Directive Issued by NBE and Its Implication2

COMMERCIAL BANK OF ETHIOPIA
Business Development
Market Research
Implications of NBE Released Directives after

Devaluation of Domestic currency
March 2019
Prepared by
AnwarE Mohammed
&
Desalegn worku
Implications of NBE Released Directives Pro- Devaluation of
Domestic currency
Table of Contents
Contents…………………………………………………………………………………………………………….Page
1. Introduction........................................................................................... 1
2. Problems that Led to the Issuance of the Directive .................................. 2
3. Key Contents of the New Directives ........................................................ 4
3.1. Interest rate directives No. NBE/INT/12/2017 ...................................... 4
3.2. Limiting the outstanding loan growth rate of banks to 16.5 percent ....... 4
3.3. NBE directive that forces all banks to sell 30 percent of their hard
currency to NBE.............................................................................................. 5
3.4. External loan and supplier’s credit directive No REL/05/2002 by new

directive No/47/2017 ...................................................................................... 5
3.5. The Retention and Utilization of Export earnings and inward remittance
directive FXD/48/2017 .................................................................................... 5
3.6. Limit on the Birr and Foreign Currency Holding in the Territory of
Ethiopia (Directives No FXD/49/2017) ............................................................ 6
3.7. Setting of Indicative Minimum Price for selected Import items

Directives No FXD/53/2018 amendments to directive No FXD/52 2017.............. 7
3.8. Transparency in Foreign Currency Allocation and Foreign Exchange

Management directive ..................................................................................... 8
4. Implications of New Directive to the Economy and Banking Industry ........ 8
4.1. Impacts of Birr Devaluation ................................................................. 8
4.2. Impacts of Interest Rate Rise ............................................................ 22
4.3. Impacts of Limiting Outstanding Loan Growth Rate............................. 25
4.4. Impacts of Banks to Sell 30 Percent of their Hard Currency to NBE...... 27
4.7. The Impacts of Limit on the Birr and Foreign Currency Holding
Directive.................................................................................................29
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4.8. Impacts of Setting of Indicative Minimum Price for selected Import

items.....................................................................................................30
4.9. Impacts of Transparency in Foreign Currency Allocation and Foreign

Exchange Management Directive ................................................................... 30
5. Implications of Introductions of New Directive to CBE ............................ 31
6. Changes and Improvements Brought about as a Result of the Directives 35
7. Challenges Remained ........................................................................... 35
References ................................................................................................... 42
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1. Introduction
In accordance with Article 55(1) of the constitution of the Federal Democratic
Republic of Ethiopia, the National Bank of Ethiopia (NBE) is established to control
the financial system and monetary policy of the co untry. It exercises control
over the banking sector through issuance of directives pertaining formation and
operation of a banking business. Most of the operational directives implemented
so far aim at reducing risk of liquidity and solvency in the banking system. Some
of NBE’s directives are issued as part of the central bank’s conduct of monetary
policy and some are issued to ensure that the sector plays adequate role in
channelling funds to priority sectors of the economy.
NBE has recently announced that Birr, Ethiopian currency, has devalued by
fifteen percent (15%) effective from October 11, 2017 for the third time. The
devaluation pegs the Ethiopian Birr at 26.91 to the dollar, up from 23.40 Br on
the official market.
The devaluation was made to boost exports, which have stagnated the last
five years owing to the Birr’s strong value against major currencies. Following
this, it has introduced various directives that mitigate the current inflation rise
and currency shortage, intended to encourage exporters and recipients of
remittance.
Therefore, this brief report discusses different directives and circulars introduced
by NBE after the recent devaluation. It briefly discusses the following directives
and circulars released in different time and its implication to the bank industry
and CBE specifically:-
 Interest rate directive;
 Limiting the outstanding loan growth rate of banks;
 All banks have to sell 30 percent of their hard currency to NBE;
 External loan and supplier’s credit directive;
 Retention and utilization of export earnings and inward remittances

directive;
 Regarding Birr and foreign currency holding limit in the territory of Ethiopia
directive;
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 Setting of Indicative Minimum Price for Selected Import Items directives

(to access LCs equivalent to the price of the selected imported items);
 Transparency in Foreign Currency Allocation and Foreign Exchange

Management directive.
2. Problems that Led to the Issuance of the Directive
According to NBE annual report, before the previous devaluation year (2010),
the export earnings of the country were $2.0 billion in 2009FY and reached $3.3
billion in 2013. Then after, export revenues have started declining and fell back
to $2.9 billion in 2016, almost equal to the previous devaluation period. Note
that this figure is given in nominal terms that are to say without taking the effect
of inflation into account. The cumulative change in general price level (CPI)
from 2010 to 2016 was 2.24; on average there has been more than two -fold
increase in prices of goods and service in just six years (2010-2016)1 .
Therefore, in real terms Ethiopia’s export revenues in 2016 was less than 50% of
the amount earned in 2010.
On the other hand, expenditure on imports has sharply increased from $8.3
billion in 2009 to $15.8 billion in 2016, almost a two-fold increase. The sluggish
growth in export earnings and rapid growth in expenditure on imports means
Ethiopia’s current trade deficit has deteriorated, rising from about $6.3 billion in
2009 to $12.9 billion in 2016, again nearly two-fold increase. Similarly, in 2010
the difference between the black market and banks rate was almost 2.3%. But,
in 2016 the gap between the black market and the exchange rate market was
reached to 20 percent associated with presence of a massive demand on the
parallel market for the buying and selling of hard currency (Table1).
The trends of under-invoicing import items might have also contribute for the
widening of the gap between the black market and official exchange rate. Under-
invoicing is the practice of declaring a lower than actual price on an invoice for
import items. The difference is then paid to the seller in cash. The only way to fill
the margin is by accessing hard currency from the black market. Specifically, it
is done using Togo-Challe; the illegal exchange of cash along the Ethio -Somali
1
J. Bonsa (PhD), http://addisstandard.com/economic-analysis-devaluing-birr-thing-
expecting-different-outcome/
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boarders2 . This transaction is specifically done when hard currencies are

transferred into the country via the formal channels. The currency is then
transferred to banks in nearby countries where it can be withdrawn in different
currencies. The hard currency will then be carried into the country and traded in
the black market. Importers go to forex dealers, buy hard currency and use it to
import different commodities. The exporters receive money from outside the
country as advance payment for their goods, and declare the money to bring it
into the country (ibid).
Table1. Export-Import Performance of Ethiopia from 2009/10-2016/17FY
Fiscal year
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Particulars
Export(Fob)
in mn.USD 2,003.1 2,747.1 3,152.7 3,075.2 3,300.1 3,019.1 2,867.7 2,907.5
Growth Rate -
(%) 37.1 14.8 -2.5 7.3 -8.5 -5.0 1.4
Imports in
mn.USD 8,268.9 8,253.3 11,061.2 11,467.3 13,712.3 16,458.6 16,725.2 15,802.6
Growth Rate
(%) - -0.2 34.0 3.7 19.6 20.0 1.6 -5.5
Trade
Balance in (6,265.8) (5,506.2) (7,908.5) (8,392.1) (10,412.2) (13,439.5) (13,857.5) (12,895.1)
mn.USD
Official
Exchange
rate 12.8909 16.1178 17.2536 18.1947 19.0748 20.0956 21.1059 22.4137
Parallel rate 13.6806 16.5292 17.9883 19.3025 19.8666 22.2932 - -
Source:-NBE Annual Reports and Own Computation
Since the previous directive did not mention about the rate or percentage of
hard currency allocation for the priority areas, priority sectors were only financed
by CBE and the private banks were not forced to finance the sector. In addition,
customers had previously complained that people were supposed to get a NBE
approval in obtaining a Letter of Credit (LC) from the banks. The system created
crowded conditions at the central bank forcing NBE to give the role to banks
(ibid).
Thus, the new directives are aimed to tackle the possible negative effects that
could follow the devaluation. In addition, the new directives are aimed to push
2
Addis standard magazine.
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the private banks to serve the priority sectors and tackle mal practices of in the
illegal business.
3. Key Contents of the New Directives

