Yesterday, the new prime minister of Ethiopia, Abiy Ahmed, said the foreign exchange shortage currently plaguing the country will last for years. He also said the further cooperation of the private sector is needed to help solve this problem. These were Abiy’s first public comments on the economy since he was sworn in as prime minister on April 2nd.
“The crisis with hard currency will not be solved today, nor will it in the next 15 or 20 years,” he said, as reported on state-owned Ethiopian Television (etv). “There is an urgent need for more cooperation with the private sector to find a solution.”
The 42-year-old former army officer made this known while addressing the local business community in a hotel in the Ethiopian capital, Addis Ababa. He noted that remittances from Ethiopia’s diaspora communities had also fallen for political reasons. He also called for Ethiopian businessmen to repatriate their hard currency back to the country in order to help with the shortage.
“If you would transfer them back to Ethiopia from your accounts in Dubai and China, it would be of immense benefit to a country that is struggling with shortages at the moment,” he said.
Over the past decade, Ethiopia has recorded average annual economic growth of about 10 percent which is the fastest in Africa. However foreign investors and local businesses have complain about the severe hard currency shortages which is stifling investment and business activities, increasing inflation and slowing down the overall economic activity of the country.
About a few days ago one of the oldest supermarkets in Ethiopia Bambis Supermarket said it was at the verge of shutting down its operations in the country due to hard currency shortage and administrative hurdle. The 67 year old supermarket that is owned by Greek national imports most of its food products and needs foreign currency for importation.
“We serve diplomatic communities and I can’t say I don’t have rice or table salt,” the owner of Bambis, Charalambos Tsimas told Ethiopian news platform the reporter. It’s humiliating. Ethiopia was not like this before. Ethiopia has been a queen of Africa but that doesn’t seem to be the case anymore.”
Since the government of Ethiopia does not regularly release foreign reserves figures, the International Monetary Fund (IMF) in January said that Ethiopia’s foreign reserves at the end of the 2016/2017 fiscal year stood at $3.2 billion, which is less than what it spends on imports in two months. According to Reuters, the IMF flagged inadequate reserves as a downside risk to economic growth for 2017/2018, which it forecast at 8.5 percent. The IMF also said revenues from export last year were largely unchanged despite volume growth as global agricultural commodity prices remained low and exports from manufacturing are just beginning.