European Chamber in Ethiopia (EuroCham) backs Ethiopia's recent reform on a market- based exchange rate signaling such move to eliminate nation's forex crunch amidst some ongoing concerns.
According to a press release sent to the Ethiopian Press Agency (EPA), EuroCham believes that the historic economic reform surely brings "a landslide change into the macro-economic landscape" while addressing the longstanding disparity in structural distortions.
The reform, based on the press release, will open doors for the forex availability for the manufacturing and import-substitution sectors by reducing the role of parallel market. "The announced measures have the potential to address long standing macroeconomic imbalances."
"The authorization of forex exchange bureaus is a crucial step towards addressing the scarcity of foreign currency notes in the formal economy which will benefit outbound travelers."
These measures, together with a more unified exchange rate are expected to stimulate the inflow of forex into the formal market, including remittances originating from the diaspora community, and reduce the demand for black market exchange.
The ability of exporters to freely use their own foreign exchange for purchasing goods and services within the same legal entity also marks a groundbreaking shift in Ethiopia's economic landscape, the presser stated.
"The new regulations allow big scale mining, public-private partnerships (PPPs), and strategic foreign direct investments (FDIs) to establish offshore accounts. It also introduces favorable conditions for Special Economic Zones (SEZs) and Industrial Parks (IPs)."
The presser also disclosed the concerns observed such as price hikes seen on many agricultural commodities, minimum export prices, backlogged dividend repatriations, and the restriction on fuel powered vehicles, and the like.
"Unless the government takes bold action on actors engaged in contraband, price hiking and hoarding, the envisioned reforms will miss their target and trigger an accelerated inflation."
"For the reforms to be effective, a multi-stakeholder approach is required, and government stakeholders such as customs, tax authorities, trade regulators, security forces and NBE jointly crack down on illicit actors whereby the rule of law and peace and security shall prevail and anti-inflation measures are rapidly implemented."
