It is the memory of those at the gossip corridors

It is the memory of those at the gossip corridors that the nation’s longest serving finance minister, Sufian Ahmed, once shared in Parliament, his belief that he would not see the forex crunch resolved in his lifetime. For close to two decades now, Ethiopia’s treasurer has reined in an economy which has deeply structural and terminal shortages of foreign exchange, both for casual travellers and major importers.

In a way, he and his comrade-in-party at the exchequer, Teklewold Atnafu, have been managing scarcity during an era of economic boom that is unprecedented in Ethiopia’s history, gossip noted. Nonetheless, it is an economy with a record in negative trade balance averaged at 1.8 billion dollars in eight years beginning in 2006. Neither does the forecast serve as a source of comfort, gossip noted. The negative trade balance will reach historic proportions of close to four billion dollars at the end of 2015.

Thus, like any economy which is all about managing perpetual scarcity, the story lies in the fault lines of providing access to the resources in short supply. And the nation’s reserve in foreign currency has always been short compared to the bill it has to foot to get its imports. While the minimum reserve is meant to cover three months of imports of any country, Ethiopia’s average 2.5 billion dollars in reserve has always been enough to pay for its imports of just below two months.

Certainly, it is a source of great discomfort to the administration’s macroeconomic team chaired by Prime Minister Hailemariam Desalegn, and comprising Sufian, Teklewold, Neway Gebreab, chief economic advisor to the Prime Minister, Mekonnen Manyazewal, commissioner of national planning, and Kebede Chane, minister of Trade.

It could also be a discomfort to the nation’s importers who are fighting to get their hands on what little dollars there may be. But for some, who are good at thriving in situations of scarcity and deprivation, the crunch is a means by which to enrich themselves in superb manner, gossip claims. It is still fresh in the minds of those at the gossip corridors that some of the private commercial banks had had their officers embroiled in illegitimate affairs, furnishing foreign exchange to importers in return for commissions. At the start, the allegation was that for every dollar those officers made available to importers, they were paid an equivalent of one Birr in commission, gossip recalled.

Not only has this practice continued in a broader way than it once was, the rate has jumped from one to one ratio to rather one dollar to three Birr in commission, gossip claims. Ironically, the regulators at the central bank appear to have little leverage in stopping the practice, largely in the absence of sheer evidence, despite the fact that it is common knowledge in the business circles in Addis Abeba, according to gossip.

The forex crunch has also transformed itself as an instrument of competition among businesses, claims gossip. It has attracted a large number of businesses in the export market with the motive of exporting primary goods at a loss, simply to get foreign exchange proceeds, claims gossip. A directive which gives a priority to exporters over the proceeds they have collected, has enabled the same businesses to open an import line of business which helps them profit from their imported merchandise; the profit margin is so high, it also helps them recover the losses they incur during their exports, gossip claims.

For some though, this appears too much trouble to take, according to gossip. There could also be a way whereby they make money in all, but do some tiresome job, according to gossip. The latest way of skimming an economy in eternal scarcity is to furnish the foreign currency in their accounts to other importers in exchange for kickback in Birr, claims gossip. Again, the town’s rate goes at three Birr for a dollar, where one Birr is shared with the officers at the bank involved in the transaction, gossip alleged.

Published on Jul 20,2015 [ Vol 16 ,No ]



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