Feb 1 , 2020

Ethiopian-born diaspora can now import basic food items using their own foreign currency, according to a new directive issued by the Ministry of Trade & Industry.

Approved two weeks ago, the directive allows the diaspora and companies owned by business people of Ethiopian origin to import edible oil, sugar and wheat through a franco valuta license. The trading business of these commodities was previously reserved for the state enterprises and a few selected local companies. The move was made as part of a new exit strategy from the government to end its own focus on importing basic food items.

A member of the diaspora who can bring a document showing an overseas bank account that has been active for two years and has a balance of 1.5 million dollars can secure a license from the Ministry. The documents are also subjected to scrutiny from the respective embassy or consulate where the bank account of the applicant is located.

The Ministry approved the directive, which was drafted in cooperation with the National Bank of Ethiopia, the Ministry of Finance, and the macroeconomic committee, on January 14, 2020. The new directive, which was in the making for four months, also allowed the diaspora to import other food items.

The Trade Ministry drafted the directive following a letter from the Ministry of Finance at the end of October. Then the National Bank of Ethiopia forwarded the criteria for diaspora to be approved under the franco valuta scheme.

“We believe this will alleviate the current supply-side constraint on basic food items,” Eshete Asfaw, state minister for Trade & Industry, said.

Last month, the country recorded a five-year high in headline inflation of 19.5pc, which was mainly driven by the price inflation of food items that reached 24.5pc.

The imported food items will be distributed along the existing distribution channels or through the importers' preferred channels. The importers are supposed to sell the items based on the market price.

Currently, the government imports wheat every year that it sells to distributors or flour factories at a subsidised price of 550 Br. The flour factories sell it at a fixed price of 796 Br.

Getachew Woldie (PhD), an economist with 15 years of experience who works and lives in Canada, doubts whether the country would see a well-functioning market through these kinds of schemes.

“Establishing a well functioning market isn't about allowing imports of certain goods," said Getachew, "but it’s about solving our institutional and structural problems.”

In the textbook sense, the abundance of supply of basic food items may lessen inflationary pressure at least in the short run, whereas over the long term adverse consequences may appear, as it will affect the livelihood of the local farming community by benefiting foreign producers, according to Getachew.

“Food prices in the global market are also increasing, especially wheat," he said, "The vegetable oil price index was up by 9.4pc in December, reaching a 25-month high, and this will have important implications as imported inflation will likely increase as well."

The Ministry of Finance has also drafted a new directive that will allow foreign multinational companies to use their own forex to import selected commodities. The directive is tabled to the macroeconomic committee, which is chaired by Prime Minister Abiy Ahmed (PhD), and waiting for approval.

PUBLISHED ON Feb 01,2020 [ VOL 20 , NO 1031]

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