3.1. Interest rate directives No. NBE/INT/12/2017
The objective of this directive is to stimulate savings and counter inflation that
would arise from the declaration of devaluation effected from October 11, 2017
in the country.
Following the 15 percent devaluation of Birr, NBE increased minimum saving

interest rate. According to the new directive minimum interest rates on saving
and time deposit was made 7 percent. The rate for demand deposit was left free
to be determined by each bank. The board director of each bank shall set in
writing demand deposit rate; saving and time deposit interest not less than the
minimum rate. Similarly, lending rate on loans and advances was left free to be
determined by each bank. In addition, the new directive set the lending rate on
loans and re-discounts facilities granted by NBE to commercial banks were left to
be determined by NBE. The inter-banking lending rate among commercial banks
is negotiable between the banks.
3.2. Limiting the outstanding loan growth rate of banks to 16.5

percent
The objective of this directive is targeting to shrink money supply in the market
that enables the National Bank of Ethiopia to control the inflation rate and also
encourage investment in the export sector.
At the beginning of the second Growth and Transformation Plan (GTP-II) period
the bank issued its five-year financial strategy for commercial banks. In the
plan, commercial banks were told to increase the amount of loan they provide by
30 percent annually. However, after the devaluation, the bank announces that
the amount of loan to be issued for sectors other than export and priority
sectors to grow only by 16.5 percent annually. The directive aimed to counter
expected inflation derived from devaluation and to force banks to focus on
export sectors.
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3.3. NBE directive that forces all banks to sell 30 percent of their
hard currency to NBE
In this regard, the above directive objective is to improve hard currency reserve
of the National Bank of Ethiopia.
NBE has applied hard currency rule on banks to improve its hard currency
reserve. According to the directive, commercial banks were told to transfer 30
percent of their foreign currency earnings to the government and the remaining
70 percent to use by themselves. The hard currency banks secure via any kind
of options will be partly transferred to NBE, while the central bank will pay the
equivalent in birr.
3.4. External loan and supplier’s credit directive No REL/05/2002

by new directive No/47/2017
As a result of the shortage of hard currency, this amended directive objective is

authorizing companies those who are involved in export oriented investments of
the manufacturing sector in the country to import the badly needed raw material
for their production plants using supplier’s credit scheme.
According to the directive, exporter and domestic investors who is engaged in

projects that generate foreign currency are eligible borrowers. It underlines that
any form of guarantee may not be issued by government and banks for private
loan.
An external loan guaranteed by federal government of Ethiopia shall be
registered by the NBE by presenting the agreement and the guarantee issued
there too, according to the directive. The repayment also shall be approved by
the NBE.
3.5. The Retention and Utilization of Export earnings and inward
remittance directive FXD/48/2017
The objective of this amended directive is to resolve unfair competition between

banks due to the shortage of foreign currency in the country. And also
incentivise eligible exporter of goods and services in line with power and
responsibility vested in the National Bank of Ethiopia.
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Following the currency devaluation, NBE has also introduced new directive that
will encourage exporters and recipients of inward remittances through the
Retention and Utilization of Export Earnings and Inward Remittance Directive No,
FXD/48/2017. This Directive has repealed and replaced the old Directive,
FXD/11/1998, which had been put in to force since August 31, 1998.
The new directive increased the amount of FCY to be retained in retention A

account from 10 percent to 30 percent. In retention A, 30% of the foreign
exchange earnings will be deposited for an indefinite time, whereas the rest 70%
of the earning will be deposited in retention B to be converted by the customer's
bank effective immediately to local currency, which is after 28 days of the
deposit thereof by using the prevailing buying exchange rate.
3.6. Limit on the Birr and Foreign Currency Holding in the

Territory of Ethiopia (Directives No FXD/49/2017)
Here, the basic objective of this directive is to limit the Birr holding amount for
travellers exiting in Ethiopia, in order to ensure the proper use of the
currency within the country and indicate clearly to travellers the legally
allowed Birr holding.
The directive which limit Birr and FCY holding in the territory of Ethiopia come to
action on October 03 2017, in the place of the old directive set in 2007.
According to the new directive, a person entering to or departing from Ethiopia
may hold up to Birr 1,000 while those who travel to Djibouti can hold up to Birr
4,000. The previous provisions limit the amount at Birr 200 but hadn’t specified
the amount for Djibouti. Any person residing in Ethiopia entering into the
country, hold FCY of exceeding USD 1,000 shall convert it within 30 days. On the
other hand, any person not residing in Ethiopia may hold the foreign currency in
his possession until his visa expired.
Any person not residing in Ethiopia, who is travelling abroad, can carry foreign
currency exceeding USD 3,000 provided that the traveller produces proper bank
advice and customs declaration. The same applies for embassy employers,
temporary workers of foreign institutions, or workshop participants and trainers.
On the other hand, any person residing in Ethiopia is allowed to carry foreign
currency for which he can produce a bank advice and/or a foreign currency
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custom declaration for a period not exceeding 30 days from the date of
acquisition and/or declaration of the foreign currency.
Foreign currency holing limit of Ethiopian resident is 30 days in the new directive
that was 45 days in the previous one. According to the new directive no person
residing in Ethiopia is allowed to hold foreign currency for more than 30 days
since the date of acquisition and/or declaration of the foreign currency.
3.7. Setting of Indicative Minimum Price for selected Import

items Directives No FXD/53/2018 amendments to directive
No FXD/52 2017
The objective of both the former and the new directives is to tackle under
invoicing and the illegal forex market. According to the latest directive, banks
are authorized to check and approve the price of items. This was previously the
responsibility of NBE according to the former directive issued in December. The
system created crowded conditions at the central bank forcing NBE to give the
role to banks. In addition, in the new directive NBE provided an approval for the
price of items that are not found as stated items on Ethiopian Revenue and
Customs Authority (ERCA) lists.
Article 4 sub articles 3 of directive No. FXD/52 2017 indicated that any
commercial bank is authorized to process import items if the price of the item is
under the Harmonized System of Commodity Description. The directive has also
attached a letter format that has to be filled for such kind of process.
The banks are also authorized to undertake the Performa invoice on their own,
but they are obliged to report with relevant documents to NBE every week.
Moreover, importers have to open an equivalent letter of credit (LC) as per the
given price that NBE distributed to banks for selected items. In the past,
importers may access a small amount from banks other than the exact volume
of imported items. They have been using the hard currency from other sources
like illegal remittances or the parallel market. But the new law that NBE imposed
would fully cut this illegal action, since the importers are expected to import the
product based on the real value estimated by the ERCA and the amount written
on the LC.
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3.8. Transparency in Foreign Currency Allocation and Foreign

Exchange Management directive
Since foreign exchange is a scarce resource that should be managed carefully

to ensure its efficient and proper allocation, the objective of this directive is
ensuring that foreign exchange is allocated in a transparent and sound
manner to priority and other economic sectors without opening a room
for rent seeking behaviour and malpractice.
NBE has placed a fixed percentage on the hard currency allocation for private
banks on the letter of credit (LC) approval for priority areas. The central bank’s
new directive that replaced the 2016 directive stated that 40 percent of the LC’s
must use for importing goods/services to the priority sector. The previous
directive did not mention about the rate or percentage of hard currency
allocation for these priority areas.
In the new directive, the import of petroleum, fertilizer, agricultural machines,

inputs, spare parts, medicine and related items, industrial inputs and
accessories, supplement food for babies, are mentioned as a priority for the hard
currency allocation.
4. Implications of New Directive to the Economy and Banking

Industry
4.1. Impacts of Birr Devaluation
Impacts of birr devaluation on trade balance
 The economic reasoning behind the devaluation of the birr value as a means
of improving a country's trade balance is that a decline in the birr would
cause exportable to be cheaper relative to other countries. This would then
lead to an increase in the volume of exports, other things being equal. With
the cheapened birr, imported goods become more expensive thereby leading
to an improvement in the country's trade balance. The expected reduction in
the trade balance depends, of course, on the exact amounts of imports and
exports, their respected price elasticises and a number of other factors.
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Figure 1: Quarterly trade balance of Ethiopia from 2016/17Q1 to 2018/19 Q1
Source: NBE (2018)

