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AU & EU: A partnership anchored on trust

The European and Africa Union’s partnership is one that over the years has been anchored by trust and propelled by the visionary success powered by common values and interest, shared by the two continents.

Africa which is the closest neighbor to Europe has through the Africa-EU partnership, benefited from several engagements in political and policy dialogues, that has well defined the continents cooperative relationship with Europe.

This solid partnership that has withstood the realities of today such as the pandemic and war is a great example that if the two continents come together and seize shared opportunities, those common challenges can indeed be tackled together, and overcome.

In light of the Africa-EU multi-actor partnership, Capital’s Metasebia Teshome, reached out to Ambassador Birgitte Markussen, head of the EU delegation to the African Union and UNECA, for in-depth insights on the flourishing partnership. Excerpts;  

Capital: What are the priorities of the two continents relationship, and how do you see the current state of relations?

Birgitte Markussen: The main objective of what we do here, as the European Union working with the African Union, is really to try to create the best possible relations between two unions. What is interesting to note is that despite our different historical backgrounds, we share a lot of issues in common.

The European Union originated from economics and trade, the coal and steel union, and there were only five or six countries then. At the time, it was to primarily cooperate on trade and economic integration. If you look at the African Union, the former Organization of African Unity was a political project and it was only later, that the whole issue of economic integration came on board with the AfCFTA.

With regards to priorities, we have seven focus areas that our large delegation works on courtesy of our many specialists in different areas. The first of the seven is our focus on climate change which is quite easily one of the big challenges of our time.

Secondly, we are keen on matters digital, and we are very active in getting digitalization and transformation, both in hardware and software running on the ground. On the third spot, but of course not in any particular order, is an investment package we call the Global Gateway, a 150 billion Euro scheme to support Africa for a strong, inclusive, green and digital recovery and transformation by accelerating; the green transition, digital transition, sustainable growth and decent job creation, strengthening health systems and improving education and training.

Our fourth, fifth and sixth focus areas are; peace and security, health and education, and migration and mobility, respectively. Last but not least we focus on multilateralism. Since we are a multilateral organization based on member states, and representing our member states and working in a multilateral forum, this brings forth international law. It brings up the whole issue of, you know, the UN Charter, which is also very important at these times. Sovereignty and climate change are also multilateral issues.

With regards to the two union’s relations, it can easily be summed up as relationship of great trust. Just the past three years alone, we have weathered through the storm of the pandemic and the Russia-Ukraine war, which impacted both our continents.   I believe this relation will continue to flourish for years to come.

Capital: The last three years were full of global challenges: the COVID crises, the Russia-Ukraine war, political instabilities in different countries, including the war in Ethiopia, which ended on November 20, 2022, with the AU-led peace process. So how did you follow the whole AU-led process and the implementation of the agreement?

(Photo: Anteneh Aklilu)

Birgitte Markussen: Since we reside here, I have witnessed personally what it’s been like, and I empathize with Ethiopians, who were heavily affected by the conflict and hard times. I was here from the start. In 2020, the situation intensified even more in 2021, and at the time we were actually asked to relocate, that is, most of the international staff.

Over the course of that period, I and my colleagues tried the best we could to support the African Union in helping and supporting Ethiopia. To this end, I want to congratulate Ethiopia on the cessation of hostilities agreement. I followed the situation closely when they all went to South Africa with the Ethiopian team, the African Union team, the Tigray team, and the UN team. I have followed many peace processes across the world, and what I saw here was really the Ethiopian partners’ desire for that agreement.

We’ve been supporting the African Union in its role. What is important from the African Union perspective is that the monitoring and verification mechanism is now in place.

We are a supporter of any of the commission’s move for reconciliation and DDR initiatives, which are really important as well.

Capital: You came to Ethiopia at the time of the pandemic outbreak; how do you recall the challenges?

