The Central Bank claims that it’s becoming difficult to apply strong fiscal and monetary administration to stabilize inflation.
The National Bank of Ethiopia (NBE) governor, Yinager Dessie, in his first quarter performance report to the House of Peoples’ Representative Plan Budget and Finance standing committee underlined that illegal high cash flow in the economy is increasing the inflation.
“Excess amount of cash flow in the market is one of the reasons for the increasing rate of inflation in the country,” said the governor.
“At the time when we introduced the new currency note, we set a maximum withdrawal and cash holding limit for both individuals and organizations. But it is not working as expected as a lot of currency has been injected in the economy in different ways,” Yinager explained.
Since the beginning of demonetization in mid-September 2020, NBE has been imposing different limits on deposits and withdrawals.
Speaking to the standing committee, Yinager indicated that, NBE’s method to control the growing inflation rate is by increasing or decreasing commercial banks reservation through the open market purchase or sales of government securities.
“NBE is working on effective ways of curbing and controlling illegal flow and base money circulating in the market and in commercial banks deposit. The cash deposit decrease has resulted in NBE buying t-bills with 20 percent of the cash to fulfill budget deficits and in minimizing unnecessary cash flow in the market,” the governor cited the measures taken.
“We need to apply strong fiscal and monetary administration to control the cash flow in the market,” said Yinager, adding, “We are trying our best but due to the current situation in the country it is becoming difficult to apply strong fiscal and monetary administration.”
“We have started applying new rule to make changes in controlling the base money in the market. NBE has been tracking investigations and evaluating the illegal actors through their storm activities of hoarding cash illegally,” the governor pointed out whilst indicating the issue needed collaboration among different authorities.
One of the new instruments that have been used is the implementation of a new directive that provides privilege for collaborators who inform illegal actors to the regulatory body.
The Governor said that as per the new directive, NBE has facilitated reward payouts for those who provide intel on the foul players, citing that rewards will be got off the property of the illegal actors.
Inflation is now becoming unendurable for the working class with food, housing, fuel, industrial input, and rent skyrocketing in price. In its recent report the Central Statistics Agency showed that Ethiopia’s inflation decreased in August falling to 32.5% year-on-year from 33.5% a month earlier with an overall month-on-month inflation falling to 2.9% from 3.1% in July. Although there is a decrease the percentages are small in comparison to the government targets to which the Ministry of Finance expects to cushion inflation to 11.9 percent until the end of this fiscal year which seems unrealistic.
“Although we are doing lots of efforts, in my opinion it is difficult to achieve our targets,” the governor vividly remarked, adding, “It is becoming difficult to control the increasing rate of inflation. After the government took stringent measures it has shown slight improvements but it is not as expected.”
Stabilizing inflation becomes a tough nut to crack
Gold smuggling shrivels markets as the Chinese get involved
Remittance decreases by 80 percent
Ethiopian gold export shrinks as both foreign and local residents get in on the illegal gold trade. As the National bank authorities claim, Chinese residents in Ethiopia have also played a hand in the smuggling of gold in the country.
In a report presented to the House of Peoples’ Representatives for the Plan Budget and Finance standing committee with regards to the first quarter performance of the National Bank of Ethiopia (NBE), Yinager Dessie (PhD), governor of the bank, indicated that, “It is becoming hard for the national bank to control the situation. In addition to Ethiopians, the Chinese are also engaged in the illegal trade.”
As the governor indicated, NBE is buying gold from producers and suppliers 35% greater than the global gold purchasing rate while expansion of illegal gold producers in gold producing areas has shriveled the gold which flows to the central bank.
“We have started to closely follow the matter with regional authorities and city administrations and things have been showing progress in the past three weeks,” said the governor adding, “Recently, in Oromia region around Shakiso, our cooperation with local authorities has led us to detain Chinese suspects engaged in illegal gold trading.”
Oromia, South West and Benishangul-Gumuz regions are known as the highest gold producing areas.Ethiopia has earned more than 560 million U.S. dollars in revenue from gold exports during the last Ethiopian 2021/2022 fiscal year.
In the first quarter of the current fiscal year as the governor indicated the country has earned 977 million dollars from export while it has paid 3.6 billion dollar to import, oil which takes the major share followed by capital goods.
“To fulfill the trade deficit, we have been doing a lot, however it will be difficult to continue, and thus we need to improve supply and export in the coming months,” the governor underscored.
Flower and coffee have now taken the larger piece of the pie for the export earnings. The agriculture sector mainly coffee export has been dominant earning USD 426 million contributing to the biggest share for the total export value. As the governor indicated export of leather products, pulse and oil seeds, textile and gold has shown decrease compared to last year.
“Even though the government is working by establishing a string committee under the Prime Minister’s office to follow up and increase export, it is not showing improvements as it is expected,” explained the governor.
In recent times Gold, hard currency notes, coffee, live animals, oilseeds and even grains are being smuggled out of Ethiopia to neighboring countries, at higher rates. Once these items are smuggled out of Ethiopia and sold, the forex is then used for import under the Franco Valuta scheme.
“Improving the export will improve forex earning,” the governor stressed.
In related news, loan, grants and remittance in the first quarter showed Ethiopia getting 1.7 billion dollar. From these as indicated on the report, the country has earned only 217 million dollar in private remittance in the first quarter of the fiscal year. Last year at a similar period, the country earned around 1 billion dollar in remittance, which is a decrease of 80 percent.
“Remittance and both grant and loan flow to Ethiopia decreased in the stated period even when compared to last year due to the current situation (war in the north) of the of the country,” the governor cited.