 As compared to the same period of a year ago, Ethiopia’s export is still
worsening even after the October 2017 birr devaluation. At the immediate of
devaluation in 2017/18Q2 the export was increased by 16 percent against a
year ago same period. But, the third and fourth quarter of 2017/18 export
value was declined by around 4 and 17 percent respectively compared with a
year ago the same period. Similarly, the export earnings in the first quarter
of 2018/19 were also less by 7.5 percent than a year ago the same period.
 Total merchandise export earnings declined by 2.3 percent over last year
due to lower earnings from export of coffee (5.0 percent), pulses (3.7
percent), gold (52.0 percent), live-animals (9.6 percent), chat (3.6
percent) and other export items (2.9 percent).
 But, export revenue from oilseeds, leather & leather products increased by
20.6 percent, 16.1 respectively due to rise in international price.
The decrease in export revenue was associated with the decline in export
volumes and export prices of major commodities. For example;
 Earnings from export of coffee dropped by 5.0 percent wholly due to
10.1 percent decline in its international price despite increase in its
export volume.
 Earnings from pulses also decreased by 3.7 percent to USD 269.5
million solely due to 13.7 percent fall in international price despite 11.5
percent growth in export volume.
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 The revenue from export of gold showed 52 percent reduction, driven

wholly by 52.8 percent contraction in volume of export despite a 1.6
percent rise in international price.
 Chat export earnings declined by 3.6 percent. This was wholly due to
3.7 percent drop in volume of export.
 The proceeds from export of live-animals showed 9.6 percent
reduction resulting from 11.4 percent contraction in export volume
against 2.1 percent rise in world price .
 Export revenue from oilseeds increased by 20.6 percent and
reached by 15.4 and 4.5 percent rise in international price and
export vo lume.
 Earning from export of leather & leather products registered 16.1
percent increment owing to 8.7 percent expansion in export volume
and 6.9 percent rise in international price.
Table 1: Volume of Major export items (in millions of kg unless stated otherwise)
Percentage Change
2015/16 2016/17 2017/18 2016/17 2017/18
Coffee 198.7 225.7 238.6 13.6% 5.7%
Oilseeds 436.6 333.5 348.5 -23.6% 4.5%
Leather and Leather
products 6.0 5.9 6.4 -1.7% 8.5%
Pulses 375.4 392.7 438.1 4.6% 11.6%
Meat & Meat Products 19 19.6 20 3.2% 2.0%
Fruits & Vegetables 167.1 178.6 189 6.9% 5.8%
Live Animals 77.8 36.1 31.9 -53.6% -11.6%
Chat 47 48.8 47 3.8% -3.7%
Chat 47 48.8 47 3.8% -3.7%
Gold (in mill of grams) 8.6 6 2.8 -30.2% -53.3%
Flower 50.6 49.4 50.1 -2.4% 1.4%
Electricity(in mill of
KWh) 511.3 1,305.5 1,516.2 155.3% 16.1%
Source: NBE annual report 2017/18, pp 69
 Likewise, earning from export of flower showed 4.6 percent increment
over last year. This was attributed to improvements in both export volume
(1.5 percent) and international price (3.1 percent).
 Receipts from meat & meat products grew by 3.1 percent on account of
1.0 percent increase in global price and 2.0 percent growth in volume of
exports.
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 Earnings from electricity export increased by 14.9 percent from last

year owing to 16.1 percent growth in export volume despite a 1.1
percent fall in international price.
 According to NBE annual reports of 2017/18 FY, total merchandise import
bills amounted to USD 15.3 billion depicting 3.5 percent annual decline. This
was mainly on account of lower import of capital, consumer and semi-finished
goods. However, import of raw materials, fuel import bills, and fertilizer
import increased by 9.8 percent, 27.1percent and 30 percent over last year.
Similarly, in the first quarter of 2018/19 FY, the total merchandise import
was also declined by 9 percent from last year the same period.
 The trade deficit was narrowed 4.9 percent , 9.1 percent and 9 percent
during the third, fourth quarter of 2017/18 FY and the first quarter of
2018/19 FY relative to last year similar period respectively. The annual trade
deficit amounted to 12.41 billion in 2017/18 FY, which narrowed by 3.7
percent from last year.
 According to NBE 2017/18 FY annual report, the deficit in current account
balance including official transfers narrowed to USD 5.3 billion from USD 6.5
billion last year, due to the improvement in trade balance, in net services
deficit and strong increment in net private transfers. However, the current
account deficit is projected to remain wide and decline only gradually (IMF,
2018).
 The study conducted on the effect of Birr devaluation on trade balance of
Ethiopia for the period 1970-2014 revealed that Birr devaluation deteriorates
the trade balance of Ethiopia in the short run and improves it in the long run
if other things being constant (Eshetu, 2017). The study firmly explains that
devaluation of birr will have the desired impact in improving the trade
balance if the country has encouraging productivity improvements,
diversification of the export sectors and expansion o f import computing
industries.
 Thus, devaluation improves the trade balance and leads to output growth
only if the country is initially export dependent. But, if the country is initially
import dependent like Ethiopia, devaluation may worsen the situation. For
example, the December 2018 IMF report explained that exports of goods and
services are envisaged to pick up substantially in the medium term, reflecting
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the completion of key infrastructure (electricity generation and transmission,

railway to Djibouti and other logistics, industrial parks) and pay-offs from
domestic investment and green field FDI. Nevertheless, this pickup is unlikely
to reach its full extent immediately: time may be needed for testing,
installation and training of newly-hired industrial workers before production
facilities can operate at full capacity.
 Import growth will remain moderate in 2017/18, premised on continued
public sector restraint, as announced in the recent budget speech. However,
imports will gradually accelerate over the medium term since expanding
manufacturing activities will entail substantial importation of inputs until
alternative local sourcing, where feasible, develops. Thus, the current
account deficit is projected to remain wide and decline only gradually.
 Therefore, Devaluation would have positive impact, once the country
establishes export oriented firms and international markets. Otherwise, the
current devaluation made the essential import goods more expensive and
didn’t boost the export. It is better for the country to import capital goods
and raw materials until the industry is established. Then, once the production
gets its way, devaluation would make a sense.
The Impact of Devaluation on Exchange Rate Overvaluation
 IMF on Ethiopia’s economy report in January estimates that the real effective
exchange rate was overvalued by about 20 percent during 2016/17 based on
a variety of approaches resulting in widespread foreign exchange shortages.
The October devaluation eliminated most of the accumulated overvaluation,
leaving it at about 7 percent (IMF, January 2018).
 A we see from Table 1 below, the REER in the first quarter of 2017/18 was
overvalued by 7 percent as compared with the same quarter a year ago.
However, the NEER is depreciated by 2 percent. Simultaneously, after
devaluation of Ethiopia birr by 15 percent in October, the REER depreciated
by 8.6 percent at the second quarter of 2017/18 compared with a year ago
the same quarter. However, the rate of depreciation of REER decreased as
compared to the previous year similar quarter. It means that the REER is
appreciating and almost return to the previous position. For example,
2018/19 first quarter REER is only depreciated by 1.5 percent when it
compared with last year the same period. Then again, the rise in domestic
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price level compared with the exporting countries inflation leads to appreciate
the REER. Thus, the appreciation of REER is mainly due to a relatively higher
domestic inflation and lower depreciation rate of Birr relative to that of
Ethiopia’s major trading partner currencies.
 Thus, the October 2017 devaluation was effective in depreciating the REER at
the time of devaluation, but through time the REER is appreciating. This may
in turn makes Ethiopia’s export commodity expensive in the world market as
compared with other countries product. Therefore, a substantial policy
measure should have to be taken in order to restrict the domestic inflation.
The substantial reduction in base and broad money growth targets are
appropriate to contain second round and pass-through inflationary effects.
Table 2: The nominal and real effective Exchange rate before and after
devaluation
Period NEER REER %NEER against last year %REER against last year
2015/16 QI 42.4 162.4
QII 42.3 158.8
QIII 42 158.7
QIV 41.2 159.3
2016/17 QI 40.6 160.4 -4.2% -1.2%
QII 42.3 165.6 0.0% 4.3%
QIII 43 171.7 2.4% 8.2%
QIV 41.8 171.9 1.5% 7.9%
2017/18QI 40.5 172.1 -0.2% 7.3%
Post October Devaluation
QII 35.7 151.4 -15.6% -8.6%
QIII 35.6 152.3 -17.2% -11.3%
QIV 37.2 161.8 -11.0% -5.9%
2018/19 QI 39.3 169.5 -3.0% -1.5%
Source: NBE, 2019
The Impact of Devaluation on Banks Foreign Assets and Liabilities
 A depreciation of a country's currency is expected to increase both the value

of assets denominated in foreign currency and the burden of liabilities
denominated in foreign currency. The value of assets and liabilities
denominated in the home currency will not be affected by changes in the
exchange rate.
 As expected, banks foreign liabilities in foreign assets were increased after
the October 2017 devaluation. Similarly, banks foreign assets were
increased. However, the rate of increment in foreign assets was lower than
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the increment of liabilities since October 2017 to December 2017. Because of

this, the net foreign asset during this period was declining monthly. And
then, the net foreign asset was rose at January 2018.
 Generally, the net foreign asset reached to Birr 39.37 billion in 2017/18,
increased by 3.5 percent from last year position (Birr 38.03 billion). In
October 2018, the net foreign assets were reached to Birr 74.85 billion, which
was increased by 97.3 percent from October 2017.
 Thus, the net foreign assets of banks slightly increased on overage after
devaluation.
Figure 2: Ethiopia's banks Foreign Asset, Liabilities and Net Foreign Asset, in
millions of Birr from July 2017 to October 2018
Source: NBE, 2018