Birgitte Markussen: From a personal perspective, you cannot stay at home or in your country when you are an ambassador. We were all in isolation. At the time I arrived here, we were only allowed to have two people per floor. So I came in every morning and greeted the two colleagues. We were on each floor. And then, of course, I made sure I met all my colleagues online. So I had an interaction with everyone because we had people who, for health reasons, lived in Europe in many different places. That was a special job, arriving as a new ambassador. Because usually everybody thinks our work and network as diplomats are just a cocktail.

No, that could not be further from the truth. Our work revolves around engaging with other diplomats to find out what they are doing at the moment. How can we work better together, and so on! And that part was not there the first year, at least. So that was quite a challenge.

If we look at the consequences for the continent, it was economically hit hard. And that’s one of the serious things that we’re working on. I think the growth rate, which has on average been reduced across Africa, was 6%, which is a lot. So that has hit in terms of debt. So we have worked a lot as the European Union on debt recovery. With the IMF, we’ve been strong supporters of that. We need to create a financial space in the core economies to actually recover. There is what is called the European Investment Bank, the world’s largest bank. It’s bigger than the World Bank in terms of its volume of getting and giving loans, and the main thing was the understanding of creating the space in the economies to recover during the pandemic.

Capital: How is the EU working with the AU to sustain and bring peace and stability to the continent?

Birgitte Markussen: Beside the worry of economic issues, the other major, or mega, trend is the rise in conflicts on the continent. The European Union finances 90% of the projects of African-led peace support operations.

The European Union is a very close and strong supporter of African peace support operations. One prime example while I’ve been here is how we worked with the African Union and SADC, Mozambique Cabo Delgado conflict.  We are also working on issues in West Africa, Central African Republic. The European Union is very often invited to have discussions with the AU Peace and Security Council to discuss these different situations. So politically, we support a lot.

Similarly, Somalia has been a big issue where we have worked with the Somalis, the African Union, and their previous mission called AMISOM. We have been there for 16 years together with the African Union and working with the Somalis as well. AMISOM is now on a transition mission so that the Somalis in 2024 will have to take over the security of the country. So we have contributed 3.2 billion Euros in total to security and developments in Somalia. We’re supporting the transition. I think Al-Shabaab is still active and has security issues, and that’s something we are discussing with the African Union at the moment, to unburden the situation.

Also at the UN level there has been a long discussion of reforms in the UN on should Africa have a stronger voice? At the UN Security Council as the European Union, we’ve supported that. We’re also supportive of a very important discussion at the moment where we are looking for UN contributions to African led peace support operations. That’s a discussion ongoing right now.

We have been asked many times whether the war in Ukraine is affecting the level of contribution and engagement of the European Union, and the simple answer is, No! If you look at what was foreseen, we have kept our engagements.

Capital: What is the EU doing in regards to the current conflict in Sudan?

Birgitte Markussen: For the case of Sudan, on the 15th of April this year, when it all started, I was actually interviewed just one or two days after the fighting started and can confirm that the issues at stake are really serious and complex.

We have worked very closely again with the African Union, and they are taking a leading role. They have set up coordination platforms, called an expanded group. There is also a core group where we are active in three areas. One thing is certain: everybody is worried and working to get a permanent ceasefire. So far, there have been 10-15 ceasefires that have not been fully respected. And I really feel that this must be so difficult for the Sudanese people, and we are keenly following the matter.

There has been a process in Jeddah led by the US and the Saudis; this is a process we support. It’s going well with the US and Saudi Arabia, and if anybody needs us, we’re there. For us, it’s not a parallel process with other processes. It’s just a very important process altogether.

We are very active directly as the European Union in humanitarian support and working with the African Union and the UN. We have already provided 90 tons of humanitarian assistance twice through Port Sudan and Chad. And we provided 73 million euros in support. What is important politically is that we keep insisting on humanitarian access and the respect and protection of civilians.

We are also focused on bringing Sudan back to a politically civilian-led situation. We are really working with the Sudanese, with the AU, and with IGAD. I have a lot of confidence in them at the moment that they can speak to the two generals. Sudan is such a big country with such a rich history and culture, and the population is suffering at the moment. So we are working on following all three tracks.

Capital: The other main issue is economic cooperation; how do you see the current state of the two continents economic cooperation?

