercial Bank of Ethiopia (CBE) to open LC four months ago, but got nothing,” said Demeke of Baro.

But for an economist with decades of experience, the country needs an immediate solution, such as allowing a Franco-valuta, a process of importing goods using foreign currency from the importer’s own source.

“With the proper caution against the risks and damages, this solution has to be carried out for at least three months,” he told Fortune. He added that “such kinds of problems relating to medicine and health can’t be tolerated”.

However, importers such as that of Baro Pharmaceuticals are planning to cut the number of staff by half to reduce their administrative cost and wait for better days. Meanwhile, The Somali Regional State Health Bureau is considering to suspend part of the campaign temporarily.


Published on Mar 03,2018 [ Vol 18 ,No 931]



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