The Impact of Devaluation on Remittance Inflow
 Devaluation expected to improve the current account balance through
remittance. However, remittance inflow and hard currency purchase of the
banking system can increase when complementary measures that narrow the
parallel and bank rate are implemented along with the devaluation.
 After the day of NBE announcement of devaluation, a jump in the official
Birr/Dollar exchange rate was observed from 23.3 to 26.9, the parallel
market have made also an adjustment of their own in the parallel rate in the
form of an increase from about 27 Birr/Dollar to 343 . But, following
government warnings to individuals hold foreign currency at hands and FCY
smugglers at the end of May 2017, the price difference for FCY between black
market and formal markets narrowed. The birr was trading on the parallel
3
https://www.thereporterethiopia.com/article/precarious-birr
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market around 28 to the dollar, close to parity with the official rate and 25
percent firmer than three months ago at July 20184 .
 Before the devaluation, in September 2017, the individual remittance
collected were USD 206.6 million, which was 3.6 percent below a year ago
the same period. Immediately after the devaluation, in October 2017, the
amount dropped to USD 203.6 Million however it was 8.2 above last year the
same period. The individual remittance inflow decreases in November 2017,
March, May and June 2018 relative to a year ago the same period. Even in
the remaining months didn’t show a significant improvement.
Table 3: Individual cash remittance inflow (in millions of USD)
Months before Remittance in Months After Remittance in Year on year

Devaluation million USD Devaluation million USD change (%)
Jul-16 226. 1 Oct-17 203.6 17.9%
Aug-16 208.6 Nov-17 197.5 -8.2%
Sep-16 213.9 Dec-17 213.9 10.9%
Oct-16 172.7 Jan-18 210.9 13.3%
Nov-16 215.1 Feb-18 212.8 21.9%
Dec-16 192. 8 Mar-18 230.8 -4.1%
Jan-17 186.1 Apr-18 224.3 8.9%
Feb-17 174.6 May-18 231.1 -11.0%
Mar-17 240.7 Jun-18 215.4 -4.6%
Apr-17 206.0 Jul-18 278.1 17.3%
May-17 259.6 Aug-18 301.1 7.0%
Jun-17 225.7 Sep-18 245.8 19.0%
Jul-17 237.1 Oct-18 231.2 13.5%
Aug-17 281.3 Nov-18 215.9 9.3%
Sep-17 206.6 Dec-18 258.0 20.6%
Source: NBE, 2018/19
 However, following Prime Minister Abiy Ahmed called upon those hoarding
hard currency to deposit it in banks and the talk held with Ethiopian
Diasporas abroad in the first weeks of July 2018, the remittance inflow has
been increasing. Since July to December 2018, the individual remittance
inflow has been increasing as compared with a year ago the same periods.
4
https://af.reuters.com/article/investingNews/idAFKBN1KA2 AA-OZABS
Market Research 15
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 The annual remittance inflow was USD 2.7 billion in 2017/18 FY, which was
increased by 5.7 percent from USD 2.5 billion in 2016/17. Similarly, the
individual remittance inflow reached USD 1.74 billion during the first half year
of 2018/19, which increased by 11.5 percent as compared to a year ago the
same period (USD 1.56 billion).
 Thus, as we see firm the data, the improvement in remittance inflow had
more political motive rather than economical. As it is known the remittance
inflow after 2014 was deteriorated. 2014 was the year Oromo Protests was
ignited in Ambo, spread to the rest of Oromia like a forest fire, and finally
engulfed the whole nation, when Amhara Resistance followed suit. A
relentless campaign ended up with a remittance boycott to punish the regime
that desperately needed hard currency to sustain itself and stay on power
(Gelan, 2018).
Figure 3: Individual Remittance inflow 2012/13 to 2017/18
Source: NBE, 2018

The study finding of Gelan (2018) revealed that Ethiopia lost remittance inflows
because of remittance boycott amounting to US 765 million in 2015, USD 1.4
billion in 2016, and US 1.7 billion in 2017. The losses over the three years period
amounted to US 3.8 billion that is today Ethiopia lost nearly US 4 billion of
remittance inflows during the three period.
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The Impact of Devaluation on Tourism Revenue

 In the service sector, tourism will be much benefited as the devaluation
makes domestic services relatively cheaper for tourists.
 Ethio pia’s tourism has surged to 863,742 visitors in 2017/18, increased
by 8 percent over last year. However, the number of tourist came for
leisure and holiday was lower by 7 percent than last year.
 After the devaluatio n, the number of visitors showed a steady increase in
2017/18Q2 and 2017/18Q3 as compared w ith a year ago the same
period. Then after, the number of visitors steadily declined in 2017/18Q4
relative to a year ago the same month and the earlier quarter. In 2017/18
FY, USD 3.57 billion was earned from visitors; however, as it is compared
with the previous year the amount didn’t show a significant increase.
 Thus, it is not possible to say that the devaluation positively impacted the
tourism sector. But in the long run it may have encouraging impact.
However, the political instability and the state of emergency declared last
year might affect the incoming of tourists and revenues earned from tourists.
Figure 4 Number of tourist arrival from 2016/17Q1 to 2017/18Qlv
Source: Ministry of Culture & Tourism (2018)

The Impact of Devaluation on Domestic Inflation
 The devaluation will affect most importers that import basic consumer goods
as the cost of these good became more expensive in terms of Birr and the
wait for getting adequate foreign currency has stretched from months to
years in the banking industry. The price of the imported items are also
Market Research 17
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expected to increases for domestic consumers. Doubled with the domestic

political violence and chaos the devaluation of domestic currency exacerbates
the domestic inflation.
 The average annual inflation rate was 7.2 percent in 2016/17 Ethiopian fiscal
year. But following October 2017 devaluation, the average annual inflation
rate raises to 14.4 percent in 2017/18, which is almost double of last year
average rate.
 Before the devaluation, the monthly inflation rate was at single digit level
except August 2017. For example, in January 2017, the monthly inflation rate
was 6.1 percent and it then rises to 9.4 in July 2017.
 When we see the monthly linear inflation trend, it is strictly increasing
starting from September 2017 devaluation.
 After devaluation, the inflation rate increased dramatically for the first 11
month (since October 2017 to August 2018) and then started to fall since
September 2018 till now. In September 2018, the rate fallen to 11.9 percent
and then even score to single digit in October 2018 to 9.3 percent. Again,
starting from December 2018, again it meets to double digit (10.4 percent in
December 2017 and 10.9 in January 2018).
Figure 5: Ethiopia inflation rate from January 2017 to January 2018
Source: December 2017 & January 2018 CSA Price report
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The Impact of Devaluation on External Debt Burden of the Country

 The overall balance of external public debt in local currency expected to
increase following the devaluation, which will also raise the required amount
of budget (in local currency) to service debt.
 The outstanding balance of external public debt was reached USD 24.2 billion
(Birr 566.5 billion) at the end of September 2017, before the devaluation.
 At the end of December 2017/18, the total outstanding balances of external
debt reached to USD 24.7 billion (Birr 670.6 billion). This mean that total
outstanding balance had only increased by 1.7 percent (USD 423.4 million) in
foreign currency while the total debt balance in birr increased by 18.4 percent
(Birr 104.1billion) relative to September 2017.
 Similarly, total service debts of the country rose by 147.8 percent and 170.9
percent in foreign and domestic currency as compared to September 2017.
Table 4: Public Sector External Debt, Outstanding, Disbursements and Debt

