Even though the National Bank of Ethiopia (NBE) has taken actions to stop black market trading of foreign currency, the price difference between foreign currency on the black market and in the banks has actually increased.
Previously the black market rate was 20 percent higher than the bank exchange rate because of the hard currency shortage.
Despite the fact that the government devaluated the birr by fifteen percent against major hard currencies on October 11, 2017 which meant that it was the same as the black market rate, the black market returned the favor and went up as well.
NBE has implemented a new scheme for approving letters of credit (LC). It stipulates that banks use the given price of items when they allocate hard currency.
The new scheme that banks adopted is that the LC amount that individual or companies request needs to be equivalent to the actual price of the imported items.
According to observers, the current gap between the legal market and the parallel market has reached up to 25 percent, the highest it has ever been.
According to information that Capital gathered, hard currency sellers are getting over 34 birr for a dollar from the illegal forex market.
However the legal market is buying a dollar by 27.22 birr. Experts are confused about this because the devaluation was expected to solve this problem in December last year NBE imposed a new law forcing banks to allocate hard currency for importers based on the volume of import items.
The law was expected to stop illegal remittances exchanged based on the rate of the black market.
It is believed that importers are asking the amount of a hard currency from banks that does not actually cover the volume of the total import items. Many believe that hard currency collected from illegal remittances from abroad is linked to the same importers that cover the balance cost of the import in addition to the LC that they get from banks.
For instance a company that imports 10 vehicles would get a LC approval from banks that only covers the price of two cars and the balance will be covered from the hard currency collected from family or friends abroad, who send the money from overseas to Ethiopia. When this happens a receiver in Ethiopia secures the money in birr at the black market rate and the hard currency is not transferred to the country but instead is used to import items.
But the new law that NBE imposed would fully cut this illegal action, since the importers are expected to import the product based on the real value estimated by the Ethiopian Revenue and Customs Authrority and the amount written on the LC. However the hard currency exchange in the illegal marker does not changed, according to experts. Even it has shown sharp increment in the past few months than the expected reduction.
Previously any importer who wanted hard currency for their import was not obliged to submit the price of the imported items at exporting countries’ markets.
For instance if an individual wants to import a vehicle that may cost USD 10,000 they would not be obliged to request the full amount for the vehicle purchase.
Under the current rules individuals or companies who want hard currency can get it from banks and the balance then is filled by different sources mainly from parallel sources or black markets.
According to ERCA over 5,900 items are imported from abroad.
The hard currency crunch that the country faces has forced the central bank to apply new rules and regulations regarding the management of hard currency and tackle the illegal business.
When the new NBE rule is issued experts at private banks told Capital that the NBE rule will contribute to increasing banks’ hard currency earnings and reducing illegal remittances, which are one of the major reasons for illicit finance flow.
Even though the issue has not been studied, importers are using finance from outside sources, who collect hard currency secured from illegal money transfers, for their imports, according Teklewold Atnafu, Governor of NBE, who spoke about the issue during his appearance at the Budget and Finance Affairs Standing Committee of the Parliament in December.
It has been confusing the banking industry. There are still other ways that either importers or people in the black market can game the system. “Most of the country’s hard currency earnings are illegally smuggled abroad,” an expert said.
In its latest statement the IMF forecasted that the country had enough hard currency reserve to last for two months. It had been 1.9 months in the past fiscal year, according to the IMF report. It is considered healthy for a country to have at least three months of forex reserves.
Despite devaluation black market dollar rate gap highest ever
Ethiopia improves slightly on global corruption index
The annual Corruption Perceptions Index (CPI), released by Transparency International (TI), has ranked Ethiopia 107 of 180 countries included in the index for the year 2017.
The index, which ranks countries on a scale of 0 (highly corrupt) to 100 (very clean), awarded Ethiopia a score of 35 – a slight improvement from 2016 and 2015 when the country was given 34 and 33 points, respectively.
The report states that failure to punish individuals implicated in graft continues to be a major stumbling block. Incompetence and ineffectiveness of anti-corruption agencies also attributed to the poor ranking.
Among East African countries Rwanda was the top performer with a score of 55 at position 48.
TOP AND BOTTOM
In the new report, there were no changes at the top and bottom with New Zealand and Denmark ranked highest with scores of 89 and 88 respectively. Syria, South Sudan and Somalia were the lowest with scores of 14, 12 and 9 respectively similar to 2016.
Western Europe was ranked the best performing region with an average score of 66.
The worst performing regions are Sub-Saharan Africa (average score 32) and Eastern Europe and Central Asia (average score 34).
Botswana emerged the highest ranked country in Africa with a score of 61 followed by Rwanda.
The newly released CPI provides a good baseline for the African Union (AU) anti-corruption efforts in 2018. This year the theme for the AU is: “Winning the Fight against Corruption: A Sustainable Path to Africa’s Transformation.”
‘In some ways, the CPI points to a more hopeful future for Africa. The transformations in Rwanda and Cabo Verde show that corruption is manageable with well-sustained effort. Long-term anti-corruption investments in countries like Cote d’Ivoire and Senegal are also steadily paying off. On the other hand, tackling corruption remains a herculean task for countries at the bottom of the index, like South Sudan and Somalia,’ the reports reads.
‘Despite being the worst performing region as a whole, Africa has several countries that consistently push back against corruption, and with notable progress. In fact, some African countries score better than some countries in the Organisation for Economic Co-operation and Development (OECD). Specifically, Botswana, Seychelles, Cabo Verde, Rwanda and Namibia all score better on the index compared to some OECD countries like Italy, Greece and Hungary. In addition, Botswana and Seychelles, which score 61 and 60 respectively, do better than Spain at 57’ the report further reads.