“We expect things to improve following the peace agreement, which will stop the war in the north,” expressed Yinager.
As one source of forex for Ethiopia in 2021/22 fiscal year, Ethiopians living abroad sent 4.2 billion US dollars in remittance.
Ethiopia’s total hard currency earnings in 2021/22 in the fiscal year were close to $22.7 billion. Main sources of Ethiopia’s forex inflows in 2021-22 were service receipts which is about $6.2billion, remittances $5.3 billion, FDI $3.3 billion, loans $1.1bn, counting both Government plus state owned enterprises borrowing and grants $1 billion. Exports contribution is not more than 20 percent gross foreign currency earnings.
CWP Global, Djibouti pair to propel green power in the horn
Djibouti Ministry of Energy and Natural Resources and CWP Global, a leading developer globally of massive-scale renewable energy and green hydrogen projects, ink an MoU to develop 10GWs of renewable energy and a green hydrogen hub to be located strategically in the Horn of Africa.
“The project will make a major contribution to realize the African nation’s aspirations for cleaner and more secure energy supplies as well as create green jobs and value-add industries, and generate exports to fast-emerging markets for low-carbon fuels and industrial products,”CWP said on its statement.
At the MoU signing ceremony in Djibouti on December 5, Mark Crandall, CWP Global Chairman, expressed, “CWP is thrilled to have signed this agreement and to now have a clear action plan with the government of Djibouti on an exciting new green power and hydrogen industry at the tip of the Horn of Africa.”
“My recent discussions with President Ismail Omar Guelleh, and our work so far with Minister for Energy in Charge of Natural Resources, Yonis Ali Guedi and his team, have confirmed our alignment and shared vision for a pioneering 10GW renewable energy hub with the capacity to diversify Djibouti’s energy mix, provide secure potable water supplies to local communities, further develop local and regional agriculture, and open the door to emerging international markets for green hydrogen and derivatives, including green ammonia,” he said.
The chairman added that it is also critical to the company that the project is aligned with Djibouti’s “Vision 2035” economic plan, which prioritizes closer cooperation with regional neighbors, including Ethiopia, where there is great scope for collaboration on green energy, and an opportunity to build a thriving new commercial hub at the mouth of the Red Sea.
“We are very proud at CWP to be playing a major role in delivering this new phase of sustainable, zero-emissions economic growth in Africa,” CWP Global’s CEO, Alex Hewitt remarked.
“We intend to utilize our experience in developing a leading Power-to-X portfolio over the last five years to move quickly and collaboratively in developing this project in Djibouti, a country blessed with outstanding natural resources and a highly strategic location,” the CEO added.
CWP’s portfolio of large-scale renewables and green hydrogen hubs has now grown to seven projects under development across three continents – in Africa, Australia and South America.
Cosmo Trading files charges demanding close to 80 million birr
Cosmo Trading PLC files three civil separate charges on some of individuals and companies pinning criminal charges on high profile business people and their companies.
On its amended charge filed mid this week, Cosmo Trading demanded the payment of close to 80 million birr from individuals and companies who gained value in connection to the lease and other means of the company’s facility located at Bole Street around Wollo Sefer.
It can be recalled that the Prosecution General Division, Ministry of Justice, had filed criminal charges on individuals and companies in linkage to criminal acts including; money laundering, financing of terrorism, illegally property confiscation and illegal money transfer.
During the latest civil charge filed to the Federal High Court at Lideta Civil Division, the company, which mostly was represented by its Managing Director and major shareholder, Haileyesus Mengistu, put forth claims pinning the defendants to pay close to 80 million birr with interest.
In the charge that Cosmo filed, both Azeb Mihretab and Temesgen Yilma were included on the criminal charge of the Prosecution General Division, in addition to Wan Hao Hotel plc to pay 29.87 million birr, which is a sum calculated for 23 months until December 2021 and for another seven months calculated from March to September 2022.
The charge said that the first and second defendants had a right to administer the company in capacities of deputy General Manager as per the power of attorney given in September 2019. This thus created the opportunity for defendants to lease Cosmo’s building and use the gain thereof to their own advantage rather than for the benefit of the company.
The charge added that the company requested the lessee, Wan Hao Hotel, in March 2022 to transfer the facility to the company and pay its arrears. However, the lessee disclosed that it settled the rental charge for the first and second defendant. On the charge, it demanded the court to give its verdict on the lessee to settle the payment to the company.
On the other charge, the company filed on Azeb Mihretab, Temesgen Yilma, and JJ Properties Management PLC in connection with a 32.5 million birr claim.
The file indicated that the first two defendants were using their power of administering Cosmo to secure a 61 million birr credit from Awash Bank with the nine floors building that is worth half billion birr in credit being used as collateral. Of the stated amount, the first 21 million birr settled debt that Cosmo had received. From the remaining 40 million birr, 25 million and 7.5 million birr, in total 32.5 million birr, was transferred to the third defendant, JJ Properties Management, which is owned by Azeb and the second defendant who has the full power of attorney.
The charge further stated that another seven million birr was transferred by the first defendant for a company that does not have any business relations with Cosmo.
Cosmo thirdly charged Temesgen and TTH Trading plc claiming that the first defendant transferred over 17.8 million birr secured from building rentals and sale of construction machines to the account of TTH Trading plc, which Temesgen owns 50 percent share.
The plaintiff requested the court for defendants to settle their stated amounts filed in the three different charges at relevant interest.
