During his first meeting with the business community, Prime Minister Abiy Ahmed (PhD) indicated that the country's foreign currency shortage will last for many years. So if there is no immediate solution to the Forex Crunch in the country, what will be the lasting solution?
According to the International Monetary Fund (IMF), Ethiopia’s foreign reserves at the end of the 2016/17 fiscal year stood at 3.2 billion, USD less than what it spends on imports in two months.
As an immediate solution for this, the premier called on local businessmen to repatriate hard currency which they have stashed in accounts in Dubai and China. .
Partly accepting the premier's statement , Hibret Insurance Board Chairperson Eyesuswork Zafu says the remedy for such forex shortage is not only in the hands of domestic investors , but also in the hands of the bank governors, the economic policymakers and the leadership.
He also says :“Before the premier made such statement to us,he should have consulted the issue with the Head of National Bank and Minister of the Finance and Economic Cooperation. ”
Moreover, the chambers in respective state should have been allowed to discuss the forex shortage and its impacts on the services, manufacturing, agro industries ,he adds.
For Eyesuswork, lasting solution to forex crunch is to put in place sound reserve management practices that go along with the country's macroeconomic management.
Besides, abolishing unsound economic policies (fiscal, monetary and exchange rate, and financial) is a must to strengthen the ability to manage reserves, he says
Likewise,he advises the domestic investors to be part of the solution than the problem in strictly observing the country's monetary regulations and rules.
Bahir Dar University School of Law Asst. Prof., Gashaw Beza, asserts that the current hard currency shortage is widening the trade imbalance between nation's import and export earnings, on the top causing price hikes in services or goods.
He ,therefore, says the leadership need to work hard on avoiding foreign exchange mismanagement by government agencies and implementing corruption- free mega projects. He also noted that domestic manu factures need to be supported in bringing about export- led growth apart from encouraging the public and private institutions to purchase their produced items . By doing so , the nation would enable to save good enough hard currency that has been spending on imports.
Gashaw points out that as a given nation's economic growth depends on the extent of its financial resource mobilization of both local and foreign currencies , it is hardly possible to bring economic growth without being good at such move.
Also, he underlines that to overcome the dearth, working monetary directives and guidelines need to be put in place. The corruption and money laundering activities in various sectors have to be stamped out as well.
National Bank and other financial institutions need to come up with right way of mechanisms for lasting solutions, he says.
As to him, the black market is also the other challenge in the efforts of addressing the crunch. “ The government needs to toughen its mechanisms to control such market.
Both say there should be operational platform as think thank forum that could generate sound approaches that would assist to deal with the crunch from many perspectives.
BY MENGISTEAB TESHOME