The skyrocketing of service charges and other fees in the foreign exchange transaction has been stated as one of the contributors to inflation. To combat this experts have pushed forth recommendations to the regulatory body in order to find a way to pause the upward trend.
Experts in the banking sector said that the fees that are added on the foreign currency market have increased gradually, further expressing that in the past few years the amount has doubled.
Experts in the International Banking Division (IBD) said that charges to access foreign currency through banks has increased and on average it has reached about ten percent of the amount.
The financial experts opine that this has contributed towards the price hike on commodities which have gone on to affect the mass public, who are the last price takers of commodities and services.
“The commission and charges to buy foreign currency is jumping from time to time to which the National Bank of Ethiopia (NBE) ought to apply some sort of solution,” an IBD director of a private bank told Capital.
He said that the situation particularly in the past couple of years has totally changed and every time banks are revising their rates which impose on the foreign exchange sales service.
“In my view they are also contributing towards the inflation which has to be stopped at some point,” another expert on the sector remarked.
“It might be a market economy which is governed by the market but when it is becomes a challenge for the general economy of the country the regulatory body should make necessary interventions,” he added.
He recommended instruments like maximum threshold to be imposed on the foreign exchange, which is a national resource meanwhile banks should be involved on facilitation to earn it.
Experts said that the old established regulation of NBE indicated that in every foreign currency sales, NBE has a 1.5 percent exchange commission that has not changed for about five decades, while few years ago on average the general sales charge at commercial banks was not more than four percent, “but it has extended up to ten percent at the moment.”
The 1.5 percent exchange commission for national bank is applicable for every foreign currency sales transaction except for foreign currency account holders, who demands the foreign currency from their foreign currency savings.
Banks have service charge commission, opening commission and sometimes margin charge if it is connected with margin facilities like credit.
Banks argue that service charge and commission fee has expanded because of different reason but mainly due to costs that occur in operation.
They said that they have different costs to get the hard currency which is supposed to be compensated. However experts argued that banks are only focusing on profit maximization rather than contributing for the community.
“Our banks are competing with each other on profit maximization rather than service provision and other activities that are a good indication for the issue on discussion. Their behavior is flaming the inflation more,” one financial expert argued.
They said that because of the shortage of the hard currency, whatever it costs buyers or importers, they are willing to pay the amount requested by banks as long as they are able to access the foreign currency “and buyers compensate the cost from their import goods or services selling price.”
Experts recommended that if banks would not have ways to reduce the charges on hard currency service; at least they have to play alternative roles like providing generous credit facility for sectors like agricultural activities to scale up productivity and at least to slash the inflation that is seen on basic commodities.
Fikadu Digafe, Vice Governor and Chief Economist at NBE, told Capital that the regulatory body does not have a plan to involve itself on the matter.
“Yes it has a contribution towards the inflation but we have no a plan to involve and govern the system,” he said.
In his brief response Fikadu said that it is a free market economy and banks shall govern and engage responsibly as per the markets as opposed to being commanded by the government.
Forex service charges balloon inflation
Diaspora homecoming records huge impact
Around 100,000 Diasporas respond to the Prime Minister’s call for the great Ethiopian home coming challenge within a space of one month.
Aimed to minimize the increasing pressure of the western governments on the government in connection with the war in the country, Prime Minister Abiy Ahmed called Ethiopians and friends of Ethiopia to visit Ethiopia for the Ethiopian Christmas and Epiphany after completing the first phase of the war.
As reports from the government officials shows, a hundred thousand Ethiopian Diasporas and friends of Ethiopia responded to the challenge within the short period of time with the organized events reeling in success.
Throughout the month, the government hosted various events to engage the Home Comers in the reconstruction process and peaceful protests against unnecessary external pressures on the country and different events have likewise been held by the private sector.
Some of the notable events include those by the likes of the Ethiopian Investment Commission which promoted various investment opportunities, the grand dinner hosted by the diaspora agency and diaspora community, amongst other different exhibitions.
