In a circular letter to the National Bank of Ethiopia (NBE), the country’s Ministry of Finance has ordered the denial of foreign currency issuance for 38 selected import items, effective as of Monday, October 17, 2022.
This action was taken, according to the Ministry, to steer available foreign currency to the most critical items, such as medicine and basic commodities.
In place for an indefinite period of time, the prohibition spans a range of items including processed foods, beverages, artificial jewelry and flowers, bottled water, fruits, carpets, hand and wall watches, human and artificial hair, perfumes, fireworks, bags, umbrellas, seafood, cigarettes, and others.
Access to foreign exchange, increased exports per capita, and collective know-how are three critical components for Ethiopia to reduce extreme poverty and achieve sustainable economic growth.
In August 2020, Patricio Goldstein, a researcher at Harvard University’s Growth Lab, released a report titled ” Pathways for Productive Diversification in Ethiopia” that evaluated Ethiopia’s economic growth challenges and attempted to identify the key issues confronting our economy.
“Ethiopia will need to increase the diversity of its export basket to guarantee a sustainable growth Path.” Pathways for Productive Diversification in Ethiopia
According to the study, Ethiopia’s growth has slowed due to rising external imbalances, which have limited access to foreign exchange. As stated in the report, this macroeconomic imbalance is currently slowing the rate of economic growth, job creation, and poverty reduction across the country.
Based on the study, the country’s export growth will not be fast enough to address the foreign exchange constraint on its own in the short term; instead, exports per capita must rise for the country to achieve macroeconomic balance as it expands over time.
Furthermore, because there are few opportunities for it to do so intensively, the Government of Ethiopia (GoE) will need to strategically support the diversification of its economy in order to increase its export base, reads the study.
“To be produced, most products in the modern world require more knowhow than what any single person can hold. Modern production hence requires teams of complementary workers that span the required knowhow: it requires collective knowhow. For these reasons, collective knowhow is most likely to become the hardest form of knowledge to mobilize.” Pathways for Productive Diversification in Ethiopia
Among the major items barred from importation are automobiles, motorcycles, and three-wheelers, whose (already imported) prices might skyrocket as a result. Electric vehicles (EVs), however, are exempted in an attempt to accelerate their adoption and then substitute foreign currency-draining fossil fuel imports with locally produced clean electricity.
Source: Ministry of Finance, Addis Standard, Clean Technica
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