Service Payments in billion USD/ETB
% relative to
% relative to Sep-17
Sep-17 Dec-17 Sep-17 Dec-18
USD ETB USD ETB USD ETB USD ETB USD ETB
Total
Outstanding 24.2 566.5 24.7 670.6 1.7 18.4 26.8 752.2 10.7 32.8
Total
Disbursement 0.7 17.3 1.4 34.3 83.4 98.7 1.7 47.3 127.2 173.8
Total Debt
Service 0.3 6.8 0.7 18.3 147.8 170.9 0.8 23.7 193.4 250.4
Total Principal
Repayment 0.2 4.8 0.5 12.4 134.8 155.4 0.6 17.3 198.0 256.0
Total Interest
0.1 1.9 0.2 5.9 180.7 210.6 0.2 6.4 181.6 236.2
& Com
Source: MOFEC Quarterly and yearly public sector Debt statistical bulletins
 At the end of December 2018, the external debts of the country reached USD
26.8 billion (Billion 752.2 birr). Similarly, the total service debts5 of the
country reached to USD 846 million (Birr 23.7 billion). As it is compared with
September 2017 (before devaluation), the total outstanding balance and debt
services increased by USD 2.6 billion (10.7 percent) and USD 0.5 million (192
percent).
5
the amount of money required over a period of time to repay debts
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 Meanwhile, the outstanding balances and debt services in domestic currency

increased by 32.8 percent (Birr 185.7 billion) and 250.4 percent (Birr 16.92
billion). This is actually happen because of the 15 percent devaluation of
domestic currency.
Impacts of Devaluation on Budget Performance
The Ministry of Finance and Economic Cooperation (MoFEC) of Ethiopia proposed
a budget of 346.9 billion birr at the parliament for the 2018/19 budget year. The
proposed budget was higher than the 2017/18 fiscal year’s budget by a 3.6
percent (12 billion birr). Even though the budget had shown a 12 billion birr
increase, it had significantly decreased in hard currency, which is the major
resource for importing items. Accordingly, because of the 15% devaluation
which was applied in October 2017, the anticipated budget was in fact lower
than the previous year’s budget which was USD 13.9 billion6 .
Gap between the Parallel and Official Exchange Rate after
Devaluation
 The devaluation of the Birr is expected to narrow the rate differential
between the official and parallel (black market) rates if the devaluation
increase the supply and availability of foreign currencies.
 However, the black market for hard currencies operates outside the rules
and regulations set by the authorities. For example, after the devaluation,
the black-market rate had peaked at a historic rate of 36.6 Br, while the
official exchange rate for one dollar has been set at 27.5 Ethiopian B irr 7 .
 But, at the beginning of the two weeks of July 2018, have seen a
significant decline of 19.4 percent in the black-market rates following the
Prime Minister warns as prices of hard currency would decline. At the
time, a dollar that used to sell for 36.6 Br has suddenly fallen to 29 Br.
Subsequently, a slight increase in remittances and forex supplies has been
witnessed in the mainstream financial secto rs. However, the parallel
market didn’t stay long and again it begins to goes up because of loose
government control.
6
http://www.2merkato.com/news/alerts/5371- mofec-proposes-2018/19-fiscal-years-
budget
7
Addis Fortune magazine July 2018 publish
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Domestic currency
 For example, at March 03 2018, the black-market exchange rate was

reached between 37 and 38 birrs8 . While Dollar official exchange rate was
28.36 Birr. Thus, the gap between the official and parallel exchange rate
was more affected by government level of control or policies than the
devaluation.
 As we see in the graph, the parallel and official exchange rate gaps had
became narrowed during July and August 2018. According to Reporter and
fortune magazines published during July, the reason for the fall in parallel
exchange rate were:
 The Ethiopian birr has gone up in value today as Prime Minister Abiy
Ahmed’s reform agenda takes root and Ethiopians in the Diaspora are
increasing their remittances through banks.
 Due to Prime Minister Abiy Ahmed’s reform agenda that he has
introduced when he came to power 4 months ago.
 Strengthening of control of illegal foreign currency movements and
contraband trades in eastern, southern and Western borders of the
country.
Figure 6: Official and Parallel exchange rate since August 2017 to March 2019
40.00
35.00
Monthly Exchange rates
30.00
25.00
20.00
15.00
10.00
5.00
0.00
Official ER Minimum parallel ER Maximum parallel ER
Source: NBE9 and online 10

(Takes the average of daily parallel ER)
8
Ethiopia Birr Black Market Exchange Rate
9
Official Monthly weighted average exchange rate obtained from NBE
10
Available at: https://www.facebook.com/Ethiopia-Birr-Black-Market-Exchange-Rate-
275429032873421/?epa=SEARCH_BOX
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4.2. Impacts of Interest Rate Rise

 The rise in interest rate was aimed to encourage public saving and cut
expenditure. But this interest rate hike is expected to have impact on saving
if Ethiopian households are responsive for it. However, studies done in
Ethiopia indicate that households do not save to earn interest income rather
they save in formal financial institutions safety. So, the rise in interest rate
may not have impact in controlling the money supply in the market. Rather it
contribute to increase the lending rate1 1 of banks which is going to drive up
the cost of borrowing and investment and that may accelerate inflationary
trends through time.
Table 5: Domestic saving in millions of birr
Annual percentage
Year 2015/16 2016/17 2017/18 change
2016/17 2017/18
Savings
Deposits 217,034.30 293,431.70 382,549.40 35.2 30.4
Time
Deposits 49,622.30 63,182.70 76,868.80 27.3 21.7
Quasi
Money 266,656.60 356,614.40 459,418.20 33.7 28.8
Source: National Bank of Ethiopia (NBE)
The quasi-money that comprises savings and time deposits rose by 28.8 percent
and reached Birr 459.5 billion in 2017/18. According to the national bank annual
report, this is attributed to the increased capacity of banks in deposit
mobilization driven by the opening of additional new branches. As we see the
growth of saving in 2017/18 (after adjustment of interest rate) was even lower
than last year growth (33.7 percent). In addition, the real interest rate is still
negative which is below the inflation rate. Thus, rising saving interest rate will
not have impact on domestic saving.
Currently banks earn up to 17 pe rcent interest from loan, while they are paying up to 12 percent
11
for time deposit.
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Banks Cost of Funds

 The upward revision of the floor saving rate is expected to substantially
increase the effective cost of fund1 2 , which will also push up the total cost of
fund together with the rise in the expense related to the Birr devaluation.
 The total interest expenses of all commercial banks amounted to Birr 37.92
billion during 2017/18 FY. It rose by around 60 percent as compared with
the year ago the same period. Similarly, the total interest expenses of CBE
were increased by 66.7 percent, which was above the increments of private
banks interest expense (55.8 percent). This is mainly relating to the revision
of the interest rate on deposits following the interest rate adjustments.
Table 6: Interest expenses of banks in million Birr

Interest expense 2016/17 2017/18 Variation %age
(A) (B) (B-A) (B-A)/A
Private banks 14,868 23,165 8,296 55.8%
CBE 8,852 14,754 5,902 66.7%
All Commercial 23,720 37,919 14,199 59.9%
Banks
Source: Annual performance reports of commercial banks (2017 & 2018)
 The annual average effectives cost of funds of all private banks had increased
by 21.9 percent in 2017/18 relative to 2016/17. Related with the rise in
effective cost of funds the total cost of funds of banks had rose by 6.62
percent.
Table 7: Effective and total cost of funds of private banks

2017 2018 %age
Effective cost of funds 3.77 4.59 21.9%
Total cost of funds 10.05 10.71 6.62%
Source: Annual reports of all private banks, 2017/18
Interest Rate and Exchange Rate Adjustment Implications on