Birgitte Markussen: I think what should be the vision for the African continent is really to get more production, and utilize the raw materials here. I think that will add value to the economy and will be really important.

I think the ambitions are there. We work closely also on that front, if you look at the foreign direct investment 25% in Africa comes from European companies. It’s by far I ahead of others, and I think Chinese maybe have 15% and Russia is below 1% or something close to that. I think that is a signal of the trade cooperation and the direct cooperation.

As the EU ambassador, I don’t work directly with companies because you represent all. When I was the Danish ambassador, there were so many impressive cooperation’s going when you dig into it.

Our main focuses are, as I mentioned, the seven areas, but we work very closely on the AfCFTA. We have mobilized other EU member states to support the negotiations because trade negotiations are really technical in the sense of how do you ensure the trade of goods and what are the regulations that need to be in place? And as I said, originally, the EU came from that background. We have been working closely with the African Union and the AfCFTA Secretariat to make that happen. This could be the legacy of Moussa Faki to make the AfCFTA work; it’s within his two terms as chair; it’s within his mandate.

We also need to connect the dots of trade with the Global Gateway, which is a big infrastructure investment from the European Union. We are looking at 11 transport corridors across the African continent to complement the African Union, which has its own infrastructure investment plan. And we, of course, work closely within that plan. But the main idea is really to connect the dots so that the value chains can start to be negotiated in West Africa, Central Africa, and East Africa.

Capital: There are some rumors and concerns that western countries don’t support or don’t want to see the full implementation of the AfCFTA as it gives Africa the power to stand by itself. What is your comment on this?

Birgitte Markussen: I’m so glad you raised that. Yes, I heard that, and it’s absolutely not true. There is confusion here. We worked for many years maybe more than 10 years on something called the Economic Partnership Agreement (EPA). That is a way by which we have ensured that especially the least developed countries have tax-free access to the European market. 90% of what is imported from Africa comes into Europe under these trade agreements. It is totally different from the AfCFTA. This is not undermining the AfCFTA.

What we have tried to do from the European side is get better trade between the two continents. We support AfCFTA because it is important, and what’s more important is that it’s the African Union and the African member states in the lead.

Capital: The other big global issue is the Russian-Ukraine war, where all of the EU states are on the side of Ukraine and here most of African countries prefer to remain neutral and some are in the side of Russia and there is a so called African mediators, what is your reflection in all of these?

Birgitte Markussen: This has been a big issue for me as European ambassador accredited to the African Union where you have all 55 African Union member states represented. Yes all European Union member states are totally on the same line. This is illegal aggression from Russia, violating the UN Charter of national sovereignty and international law.

They have no rights to invade and to make the aggression into Ukraine. For us, that’s a very principled thing, because we stand up for Ukraine but we also stand up for the multilateral order. We stand up for the UN Charter.

When I look at the African continent, it’s the most divided continent on this issue. It was not a surprise to me, because I’m here. But I think, here numbers count. The last vote in New York we saw on the road to peace for Ukraine. You saw 30 African countries standing up what I say for the UN Charter because they voted in favor of that resolution. And then there were 22 that were not voting or abstained and then you had some countries voting against the resolution, Mali, and Eritrea particularly.

I think this is one of the challenges right now, for the African Union not to get divided over this and to stand up for their own agenda of national sovereignty.

(Photo: Anteneh Aklilu)

This is really an issue of standing up for the UN Charter and for the international law and I know that African leaders are thinking hard about it. We saw President Cyril Ramaphosa last week in the interviews he gave in the peace plan from the African leaders. There are some things that Ukraine will never accept as a starting point for a negotiation but I think it should be very clear that we as Europeans want peace. It’s also influencing us. I really think this is one of the major issues also for the African Union and member states to think about how they want to position themselves on this issue. I think this is a historic moment where we as European encourage everyone to stand up for the international law and the UN charter.

Capital: Minimizing the westerns influence in the continent was also raised as a reason for African countries to be divided on this Russia- Ukraine issue, what do you think of this?

Birgitte Markussen:  I have had a good and long discussion with many of the ambassadors here to understand a bit rationally on these key issues.