“The home coming challenge has four goals; diplomatic, economic, political and social affairs,” said Wondwossen Girma, Public Relations Manager at Ethiopia Diaspora Agency, adding, “The home coming challenge has been successful as one of the main goals is fundraising and support for the reconstruction as well as aid for the war victims.”
Many of the participants who have already arrived have brought very useful medical consignments that are to be used to equip the hospitals and other health service providing institutions across Afar and Amhara. Moreover, as reports show, the Ethiopian government has earned around 800,000 dollar from the dinner.
“The Diasporas and friends of Ethiopia have been successfully defending Ethiopia’s stance in the international arena to dismantle internal and external enemies’ conspiracies,” said Wondwossen stating that the event shows government’s belief on its diaspora community to which the diaspora have reciprocated the same through their rise to the call.
As government officials inform Capital, around one hundred thousand of Ethiopians responded to the Prime Minister’s call. “The number does not really matter, the weight of the impact matters most and in our case we have seen the huge impact that it has brought,” said Wondwossen indicating that the agency has asked the Immigration Nationality and Vital events Agency for full information with regards to the exact figures.
This homeland exodus by hundreds of thousands of Ethiopians is not an ordinary home coming. The challenge takes place amidst the struggle that is being conducted by heroic Ethiopians and foreign nationals of Ethiopian origin here and in the diaspora as well as by the National Defense Forces and Amhara Security Forces, and by the entire Ethiopians against the terrorist TPLF.
The Great Ethiopian Homecoming Challenge from the onset aimed to draw one Million people home ahead of the Ethiopian Christmas holiday. This historic homecoming event is the first of its kind only seconded by the home coming event that was conducted during the Ethiopian Millennium celebrations. The Ethiopian Airlines, Ethio-telecom, private and government-owned hotels, and other service giving institutions announced discounts on their services to make the challenge attractive.
A huge number of tourists and Ethiopian Diasporas have thronged to the celebration of Ethiopian Christmas in Lalibela and in the historical town of Gonder to celebrate the colorful Ethiopian Epiphany.
As Wondwosen said at a future time, the agency will organize an assessment to see the economic impact of the event.
POLARIZATION & CONSEQUENCES
Neoliberal globalization propelled by crony capitalism is facing hurdles, yet again. Unlike before though, the current crisis is quite generalized, permeating all sectors of the global economy. At the height of neoliberalism, i.e., at the turn of the century, the much touted ‘Dot Com’ bubble went bust! To rectify the situation, central banks purposely inflated the housing sector. Old people were told to refinance their homes (remember the mantra; housing prices always go up) with a very low teasing interest rate. For a while it looked as if capitalism had finally delivered paradise on earth! Unsurprisingly (to the critically inclined) as soon as interest rates start to go up, millions of borrowers couldn’t keep up with their mortgage payments and promptly lost their houses!
The ‘Housing bubble’ that burst in 2008 threatened to unwind capitalism as we know it. Again, to rectify the situation, the global status quo pumped massive liquidity, this time directly, since all the active economic actors were tapped out and rendered nonfunctional, including the banks, consumers, etc., etc. Since 2008, plenty of phony money (over USD 50 trillion) was pumped into the global system by the various central banks/governments to thwart off the collapse of the modern world’s economic regime. This massive liquidity that came with no cost, (zero percent interest rate) created one of the largest bubble ever! Arguably, we are currently wallowing in the midst of the largest economic bubble in the history of all humanity! After such unprecedented indulgence by central banks/governments, everything became a bubble; real estate (housing & commercial properties), stocks, bonds, antiques, paintings, works of art, etc., etc. This generalized phenomenon currently obtains all over the world!
