From Addis Fortune in AllAfrica. Story by Dawit Endeshaw.
Ethiopia is increasingly constrained by hard currency shortages, and business is brisk for black-market foreign exchange brokers who often operate within sight of banks, according to a report by Addis Fortune, AllAfrica reports.
Customers seek out these transactions by foot or car and make deals inside cars or in stores, according to the report. AddisFortune reporter Dawit Endeshaw said he observed 14 vehicles stopping for transactions in the space of a half hour in a given spot.
Banks are beginning to face severe hard currency shortages due to a low flow of remittances via the formal market and a decline in revenue from coffee exports, an unnamed senior manager of a private bank told Fortune Addis.
It’s not uncommon for Ethiopia to have shortages of hard currency throughout the financial sector, but this one stands out for its longevity. It has almost been three months since the shortage began, the bank manager said.
He pointed to the increase in government projects as one cause for the unbalanced supply and demand of foreign currency.
The currency shortage has forced importers to under-invoice purchases from abroad. For example, if an importer wants to buy a commodity at a certain price, he can have access to foreign currency from banks by requesting a letter of credit, but what banks offer most of the time is less than what importers need.
Due to this shortfall, importers are forced to under-invoice commodities and collect the remaining currency from the black market so they can pay their suppliers in cash, Addis Fortune reports.
“It is really hard to access hard currencies from banks these days,” an unnamed importer told Addis Fortune.
Read more at AllAfrica.