Profit of Banks
At the end of the 2017/18 fiscal year, the profit before tax of all commercial
banks reached Birr 21.39 billion. The profit registered 4 percent reduction from
the 2017 fiscal year, which is associated with a 25 percent reduction of CBE’s
profit.
12
=
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As it is explained on CBE’s annual report, CBE’s profit generated for the period
has been adversely impacted by the 15% devaluation of Birr which has resulted
in a net loss of Birr 3.8 billion to the Bank. In addition, the magnitude of the
Bank’s total expense has been above the plan mainly due to increase in interest
expense as a result of the interest adjustment on deposits as well as escalation
of salaries and benefit expenses due to settlement of employee benefit tax
arrears paid to ERCA. By contrast, the profit before tax of all private banks
showed 36.6 percent increment.
Table 8: Profit summaries of Commercial Banks in millions birr
2016/17 2017/18 Variation %age
Private banks 7,675 10,482 2,807 36.6%

CBE 14,618 10,912 -3,706 -25.4%
Total 22,293 21,394 -899 -4.03%
Source: Annual reports of all commercial banks
Banking lending rates following the adjustments of interest rate
The average lending rate was 12.75 percent before the devaluation and interest
rate adjustment. Following 2 percent rise in interest rate the average lending
rate rose by around 5.9 percent reached to 13.5 percent since October 2017.
Similarly, the maximum rate rose by 11 percent, it reached to 20 percent.
Figure 7: Ethiopia's commercial banks lending rate
Source: NBE, 2018
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4.3. Impacts of Limiting Outstanding Loan Growth Rate

 Following the devaluation of Birr, the directive was targeted to control the
money supply in the economy that might lead inflation.
 Total outstanding credit of the banking system including to the central
government increased by 22.8 percent and reached Birr 449 billion at the end
of June 2018.
 Excluding central government, credit to industry accounted for 39.3 percent
followed by international trade (19.8 percent), domestic trade (11.4 percent),
housing and construction (11 percent), others sectors (5.8 percent) and
agriculture (4.9 percent).
 The share of private sector in outstanding credit was Birr 284.5 billio n (or
63.4 percent) reflecting a 23 percent year-on-year growth. This indicates
that the bank industry outstanding was above 16.5 loan cap limits.
 But, the total dispersed amount of loan during the fiscal year was o nly
rose by 15 percent.
 The outstanding loan for import trade was grown by 36.1 percent relative
to last year. However, the dispersed loan amount was declined by 5.8
percent.
 The outstanding loan for export sector rose by 59 percent year on year.
The total disbursement of loan was also rose by 91.4 percent . This may
have a significant contribution in encouraging the export sectors.
 Similarly the dispersed loan for industry sector was rose by 21.8 percent
relative to last year.
 Other loan types and personal loans loan dispersed amount was rose by
50 percent and 34 percent respectively.
 As we see the empirical data’s, the loan dispersed during 2017/18 FY was
lowered in different sectors like import trades, domestic trade, hotel and
tourism, transport and communication, Mines, Power and Water resource and
agricultural sectors.
 On the other hand, the amount of loan dispersed increased significantly in
export sectors and industry sectors. This may encourage the foreign currency
earnings of the country by providing financial support to exporters. However,
the reduction in finance in the agriculture sectors may lead the export to
Market Research 25
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decline since Ethiopia’s main export commodities are agricultural raw

materials. Thus, rather than only financing exporters, mechanism should
have to be established to finance the agricultural sectors in order to increase
export commodities supplies.
Table 9: Loans & Advances by Economic Sectors

Percentage
2016/17 2017/18 change
Disburse Loan Loan
ment Outstanding Disburse Outstandi
Economic sectors (A) (B) ment(C) ng (D) C/A D/B
Agriculture 13,133.7 20,041.8 11,401.9 19,511.8 -13.2 -2.6
Industry 25,035.6 129,977.7 30,503.0 154,904.4 21.8 19.2
Domestic Trade 23,608.9 41,830.1 19,935.9 44,945.3 -15.6 7.4
International
Trade 13,494.8 52,207.7 18,606.2 77,976.5 37.9 49.4
Export 6,062.2 30,017.5 11,603.2 47,774.1 91.4 59.2
Import 7,432.7 22,190.2 7,003.0 30,202.5 -5.8 36.1
Hotels and
Tourism 2,213.4 5,852.8 2,197.9 9,856.6 -0.7 68.4
Transport and
Communication 6,924.9 14,275.4 4,525.6 13,826.9 -34.6 -3.1
Housing and
Construction 13,583.6 37,970.6 12,281.4 43,572.6 -9.6 14.8
Mines, Power and
Water resource 363.4 225.1 319.5 221.9 -12.1 -1.5
Others 8,452.9 16,373.4 12,674.1 23,044.3 49.9 40.7
Personal 2,199.8 4,252.8 2,952.6 6,695.2 34.2 57.4
Total 109,011.2 365,601.2 115,398.1 448,954.1 5.9 22.8
Source: NBE annual report, 2017/18

 Even though the new loan cap was assumed to affect banks profits, private
banks had obtained attractive profits during the year.
 The restriction imposed loans of banks, expected to have impacts in limiting
inflationary pressures. As it is compared with the same period after the
previous period devaluation (September 2010), the inflation following
October 2017 was relatively very low. Thus, it plays a role in controlling the
domestic inflation.
 The loan cap was expected to have negative impact on banks branch
expansion of banks. However, commercial banks opened 500 new branches
(by 12 percent) in 2017/18, which increased the total number of branches to
4,757 from 4,257 a year ago (NBE, 2017/18).
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4.4. Impacts of Banks to Sell 30 Percent of their Hard Currency

to NBE
The NBE also instructed all banks to surrender 30 percent of their gross foreign
currency inflows, which is being used for fue l imports (IMF, 2018). At the same
time, the NBE has loosened exchange control regulations on foreign currency
accounts held by the Diaspora, including eliminating the ceiling on their balance
(previously USD 50,000).
The directive expected to minimize the amount of foreign currency allocation of
commercial banks to import commodities. As table below shows:
 Since 2009/10 to 2017/18, the banking industry allocated 88 percent of
its foreign currency earnings for the importation of goods. Out of these,
private banks contributed 48 percent of the foreign currency and the
remaining 52 percent was covered by CBE. When we consider the
2017/18 FY only, the share of private banks contribution of FCY to import
was reached 62 percent and CBE contribution falls to 37.9 percent.
 Out of the total imports between 2009/10 and 2017/18, 12 percents are
official imports such as crude oil, pharmaceutical, and fertilizers, and 76
are non-official imports.
 CBE had allocated 92 percent of its total foreign currency spending to
official imports such as crude oil, pharmaceutical, and fertilizers between
2009/10 and 2017/18. However, when we consider 2017/18 FCY
allocation only, the share of CBE FCY allocation to official imports was
lowered to 78.5 percent.
 On the other hand, the share of other banks FCY spent to official imports
such as crude oil, pharmaceutical, and fertilizers increased from 8 percent
to 21.5 percent. The share of FCY spent to other commodities import was
also rose from 54 percent 67.1percent.
 Generally, the total share of FCY allocation of CBE was fall from 53
percent during the period 2009/10 to 2017/18 to 31.8 percent in
2017/18. Conversely, the share of other banks FCY contribution increased
from 47 percent to 68.2 percents during the same period.
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Most of private banks were complaining that the selling of 30 Percent of their
instruction would affect their profitability. However, the profits of banks are
improving from time to time.
Table 10: Foreign Currency Allocation of the banking industry (million Birr)
Total payment in million Share from Total

CBE’s share Other CBs Share
2009/10 -
2009/10 -
2009/10 -
2009/10 -
2017/18
2017/18
2017/18
2017/18
2017/18
2017/18
2017/18
2017/18
Import 52% 37.9% 48% 62.1% 895,233.3 102,350.9 88% 72.1%
Official13 92% 78.5% 8% 21.5% 118,753.7 11,059.5 12% 7.8%
Others 46% 32.9% 54% 67.1% 776,479.5 91,291.5 76% 64.3%
Service payments 63% 15.0% 37% 85.0% 106,017.4 28,043.1 10% 19.7%
Income Transfer 51% 27.3% 49% 72.7% 5,386.3 7,932.8 1% 5.6%

Unrequited transfers 19% 0.5% 81% 99.5% 10,630.7 2,981.3 1% 2.1%
Financial Accts 10% 0.3% 90% 99.7% 1,418.5 688.4 0% 0.5%
Total 53% 31.8% 47% 68.2% 1,018,686.4 141,996.6 100% 100%

