As the central bank slashes foreign currency retention rates by half to 20pc, exporters are decrying the move as detrimental to their businesses and warn a fall in foreign exchange revenues is inevitable.

The majority (70pc) of forex earnings from exports, remittance and transfers to non-governmental organisations (NGOs) should be surrendered to the central bank, declared one of the two directives Central Bank Governor Yinager Dessie (PhD) signed off on January 6, 2022. Foreign account holders can only retain 20pc of their transfers in foreign currencies, and they should cede 10pc to the commercial banks.

Policymakers argue the amendment was prompted by their desire to encourage exporters and recipients of inward remittance. The exporters are fuming over the latest bout from the central bank, seeing it as further erosion of their earnings from 50pc. There was a time when exporters retained 70pc of their forex earnings to finance imports with widely high-profit margins. The recent adjustment is the third in about a year as the central bank continues to tinker with the foreign currency retention ratio between exporters, commercial banks and itself.

In March last year, the first significant change came about when regulators told exporters to surrender close to 70pc of their earnings to commercial banks and the central bank, repealing a directive issued two years ago. This, too, was a reverse to exporters' relatively unrestricted access to their foreign currency earnings. Nearly a third of their earnings was available indefinitely, and the balance was available for use within 28 days of deposit.

The authorities at the central bank saw this scheme manifesting in exporters using much of the available foreign currency, leaving none for banks to allocate to other sectors. They introduced a new rationing regime and allowed exporters to use retained forex to import their chosen items as long as they had the necessary permits.

Exporters are displeased.

The Ethiopian Horticultural Producer Exporters Association (EHPEA) is one of the lobby groups from export-focused industries that is apprehensive about the decision. Its leaders wrote a letter to the central bank voicing the misgivings of their members. They pleaded to the authorities to treat "producer-exporters" differently from other traders.

The Association represents over 100 members, many of them cut-flower growers and exporters demanding foreign currency to import inputs such as fertilisers, chemicals and packaging. Rarely available in the local market, these products represent 90pc of the inputs the cut-flower industry uses. Some also make periodical royalty fee payments in foreign currency for using patented flower breeds.

Sentayehu Kebede, general manager of Afriflora, a horticulture farm in Holeta town, Oromia Regional State, says the latest round of restrictions will make importing difficult and affect their business.

"The situation was at least manageable when the retention rate stood at 40pc," he said.