One of the arguments is that we really don’t want to have a history where it was not positive for us to take sides between one big party and one other global player. So, we would rather stay out of that.  Although other countries especially in Southern Africa, they have a history, they have seen the support of the Russia in their independence. I fully respect that history, and I know that’s also a painful history for many African countries but I think it’s a type of question where you really have to stand up for what future you want.

When I was a young girl I used to sing in a choir, and we sang the songs for freeing Nelson Mandela. If you go and look at the story of the Nordic countries, we were standing up even as teenagers singing for the freedom of Nelson Mandela. I understand their point but I think this really is a big issue for the future for all of us.

Capital: Throughout the last three years, what has the EU done in supporting the African union in promoting good governance, democracy and human rights?      

Birgitte Markussen: On government, and human rights a very concrete example is election observations. We work together with the African Union. Very often you will see European Union election observers working with African Union election observers. We have that interaction. Democracy is built between elections. But election is an important time where also problems come but we work a lot on that. We also work on something called the Africa governance architecture with the courts System in Banjul. Every year we have a dialogue on human rights and governance. We have a special representative for the EU who works on Governance and Human Rights. It’s a big issue and it’s very closely linked to many conflicts as well; because human rights are tested in conflicts.

Capital: The other major global issue is climate change, of which Africa is a least contributor but often the most affected continent. How are you working with the AU on this front?   

Birgitte Markussen: In addition to being a diplomat, I am also a climate activist. For me, there are two key issues at the moment. One is the war that we have in Ukraine with the global impacts and the other one is climate change. It’s a real issue. It’s an issue where all of us have to stand up and change the way we’re living. I’ve been involved for many years in climate negotiations and for those who have say that it’s not manmade it is, and it is changing. Some places have droughts other places have too much rain. The ice on Greenland, the world largest island is melting. So the climate change is real.

Europeans fully know that Africa is the most affected that’s why we’ve been strong supporters. The main area for Africans is adaptation to climate change, because Africa is not a big emitter. So it’s not mitigation it is the adaptation part of the negotiations.

So as Europeans, there would have been no Paris agreement if the African and Europe had not worked together. And what you saw last time in Sharm-el-Sheikh at the COP 27, which was held on the African continent, was actually the support of the EU that made this new fund for loss and damage related to climate change.

We very much recognize these imbalances and we’re trying to support them and see how we can work together especially on the adaptation agenda, and the loss of damage.

We have now several policies and we work a lot on the continental policies and for the member states to implement and follow up, on the same. We have three climate change policies that we have worked on with the African Union. Moreover, agriculture is a key area where we also work with climate change both in getting more resilient and also in terms of influencing the green agenda.

Capital: How is the EU working with the AU with regards to the implementation of agenda 2063?

Birgitte Markussen: All the areas I mentioned are included in the agenda 2063. There are experts here at the Delegation that work round the clock on matters policies with the African Union. A lot of our job here is also combining the policies of our member states with the African Union’s policy. So agenda 2063 is our framework.

There is a 10 year implementation plan and a new one is to be agreed very soon at the AU mid-year summit in Kenya. All that we do is in alignment with 2063 agenda of delivering real changes.

Capital: In your view, what are some elements that you think these two organizations can learn from each other?

Birgitte Markussen: I think I’ll go back to what I said where we come from, because we as the European Union we have a history of starting with economic integration and then later on we had more and more political integration as well. European ministers meet once a month in Brussels. Of course, each member state has its own policies, but they coordinate and are also impacted by decisions taken in Brussels; and that’s the political integration that we have,

What we can learn from each other and I say this having had discussions with my African Union colleagues, I emphasize a lot that AfCFTA has to be a legacy. Because that is what will bring the changes I think for the African Union and for the member states. So it’s good to see the African Union Commission do so much, but it’s also the leaders, the heads of states and government that can actually implement for this to happen.

Some of the value chains that have started now, in West Africa and southern Africa, are on good tracks. This is the way forward. I know that some of the leaders both in these two regions have taken the leadership on this because this will bring changes and a better economic development to all citizens.