Source: NBE
4.5. Impacts of External Loan and Supplier’s Credit Directive
 It encourages exporter and domestic investors who is engaged in projects

that generate foreign currency.
 It enables exporters to finance their project by borrowing by their own and
thus solve the hard currency shortage problem not easily available in the
domestic banks.
 It was not inclusive to local manufacturers who produce goods and services
for local consumption.
 It mostly favours foreign owned enterprises whether they produced
exportable goods/services or not.
 But it have risks if exporters are unable to return back the money within the
specified period or failed to produce the exported commodities. The bank
should expect to provide the amount of credit in foreign currency within 6
months.
13
Include import of crude oil, petroleum products, fertilizer and pharmaceu tical as per The IMF categorization
used by NBE.
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4.6. The Impacts of Retention and Utilization of Export Earnings

and Inward Remittance Directive
 Increasing the retention amount for exporters of goods and services expected
encourage exporters to export more and enhance their potential to import
the required inputs to boost their export.
 In addition, recipients of inward remittances are expected to encourage to
use the formal banking sector than the black markets.
 However, the export and inward remittances are worsening even after the
directive. The inward remittance was boomed at the time where the
government warns the illegal smugglers and take action on them. But where
the government loosen its controlling mechanism the legal root turn to where
as it was before.
 Since, most of exporters in Ethiopia do side businesses, they need the
obtained FCY from export to import commodities or raw materials. However,
there is no legal condition that permits exporters to use their earning
currencies for their own purposes unless they import inputs for the exported
commodities. But malpractices are common in private banks in linking export
and import businesses (Muluken & Melaku, 2018).
4.7. The Impacts of Limit on the Birr and Foreign Currency

Holding Directive
This directive expected to decrease the amount of foreign currency travel in and
out of the country illegally. The amount of holding foreign currency to travel
abroad can also discourage black market currency selling’s.
However, nowadays, it is common to hear news stories about the arrest of
people trying to leave the country with money, especially hard currency, via
borders and airports. A couple of months ago, law enforcement even forced a
plane to return to Addis Ababa’s Bole International Airport hours after it took off,
in order to arrest a woman who had boarded the flight with close to half a million
dollars in illegally smuggled money1 4 .
In line with the increasing illegal cross-border movement of capital, the number
of cases filed in courts has also been mounting. Since 2014/15, close to 300
14
http://www.ethiopianbusiness review.net/index.php/topic/item/6079-the-mounting-illicit-capital-out-flows-
from-ethiopia
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cases related to the illegal cross-border movement of capital were filed at the
Lideta Federal High Court. 110 of those defendants have already been
sentenced, and 99 of the cases are currently being heard. Each case involves
sums of ETB50 to ETB300 million (ibid).
4.8. Impacts of Setting of Indicative Minimum Price for selected

Import items
 It expected to solve the former under invoice problems of the country

through avoiding money laundry and illegal money transfers.
 It expected to contribute to increasing banks’ hard currency earnings and
reducing illegal remittances exchanged based on the rate of the black
market, which are one of the major reasons for illicit finance flow.
 It is cumbersome for both commercial banks and the businesses community
(i.e., to trace every imported items price with ever changing global market
price fluctuation) to implement the direction strictly ordered by the NBE. And
some of the commodities and its descriptions are not available in the list. Due
to this, currently, banks are unable to register all commodities and working
by taking undertaking from exporters.
 As trade service team leaders and managers said, some importers get
discount from senders from abroad because of their long time relationship.
This led to over-invoicing and create gap for hard currency to flow out the
country.
 The directive only set minimum price, ho wever doesn’t limit the maximum
price. This has become a cause for hard currencies to flow out.
 ERCA needs to frequently update its price list of items from a volatile and
fluctuating global market in order to make the directive become applicable
properly.
4.9. Impacts of Transparency in Foreign Currency Allocation and
Foreign Exchange Management Directive
 The directive forced banks to apply the first come first served scheme on
requests for hard currency and might discourage the previous approach of
loyal customers that have a great role on deposit mobilization strategies.
Market Research 30
Domestic currency
 Individual or company that demands a small amount of hard currency for

minor things and others looking for millions of dollars engaged in wholesale
trade being seen equally.
 Importers being strictly prohibited from lodging foreign currency request
application in one import application on more than one bank seems to be
unrealistic to control unless some automated system is established in the
banking industry.
5. Implications of Introductions of New Directive to CBE

 Devaluation of Birr expected to enhance banks hard currency earnings
generated from export, remittance inflow and foreign currency purchase.
However, CBE’s FCY earnings from these sources decreased after
devaluation. In 2017/18, the FCY earnings from export, remittance,
decreased by 11 percent, 3 percent respectively relative to last year the
same period. The currency purchase, however, show slight increment (3.7
percent) because of the short period campaign of government to tackle black
markets.
Table 11: CBE FCY earnings in 2017/18 in millions of USD

2017/18 ANNUAL Last Year Percentage
change
Same Last Year
Particulars Actual Plan Plan Period
1.Exports 586.2 1,400.00 658.4 41.9 -11.0%
2.Remittances 3,708.18 5,153.80 3,823.50 72 -3.0%
2.1. FCY Purchases 187.77 323.4 181.1 58.1 3.7%
2.2. Service Receipts 792.54 1,028.80 831.5 77 -4.7%
2.3. Private Transfers 2,172.39 3,125.00 2,171.80 69.5 0.0%
2.4. Official Transfers 555.48 676.5 639.1 82.1 -13.1%
Total Inflows [1+2] 4,294.39 6,553.80 4,481.90 65.5 -4.2%
3. Transfer from NBE 1,183.05 1,627.10 -27.3%
4.Draw down in CBE’s
Reserves -9.1 9.1 -200.0%
Total FCY Receipt
[1+2+3+4] 5,468.32 6,553.77 6,118.20 83.4 -10.6%
Source: CBE annual reports
 The total FCY earnings from all sources amounted to 4.3 billion USD which
was low compared with the preceding fiscal year‘s FCY accomplishement
Market Research 31
Domestic currency
(USD 4.5 billion) by 4.2 percent. It was also significantly low depicting 65.5%
as compared to the plan.
 Indoor research done by Muluken and Melaku (2018) indicates that the
shares of CBE FCY earnings from export are deteriorating from time to time.
This is because of the shift of exporters from CBE to private banks. Theirs
study result showed that 63% of the respondents prefer private banks’ trade
service to export their item. They choose private banks because private
banks have practice of linking export and business imports. However, CBE
doesn’t have such practices. Exporters also attracted by export credit
accesses of private banks than CBE.
 The share of export from foreign currency earning of the CBE is very small
and falling by an annual average of 13% since 2012/13 (Muluken & Melaku,
2018). In 2017/18, the share of CBE earnings of foreign currency from export
sector covers only 20.6 percent. The share decrease by 2 percent from last
year (20.6 percent).
Table 12: foreign currency earning of CBE (million USD) and its share from total
earning of the bank from 2010/11 to 2017/18.
Total FCY Share of export CBE’s share

Export earnings of Total
Year earnings of from CBE FCY from total
CBE Export
CBE Earning (%) export (%)
2010/2011 1,041.06 4,491.62 23.2 2,748.3 37.9
2011/2012 1,274.03 5,364.80 23.7 3,174.5 40.1
2012/2013 1,071.01 5,132.94 20.9 3,115.8 34.4
2013/2014 1,126.10 5,532.03 20.4 3,272.8 34.4
2014/2015 972.77 5,759.79 16.9 3,002.0 32.4
2015/2016 661.40 4,663.53 14.2 2,867.7 23.1
2016/2017 658.42 4,481.94 14.7 2,909.8 22.6
2017/2018 586.20 4,259.75 13.8 2,839.8 20.6
Average 923.87 4,960.80 18.5 2,748.3 37.9
Sources: CBE/MIS, NBE manipulated by (Muluken & Melaku, 2018)