The key ingredient that the top performing African countries have in common is political leadership that is consistently committed to anti-corruption. While the majority of countries already have anti-corruption laws and institutions in place, these leading countries go an extra step to ensure implementation.
The report also recommends that governments and businesses do more to encourage free speech, independent media, political dissent and an open and engaged civil society and should minimize regulations on media, including traditional and new media, and ensure that journalists can work without fear of repression or violence. In addition, international donors should consider press freedom relevant to development aid or access to international organisations.
Empowering women living in rural areas; benefits everyone
“Through empowerment, we are seeing more and more women holding decision making positions; from cooperatives to higher levels of leadership. We are seeing this country wide,” Alemitu Umod, State Minister of the Ministry of Women and Children Affairs said during a conference on the Commission on the Status of Women that focused on empowering women and girls living in rural areas, held at the African Union Commission from February 21 -23, 2018.
The conference was a platform for professionals in different countries to share experiences about supporting women and girls living in rural areas to become economically and socially empowered. Countries also talked about how to better organize an African delegation to CSW62 New York and to participate effectively there.
“We are gathered here to share experiences with all the other countries that are present in this meeting. In Ethiopia looking at early marriage and FGM, there is a lot of work being done. There is also a lot of work to economically empower women living in the rural area, we will be bringing to the stage in New York all this work that has been done,” Alemitu said.
The joint program on accelerating progress towards the empowerment of rural women (RWEE JP) in Ethiopia is a five-year program that was launched in 2014. The program is being implemented by the government of Ethiopia in partnership with UN Women, the International Fund for Agricultural Development (IFAD), the World Food Program and the Food and Agriculture Organization of the United Nations (FAO).
ShibireTadesse,a farmer living in the Yaya Gulele Woreda is among those that benefited from the joint program. In the same Woreda, there are 1,060 women who are also part of the program and have benefited from it.
“It all started for me when I became a part of a rural savings and credit cooperative. One day we, with the permission of the men in our community, were told to gather and discuss the importance of savings and credit and how we could be a part of it. We were asked to contribute two birr each and when the collection reached a certain amount, it was given out as a loan. That’s how it started,” she said.
The women are also part of agriculture cooperative. They produce cereals, vegetables such as tomatoes and beetroot which all of it is sold in the Wordeda’s market.
Looking back over 6 to seven years, the participation of women in the economic or social decision making was very low. “Of course there was a huge difference; women’s place was at home, taking care of the children, we didn’t make decisions. I have 6 kids with a spacing of two years between each child. I was giving birth and breastfeeding for years,” she says. Girls were not allowed to go to school and instead staying back home to help with house chores.
Through awareness creation work, the narratives were able to change and slowly, women started to participate in different aspects of the society. “Collectively we were able to understand that everyone would benefit if women were involved in economic decisions. Because I am economically empowered, my household is in better condition, all my children go to school and the community is more prosperous,” Shibire points out.
Through the RWEE joint program which is implemented in two pilot regions; Afar and Oromia, there are over 2,000 direct beneficiaries of smallholder women farmers living in rural areas. The initiative is also benefiting 32,000 community members; 17,000 women and 15,000 men.
Two rural towns get new water system from German NGO
The prominent non-governmental public partner, Menschen für Menschen Foundation (MfMF), on February 8, inaugurated another in a series of crucial water system projects. The new water system is located in the towns of Lemi and Robit. It cost over half a million euro and will benefit 6,240 people in the two small towns located in Wegidi Wereda, South Wello Zone, Amhara region.
According to a statement that Capital obtained from MfMF, the project consists of supplying electro-mechanical units, drilling a borehole, construction, civil engineering and installing electromechanical works, providing consultancy services, supervising construction and building the capacity of the community. It is expected to function for 30 years. To complete the Lemi-Robite Rural Towns Water Supply Project they had to build 26 water points (23 for public use and 3 for schools), 11.3km of a distribution main, a 3.56km pressure main, 5 showers (two for public use and 3 for schools), four VIP latrines (two for the public and two for schools), and a 200 cubic meter reservoir. All of this cost 576,723 euro. Out of this the total community contribution both in labor and cash was 67,251 euro.
“The project work started on December 31, 2015. This involved drilling a well that now yields 3.7 liters per second. After a deep borehole was drilled, the civil work, construction and installation of the electromechanical unit of the project started on August 26,2016,” the statement explained.
Thanks to this project,water supply, sanitation and hygiene coverage of the Lemi and Robite community has increased from 18.49 to 100 percent. It used to take an hour to fetch water in the towns but now it only takes ten minutes.
“The project has reduced the burden of women and children by supplying piped water closer to their homes and has improved the health of the beneficiary community by providing safe and adequate drinking water, environmental sanitation and hygiene,” MfMF stated.
In addition, the project has also contributed immensely toward achieving national WASH goals and targets set in the National Development Plans, such as the Universal Access Plan (UAP) and the Sustainable Development Goals (MDG) by addressing potable water supply sanitation and hygiene.
The Lemi-Robite Rural Towns Water Supply Project has beenfully funded by German Federal Ministry of Economic Cooperation and Development (BMZ) and implemented by Menschen für Menschen Foundation. Previously, the Menschen für Menschen Foundation built five rural town water supply systems, namely: Alge in Ilu Ababora zone, Lemi and Ginager in North Shewa zone, Arekit in Gurage zone and Lemi-Robite in South Wello zone. In addition, Seyo and Makafta rural town projects are also under construction in West Shewa and South Wello zones. The Foundation has also developed 2,369 hand-dug wells and springs in various parts of the country that have benefited 704,200 people.