It really matters of course that you have a good economy to send your children to school, eat well, and have an established social security. So the AfCFTA is what we bring as European Union with a long history of economic integration leading to prosperity and peace for a long time. We won that at some point, we won the Nobel Peace Prize because of the peace that had come to the European continent. The economic integration has made it almost impossible to go into a war with each other, and I believe that will be realized by the African continent as well.

Capital: From your three years stay in this office, what successful projects can you raise as an example?

Birgitte Markussen: Despite the challenges that we have faced I am proud to say that we have had a fair share of successes, as is seen in our reports. When I came, the headline was vaccines, vaccines and vaccines, because I came under the pandemic times. So I’m very proud of that within one and a half years we also started vaccines productions and manufacturing in Africa. The EU exported a lot of vaccines; I think up to 50% of our vaccine production was sent to Africa.

We have now six countries where you have production of vaccines in Africa, not only for COVID-19 but for other diseases as well which is very important. Of course this will go a long way in setting up infrastructure for the continents health sector and support the Africa CDC.

The other thing is, of course, the AfCFTA. I really think we as the EU have worked hard on this one. I also think we made differences on peace and security. Of course, the guns are not silent on the African continent but there are many situations where I think if we had not worked together, it would have been in a different place.

Since I came, we have also worked on the people to people program which aims to bring the best of both unions and the people together through culture, music, and performance. The latest project, Europe Day, involved supporting an African European band called Masha, who played at the largest concert in Brussels. The program also encourages young musicians from Senegal to join African-inspired bands, ensuring that music in Europe is not limited to African sounds and beat.

UNEQUAL EXCHANGE & DEBT

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Unless we Africans bury our perennial naiveté once and for all, we are going to perish, literally! First and foremost, we should fully recognize that the reigning global order is not set by us, nor is it primarily intended to benefit our sheeple (human mass). It is time Africans understand the intricate workings of the world system that continues to polarize human existence, both at the level of the individual as well as countries.
Unequal exchange is a permanent pillar of the modern world system. The North extracts resources, financial or otherwise, by employing skewed systems of exchanges! The value of currencies in the global South rarely appreciate vis-à-vis the currencies of northern countries. The economic model that we blindly follow cannot and will not allow our currencies to hold their values against the currencies of the north through time. One can visualize ‘unequal exchange’ by just looking at economies using PPP (purchasing power parity). When goods are priced using PPP, the effect of unequal exchange becomes very clear. Same kinds of goods/services have different prices, depending on location. In the north, prices tend to be dear compared to southern countries. This difference is essentially what is extracted from southern countries on a continuous basis. Going through the analytics of this thesis is certainly beyond the scope of this column. Suffice is to say, this massive loss is 3 to 5% of OECD’s GDP, on annual basis! This is where the actual structural inequality/polarization of the global system resides!
Debt is another scheme of the world order that systemically disfranchises the gullible. In the current monetary regime of the world system, money is created out of thin air and is disbursed as interest bearing financial product in the real economy, mostly to those connected to dominant interests. This systemic extraction of the sweat and blood of labor (including that of entrepreneurs) is another pillar that upholds continuous polarization. Individuals, corporations and states are all affected by this fraudulent scheme of the global banking cabals. Even ‘developed’ economies like Greece, Ireland, Portugal, Italy, Spain, etc., have fallen through the trap and are made to suffer the consequences of phony money creation and its rampant avarice! We admit; our continent has a dearth of competence to interrogate such subtle and brutal economic arrangements of the reigning world system. Obviously, our pompous elites are not up to it. As a result, our sheeple always find itself at the short end of the stick, so to speak.
To understand and elaborate the prevailing polarizing globalization, Africa’s organic intellectuals must play the critical roles. By organic intellectuals we mean enlightened individuals with commitment, confidence, competence, courage and caliber to create social consciousness, with a view to transform collective existence from the reigning life-destroying trajectory (of the world order), to a more democratic, sustainable, equitable and resilient system! This also implies that we should be left alone (or force ourselves to go it alone) to do what must be done, whatever the sacrifice. This is what the East Asian countries did, to some extent, before achieving some semblance of economic independence. The case of China is probably the best example. Countries in Africa must encourage thoroughgoing independent analyses at all levels. It is instructive to look at the case of South Korea during its transformative years. General Park set up an ‘Economic Development Board’, to lead the whole new initiative. Members of the board were mathematicians, physicists, statisticians, engineers, etc. and it was chaired by the president himself. There were no economists, accountants, managers, lawyers or the likes, in the board. The reason: the task at hand required original thinking, thinking that start from first principles, which naturally reject phony assumptions leading to blind mimicking!
We believe Africa has no choice but to fully engage in more creative ideas. It needs innovative approaches to solve its seemingly intractable problems. It is inevitable that mistakes will be made, but these mistakes will enrich the discourse and add to the whole cumulative experience. As the saying goes, ‘what doesn’t kill you will make you strong’. The western model of accumulation at all cost, is a sick philosophy we should intentionally and forcefully abandon. In its place, life centered ideologies need to be propounded. Exposing the whole truth about the system that is destroying both life and life supports systems of our precarious planet must be agenda number one! In Africa and so far, it is our learned zombies, what we call the Ivy Idiots (‘Intellectuals but Idiots’, in the recently coined phrasing of Nassim Taleb) who have been given ample space to pontificate about the various ‘make believe’ scenarios (present & future) that have no rational basis for their realization. Our lives, increasingly based on material consumption will not bring health, wealth or wisdom. Copy catting unworkable and unsustainable nonsenses, is not only very pathetic, it is also dangerous. Our indoctrinated youth expect a future livelihood that closely mimics what is piped through the stupid box, without realizing that it is all a pipedream! As we never tire of repeating; we need to have another six earths before the rest of the South can have a livelihood similar to that of the North. This is not a matter of opinion; it is a scientific fact!
Even those who have been benefiting from the lopsided arrangement of things are no more secured in their old ways, hence are trying to change or at the very least, rearrange the world system. On the other hand, the multipolar world that is trying to emerge is considered a threat and every aspect of its manifestation is being fought tooth and nail by entrenched dominant interests. The wars in MENA, pending wars in Eastern Europe, South China Sea, South America, are all reminders of where the core values of the status quo lie.

