Story sourced from Addis Fortune’s The Fineline Corner
These are indeed trying days for any business involved in manufacturing, gossip observed. Undeclared but frequent power shedding on top of credit crunch from the financial industry, not to mention the bureaucratic hassle, is testing the patience of many owners who had hoped they would carve a place in the nascent industrialization of the country. However, none makes them as helplessly desperate as the issues of access to foreign exchange right now, claims gossip.
Sadly, Prime Minister Hailemariam Desalegn is ill informed on the state of foreign exchange reserve or its allocations in the economy. Almost every senior official in his administration privately admits that the crunch in foreign exchange provision has reached a painful level.
Yet, he was made to believe that the bountiful coffers at the central bank can meet the needs of and anyone who can apply and get some. He may have in mind a pledge recently made by the Saudis to transfer a billion dollars in term deposit. It is a promise yet to be delivered, claims gossip. He, however, shot his credibility on the foot, publicly declaring there is plenty while the market suffers from severity. Gossip sees now that not many in the private sector, least of all, the banking industry, take his words seriously.
The shortage has now reached unbearable proportions. Not even the pharmaceutical importers, the last frontier to be deprived of access to ForEx, can get approval from their respective banks to open letters of credit, gossip observed. Very soon, members of the public will experience the unavailability of some of the lifesaving prescriptions across the country’s drugstores, claims gossip.
Unlike the past couple of years when there has always been an issue with ForEx, business owners are now confronted with the prospect of shutting down their factories, claims gossip. The better option is to locate the source of ForEx for their imports of raw materials from wherever it is available, and whatever is the going price, gossip says.
The underground market has the going rate close at 25 Br for a dollar, or 24.80 Br to be exact, according to gossip. The main culprits to the continued rise of the dollar against the Birr is not only the shortage in supply, but also the large appetite among some of the Chinese businesses which carry around stashes of cash in Birr to exchange it for dollars in the parallel market and take it out, claims those at the gossip corridors.
The main victims of the crises in ForEx are indeed the domestic companies, according to gossip. Unable to operate their factories, some of them have already begun to have layoffs of their labour, including an elevator assembly company and a soap and detergent factory, claims gossip.
Ironically, to put the blame for the strain in the economy as a result of unavailability of foreign exchange is an understatement of the gravity of the issue. Almost every commercial bank is suffering from its inability to mobilize as much domestic savings as it should. Thus, a credit crunch is on the horizon, claims gossip.
It should be disturbing to see that some of the private commercial banks have already stopped receiving applications for loans; privately, their senior officers admit that they are simply processing loans already in their portfolio and if they have to advance, they are discriminatory on the basis of whether the applicant brings foreign exchange through exports, according to gossip.
The incongruity of these all is that neither the officials at the central bank and ministers in the administration nor those operating in the private sector dare to call a spade a spade in public. While the latter choose to remain quiet for fear of official retribution, the former continue to deny the existence of the problem, but to the dismay of the public, claims gossip.