Ethiopia: There Appears to Be . . .

opinion

A couple of weeks ago, leaders of the banking industry were complaining about increasing incidents of theft from the banks. Their recommendations? Imposing caps on how much cash depositors could withdraw at a time and limiting the amount that can be withdrawn within a month.

There appears to be a new operational model in motion for the regulators and industry leaders in the financial sector, gossip observed. Unlike in the past where policymakers came up with regulations and directives to enforce the shock doctrine model, the guys in charge now are trying to be a little cunning, a sort of apt by half move, as those in the gossip corridors see it.

Here is how it appears to be unfolding. Regulators at the central bank may want to introduce something to the financial market. But they call the presidents and CEOs of the banks and insurance firms for a talk, claims gossip. What follows is the industry leaders make public pronouncements urging the authorities to do certain things they claim are essential. A series of directives are churned out by the central bank, trying to give the impression that they only respond to what the industry demands of them, observed gossip.

A couple of weeks ago, leaders of the banking industry were complaining about increasing incidents of theft from the banks. Their recommendations? Imposing caps on how much cash depositors could withdraw at a time and limiting the amount that can be withdrawn within a month.

Yinager Dessie (PhD), governor of the National Bank of Ethiopia (NBE), appears to be too pleased to listen to what the industry tells him and act upon it. The central bank conveniently introduced caps and limits of withdrawals on individual depositors and companies.

Some in the industry see this too unthoughtful act in an economy that relies so much on cash eventually affecting transactions on critical sectors such as the supply chain in the coffee export market. Farmers, collectors and exporters are in large part carrying boxes and sacks of cash to transact a commodity too crucial to the country's economy. Adjustments and twinkling of this directive are inevitable down the road, gossip foresees.

The latest claim from the banking industry leaders was about the unaccounted for cash in circulation arguably exceeding 100 billion Birr. They urged the authorities to change the feature of the notes in circulation hoping to force people with money on hand to deposit it into the banking system. At the same time, they figured this would push the unaccounted for notes out of the market, eventually.

There has always been an amount in the central bank books marked as money circulating outside of the banking system. The more notes are printed and injected into the economy, and the slower the process of disposing of old notes no longer fit to circulate, this amount increases.

But it is interesting to see that the recommendation from the industry leaders urging the authorities to act was made after the central bank has already placed orders to its traditional printers to print banknotes in large quantities, gossip claims. It may appear that the authorities at the central bank are responding to recommendations from the industry, says gossip. However, the redesigned features of Birr notes with denominations of 10, 50, and 100 were made a long time ago, and they are due to appear in circulation perhaps after September 2020, gossip revealed. Indeed, the five Birr denomination is also in print but without changed features, claims gossip.

The French Charles Oberthur Fiduciare and the UK De La Rue Plc are often hired to do the printing jobs for Ethiopia, which costs the central bank tens of millions of dollars. It was in March last year that the central bank had ordered the printing of 187 million Br in 100 Br notes and 19.6 million Br in 50 Br notes. Their circulation in the economy was made in recent months.

Industry leaders have also urged the authorities to consider the introduction of banknotes in a higher denomination. It would be a little surprising to understand that one of the European printers have already taken orders to print banknotes with 200 Br denominations, gossip revealed. The Ethiopian public will get to know a new note for the first time in many decades just in a few months, gossip claims.

More From: Addis Fortune

Don't Miss

AllAfrica publishes around 800 reports a day from more than 130 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.