This was first published in May 2018

Astronomical imbalance on sugar supply-demand raises alarm

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Only ten percent of the national demand for sugar has been fulfilled this year, the Ministry of Trade and Regional Integration (MoTRI), astonishingly reveals.
During the 2022/23 budget year 11 month report tabled to the Trade and Tourism Standing Committee of parliament, MoTRI disclosed that the state owned sugar supplier, Ethiopian Sugar Industry Group (ESIG), supplied only 10 percent of the actual sugar demand of the country.
Mesekerem Baheru, Domestic Trade and Consumer Protection Directorate Head at MoTRI, elaborates that the Group has met 30 percent of the target it expected to provide, “The supply however only managed to cover ten percent of the demand.”
According to the 11 month report, in the budget year, of the first 11 months, 3.3 million quintals of the sweet was expected to be distributed but the actual performance came at a shy one million quintals.
According to Mesekerem, when millers of the Group suspended their production for annual maintenance, there was a plan to import two million quintals but it was not supplied until the end of the 11th month of the budget year.
“Because of several reasons, ESIG produce very limited amount of the sweet due to that most of the regions were getting less than 25 percent of their quota which affected the performance of the sugar sector,” Mesekerem explained.
The state owned estate which is responsible for the supply of sugar from its millers and import, was hit with instability on some of the production hubs and production was under capacity for others. Similarly the import was not effective for almost two years due to challenges stemming from the procurement process.
The group stated that several external and internal challenges hampered its activities making it to not attain its maximum potential.
ESIG, which manages about eight active farms with milling facilities, is projected to fulfill the production of 2.27 million quintal of sugar.
“Owing to various reasons, production this year has been a shadow of what it was last year. Some of them, a few weeks ago have run out of production,” Reta Demeke, Public Relations Head at ESIG told Capital recently.
“Most of the factories started production late because of several challenges including lack of parts and external challenges,” Reta highlighted, adding, “Production is a chain process which primarily is supposed to be done in the preceding seasons.”
Ethiopian sugar millers have a capacity to produce over 4 million quintal per annum, while the actual demand is estimated at about six million quintal. However internal and external challenges pushed the Group to produce at least 2.27 million quintal for the budget year as per the information Capital obtained from the Group early April.
Besides local production, the Group is also importing sugar to fill the gap. For this year, the bid was opened early November in 2022 and Osirius Group was selected to supply 200,000 metric tons of sugar owing to its lowest bid offer compared to other two bidders.
The Group had made several efforts to import the product through the company, while MoTRI on its 11 months report stated that the imported item was yet to be delivered.
Experts in the sector said that the sugar market is currently widely covered by franco valuta as per government’s green light dating two years back. This has been highly eased in the past budget year with private players said to import whatever amount of the commodity they desire with their own foreign currency.
According to MoTRI, in the stated period, 8.3 million quintal of sugar was imported through franco valuta. The amount that was supplied by private players was over 800 percent higher in contrast to source by the state owned enterprise.
Those who closely follow the business told Capital that the failure that occurred at ESIG is covered by the private sector who imported the basic commodity on the franco valuta scheme.
The sector experts critiqued the failure of the Group which led to the inability to secure the sugar for the last two years, which in turn disrupted the market.
Capital’s effort to further obtain information from the Group on the matter was unfruitful.