Polarizing globalization, which is a byproduct of un-tempered, greed driven accumulation process (neoliberalism) is now hitting the wall, so to speak. We believe it is dangerously approaching its historical limits. Symptoms are all over. In the very poor of the global South, polarization is manifested as a continuum of instability, increasingly leading to fragile, failing and failed states. Africa has plenty of cases. In the semi-peripheries, those countries that are the in-betweens (between the rich and the poor) economic downturn punctuated by abrupt currency devaluation resulting in cost of living increase (for the absolute majority) is flaring xenophobia leading to irrational policies! In the world of the rich, a clear trajectory of pauperism and depression (amongst the sheeple=human mass), leading to the polarization of politics, has become a vivid reality.
Mass migration from the south to the north is accelerating. For some of the sheeple in the south, one way of escaping the punishing polarization is to just pack up and move north. Intense connectedness brought about, amongst other things, by globalized informatics, is making the journey north less intimidating. The South American sheeple seem to have joined this pilgrimage to anticipated affluence. Honduras has had ‘regime change’ few years back, instigated by the power that be. Thereafter came, a massively rigged election that brought a corrupt regime in power, which is bent on disfranchising the local sheeple. It is no coincidence we now have thousands of South Americans marching North, to the land of opportunity. As the dismemberment of Libya facilitated the migration of MENA’s sheeple (Middle East and North Africa) to Europe, ‘Regime Change’ in South America is also encouraging mass exodus to the promised lands of the Northern countries. It seems a ‘Regime of Migration’ (after all, migration is also change of domicile) is now in the offing, mostly as a reaction to the politics of ‘Regime Change’ and widespread polarization. The empire, particularly the hegemon, (once considered effectively an island, hence unreachable) must be a bit perplexed by this recent bold behavior of the southern sheeple. One cannot help but reflect: Is this what the Hindu’s call Karma?
It is obvious we are now living in a highly parasitic world that has very different value systems than the ones promised by capitalist modernity. When central banks take massive stakes in the global equity markets, (to protect the financially connected), when interest rates go negative, when junk bonds are considered premium, almost at par to sovereign bonds, when nature destroying overproduction is touted as growth, etc., etc., one is forced to resort to ancient wisdoms.
Coffee prices bulge on ECX
The price of coffee at the Ethiopian Commodity Exchange (ECX) has spiked by almost a thousand birr per feresula (17 kilograms) in the first half of this budget year when compared with the same period from last year.
Owing to the bad weather which has backpedaled Brazilian coffee as well as logistical constraints, the global coffee prices have sharply increased starting from the past budget year. On the other hand, the global circumstance has also benefited Ethiopia in terms of generating more hard currency from coffee export in the period starting from last year.
An attribute to this success is also the efforts of the Ethiopian Coffee and Tea Authority and regional bureaus which encompass the coffee production and trading which has led to increment of trading, both in volume and value.
Similar to last budget year’s performance which saw the country securing over USD 907 million, the current budget is surpassing the expectation with marvelous trends.
In likewise manner to the price increment in the international market, the price of the bean in the local market has also registered significant increment including on the modern trading floor, ECX.
As per Capital’s evaluation of coffee price trends which are drawn from the past one year’s market data of ECX, the country’s top hard currency earner has surged in price, on average by over one thousand birr.
The ECX market data that Capital evaluated indicated that few weeks ago the average price of export coffee, which is Arabica, at ECX was about 3, 400 birr to the maximum and close to 2,000 birr to the minimum per feresula (17 KG) based on their origin and quality.
Most of the price has over a thousand birr difference compared with the same period of last year.
It is to be recalled that Capital through inside sources, reported that the volume of export coffee available through the trading platform has shown reduction in the current budget year. Sources state that the reduction of coffee on ECX has narrowed in the past few months as a result of the drifting away of Oromia region from the platform to the recently introduced alternative vertical integration market scheme. The volume of coffee at ECX naturally plunged because Oromia region is one of the major sources of the coffee bean.
However, most of the coffee coming from other regions like SNNP, Sidama, South West, Gambela and Benshangul Gumuz still mainly trade through the electronic trading floor which is widely recognized for its trust in terms of payment.
Experts in the sector said that the price of coffee at the initial market of the vertical integration or at ECX has climbed on average more than a half in the first half of the budget year compared with the same period of last year.
