Ethiopia restricts the use of foreign currency

Ethiopia has ordered banks to deny foreign exchange to companies importing non-priority goods, in a bid to shore up dwindling foreign exchange reserves in one of Africa’s major economies.

The move effectively freezes the import of dozens of items such as alcohol and cars, as companies must register with banks to obtain the foreign currency needed to import goods into the country.

In a letter to the Ethiopian central bank, the Ministry of Finance said it had become necessary to restrict the use of foreign currency for the import of food, medicine and medical equipment, as well as raw materials. for the manufacture.

“Therefore … we are sending a list of assets that will not be allowed to forex for an indefinite period,” reads the letter posted on the Twitter account of Industry Minister Melaku Alebel Addis on Saturday.

The list of around 40 products includes vehicles and motorcycles, wall clocks, umbrellas, carpets and soaps, alcohol, perfumes and cigarettes.

No recent public figures are available regarding Ethiopia’s foreign currency reserves.

In late March, the National Bank of Ethiopia reported that reserves had fallen to $1.6 billion by the end of 2021, covering less than 2 months of imports, according to local newspaper The Reporter.

A largely importing country, Ethiopia is in structural shortage of foreign currency,” the French Treasury said in a periodic bulletin this month.

Ethiopian authorities have also recently tightened laws on foreign currency holdings for individuals and businesses and banned all foreign currency transactions in Ethiopia.

There has also been a crackdown this month on foreign currency trading on the black market, where the US dollar can reach almost twice the official exchange rate amid surging demand.

The central bank also announced this month that it had blocked nearly 400 bank accounts suspected of being linked to illicit currency trading and promised financial rewards to those who spoke out against shadow market players.