Policy shifts signaled as vital to escape the perils of liquidity

Policy design to control currency outside banks underlined as of paramount importance to improve liquidity resources in the financial industry.
Experts in the financial industry argue that there is a missing link in the system that has made it hard to combat currency that is circulating outside banks, which is highly affecting the macroeconomic circumstance.
Liquidity challenges have now become a notable site as one of the problems bewildering the financial industry to which some experts opine is an attribute of the loss in control of banks by the regulating body.
On the other hand, some argue the problem is seen on most of the financial industry players, “Nevertheless, it’s a problem that occurs in the absence of a proper strategy and policy which is expected to be emplaced by the government.”
If the liquidity problem is happening in one or two banks it can be stated as a fractional problem of the given financial firm, but the reality is different.
“Now, almost all of the financial institutions are facing this challenge,” one of the major bank leaders expressed.
As the leader informs Capital, the situation indicates that there is systemic problem in the market.
Experts to this end have critiqued government to revitalize its policy.
“Resources that come to banks are not an expression of the market,” financial experts claimed.
They underlined that the report of the National Bank of Ethiopia (NBE) shows that the currency circulating outside banks is increasing from time to time, “This is one of the indicators of how problematic the systemic process is rather than the problem of the banks.”
“This should be corrected immediately with different policy instruments, otherwise the problem will be extravagated,” experts signaled their concern.
According to NBE’s second quarter report of the 2022/23 budget year, the currency outside banking system beat 200 billion birr for the first time in the sector.
The reported indicated that in the second quarter that closed on December 2022, the currency outside banks reached 201 billion birr which rose by 26.6 percent compared with the same period of a year ago.
That amount was however 169.6 billion birr in the first quarter of the budget year which elasticated by over 30 billion birr or 18.6 percent just in three months time.
As of December 2022, the currency outside banks had a share of 8.7 percent of the broad money that increased by 0.4 percent compared with the preceding quarter, while its share for the broad money has decreased compared with the preceding budget year..
In his recent appearance at parliament on Thursday July 6, Prime Minister Abiy Ahmed acknowledged the situation.
“Significant amount of resources is circulating outside the banking system,” the Premier said.
He underscored that as per this coming budget year strategy, his government has taken a direction to tighten monetary policy.
He explained that controlling the money supply and sucking the resource that was pumped to the market will be a policy that his government will take into account in the current budget year that began yesterday, “This move will help to control the market and inflation.”
He added that controlling the resource circulating outside the banking system will be undertaken with the urgency that is required.