The National Bank of Ethiopia (NBE) has announced that it has increased the amount of forex that exporting firms can retain after exporting commodities from 30 to 50 percent.
The measure taken by NBE is one of the interventions to address rising inflation in the country, according to NBE Governor mamo Mihretu, who briffed the media this morning. He stated that the bank has revised its ‘forex render requirement’ in a bid to encourage exporters particularly those who are engaged in the manufacturing sector as one of its monetary measures to contain ever rising inflation.
Accordingly, he said the amount of forex to be retained by the eligible exporters will increase to 50 percent from 30 percent now and the exporters will settle 40 percent of the total forex to the National Bank while the balance 10 percent will go to the banks they work with.
He said the country’s fiscal problems have been found to be wide and deep over the past years where the country’s macro economy has faced multiple challenges including income deficit, economic imbalance and high inflation.
The governor said NBE will introduce a policy whereby it can limit the growth of the government’s expenditure so as to reduce the budget deficit against the Growth National Product.
“It is found to be mandatory to fill the budget deficit from local sources due to limitations of foreign loans and grants, ” said the governor, noting the government will work hard to address the economic imbalance, the high inflation and budget deficit through cutting the loan it could borrow from commercial banks especially from the central bank.
The governor said the inflation has seen 16 percent growth rate on average over the last ten years but went up to more than 30 percent during the last two years.
The situation has badly affected the lives of fixed and low income earning group of the society, aggravated social, economic political risks and caused macroeconomic imbalance, he said
Hence, the governor said, it was found necessary to ease the burden of inflation, improve the living standard, encourage saving and investment, create job opportunities to unleash the social and economic problems.
Mamo attributed the high inflation to limitation on the soppy side, high cost of production, ineffective macroeconomic policies particularly those monetary and fiscal policies that were in place to lessen impacts of COVID-19 pandemic.
He said conflicts that have occurred in different parts of the country have affected the volume of agricultural products and distribution while the rise in the price of commodities especially fuel, fertilizer and cost of transportation globally were the other factors that contributed to the high inflation at the national level.
“In June 2023, food inflation stood at 28 percent, down from 38 percent in the same month of the previous year and non-food inflation stood at 29.6 percent down from 34 percent in the same period last year,” he said, noting that declining inflation rate is not satisfactory.
He said the government is working to improve the supply side and transform agricultural production significantly through enhancing productivity, increasing coverage of cultivable land, expanding irrigation agriculture, urban agriculture, farming in dry-land areas and augmenting the volume of production of food grains.
According to mamo, the 10 governor of NBE, measures would also be taken to improve transportation services, provision of logistics and competitiveness as part of the government’s move to boost competitiveness and unleash the burden of inflation in the long run.
Accordingly, the government set to reduce the inflation rate to less than 20 percent until June 7 2024 and even to less than 10 percent until 2025.