 The NBE has introduced transparency in foreign currency allocation and
foreign exchange management directive to tackle the mal practices observed
in the bank sector. However, the study findings of Muluken and Melaku
Market Research 32
Domestic currency
(2018) revealed that private banks allocated much of its foreign currency
earning to non-official imports. The CBE disproportionately allocated foreign
currency for public import while other commercial banks fully targeted private
imports, which reduced CBE’s leveraging capacity to attract exporters relative
to private banks.
 Public imports including major projects and fuel imports have taken a lion’s
share of total FCY payments made during the fiscal year, though, their
performance level was below their respective plans (CBE, 2018).
 In 2017/18 FY, the bank generated a foreign exchange gain of birr 1.1 billion
which however was netted off by the FCY loss incurred. This was mainly
related to the adverse effect of the 15 percent devaluation made on Birr
during the second quarter of the fiscal year impacting the Bank with a loss of
birr 4.9 billion. In effect, the Bank incurred a net loss of Birr 3.8 billion on
foreign exchange as of June 30, 2018 (ibid).
Table 17: Summary of Expenses (In Millions of Birr)
Particular 2017/18 2016/17 Variation Change

Interest Expenses 14,754 8,852 5,902 66.7%
Salaries & Benefits 6,929 4,404 2,525 57.3%
General Expenses 4,641 4,027 614 15.2%
Total Expenses 26,323 17,282 9,041 52.3%
Total Income 37,235 31,900 5,335 16.7%
Profit before tax 10,912 14,618 -3,706 -25.3%
Source: CBE annual performance report June 2018
 The Bank had incurred total expenses of Birr 26.3 billion during the 2017/18
FY which was increased by 52 percent relative to a year ago the same period.
The expense rose because of the 66.7 percent rise in interest rate expense
and 15.2 percent rise in general expenses.
 At the end 2017/18 FY, the profit before tax of the Bank reached at Birr 10.9
billion depicting 25.3 percent decline relative to a year ago FY level.
According to CBE annual performance report, a the profit generated for the
period has been adversely impacted by the 15 percent devaluation of Birr
which has resulted in a net loss of Birr 3.8 billion to the Bank. In addition, the
Market Research 33
Domestic currency
magnitude of the Bank’s total expense has been above the plan mainly due
to increase in interest expense as a result of the interest adjustment on
deposits as well as escalation of salaries and benefit expenses.
 At the June 30, the total asset of the Bank had exceeded half trillion
amounting to Birr 565.5 billion, which increased by 16.4 percent from last
year the same period.
Table 13: Asset Position (in millions of Birr and USD)

Change in
June 30 2018 June 30 2017 percent
In Birr USD In Birr In USD In Birr In USD
Total
Assets 565,531 20,748.25 485,760 21,079.03 16.4% -1.6%
Source: Annual performance reports of CBE 2017/18 FY

 Because of the 15 percent devaluation, the bank’s asset in USD was nearly
1.6 percent lower than a year ago the same period.
 The NBE also liberalized some exchange control regulations, allowing

exporters to access foreign credit and to retain up to 30 percent of their
export proceeds in foreign currency (previously 10 percent), which, should
lessen difficulties in procuring foreign exchange when needed for their inputs
and capital imports. These measures are was expected to have positive
impact on CBE to retain its customer and to attract new exporters which
possibly raise CBE foreign currency earnings. However, due to mal practices
in the banking sector and loose in control of NBE, CBE still couldn’t get the
deserve market share in these areas.
 NBE new directive placed a fixed percentage on the hard currency allocation
for private banks on the letter of credit (LC) approval for priority areas
together with directive forcing private banks to transfer 30 percent of their
hard currency to the central government private banks will minimize previous
burden CBE in providing hard currency to the priority sectors. However, the
last year hard currency allocation accomplishment of private banks didn’t
comply with NBE directives. Rather it creates dissatisfy CBE customers belong
to non-priority sectors.
 NBE directive which enforce importers to access a LC equivalent to the price
of the selected imported items expected to reduce illegal remittance and
Market Research 34
Domestic currency
black-market currency trade. But, because of difficulties in registering all

imported commodities, CBE doing LC based on undertakings of importers.
This activity is common in all banks. Thus, the directive is not fully
implemented.
6. Changes and Improvements Brought about as a

Result of the Directives
 Even after the introduction of the directives, private banks had obtained
attractive profits during 2017/18 FY. Only, the profits of CBE had
decreased during the year. In the half year of 2018/19, however, the CBE
profits increased significantly.
 The surrender of 30 percent of banks gross foreign currency inflows, to
NBE is being used for fuel imports.
 The introduction of credit ceiling on non-export and non-priority sector
had the 2010 devaluation. Compared with the inflation after the previous
period devaluation (2010), the inflation following October 2017 was
relatively lower.
 The deficit in current account balance including official transfers narrowed
in 2017/18, due to the improvement in trade balance, in net services
deficit and strong increment in net private transfers.
 The real effective exchange rate depreciates following the devaluation of
Birr that could make domestically produced goods relatively cheaper,
which will promote exports and discourage imports. However, currently it
is appreciating because of the rise in domestic inflation.
 The new directives that enforce importers to provide LC that equivalent
with the actual price level, enforces importers to provide the required hard
currencies from legal sources. This has channeled importers to the legal
root trade and could also increase the amount tax collected if it is well
implemented.
7. Challenges Remained
 The recent political transition the country had sparked hopes that the foreign
currency crisis and the gap between the official market and the black-market
rates became narrower. But, after few months’ improvement, things are
turned into its place. The gap in foreign currency purchase between black
Market Research 35
Domestic currency
market and official markets was narrowed in July, August and September
2018. But now, the gap is picks higher than ever.
 Due to the broadening gaps between the official and parallel market
exchange rates the amount of remittance, export values and foreign
exchange purchase of banks could not restore even after devaluation.
 The persistence inflow of foreign currency into the country in the black
market that came through smuggling of exportable items, over- invoicing of
imports, foreign tourists, and remittance sent through non-official channels is
still a great set back to the banking industry.
 The government which has limited earning of foreign currency from the
export sector but has a huge amount of import bill is forced to an ever
increasing debt service year after year due to huge trade deficit on its current
account if otherwise used this resource for other sector of the economy.
 The real saving interest rate is still expected to be negative, around -3%,
after the revision of saving interest rate floor. Thus, still rising the floor rate
is could not compete with the current inflation rate of the country.
 Even though the NBE has introduced transparency in foreign currency
allocation and foreign exchange management directive to tackle the mal
practices observed in the bank sector, private banks are still allocated much
of its foreign currency earning to non-official imports.
 Sectors that are much dependent on importable raw materials and industrial
goods are impaired due to the devaluation that will make them less
competitive due to imported inflation. In contrast, the share of export from
the aggregate sales of some firms is expected to rise due to the devaluation
for some industries with a low import ratio of input but the case is rare.
 When exportable items become cheaper, exporters may incur losses from a
given quantity. But if larger quantity is sold then gains will more than
compensate for losses incurred. So, devaluation is justified if lack of demand
for Ethiopian exports is the only obstacle and there are no troubles on the
supply side. However, Ethiopia does not have a stockpile of exportable
commodity waiting to be sold. Still worse, there are entrenched policy biases
against exportable products such as coffee and its producers raising concerns
that export supplies may not increase in the near future. Thus, the most
Market Research 36
Domestic currency
likely immediate effects of devaluation will be deterioration in revenues from

a given quantity of available exports.
 As Ethiopia’s stock of outstanding debt is high, the devaluation has rose debt
service costs of the country. Quarterly debt service payments on public sector
external debt of the country increased by 29.4 percent in the first quarter of
2017/18 (before devaluation, USD 315.45 million) as compared to the second
quarter of 2017/18 (after devaluation, USD 408.13 million) (MOFEC,
December 2017). After the immediate quarter of devaluation, the total
outstanding external loan of the country increase by 1.7 percent in terms of
USD but it increases by 18.4 percent in terms of ETB.
 World Bank’s recommendation for devaluation of the Birr was based on
statistical analysis using Ethiopia’s trade data. But Ethiopia’s trade data is
simply not reliable to undertake such statistical estimations to make sound
policy recommendations (J. Bonsa, 20181 5 ). According to Bonsa, “comtrade”
refers the figure reported by Ethiopia to the United Nations Statistical Division
(UNSD) while the “total trade” represent figures compiled by the UNSD using
mainly the International Monetary Fund (IMF) financial statistics. For most
countries, the two data series fall within close ranges, some discrepancies are
inevitable but differences often fall in single digit percentage points in either
direction. This was the case even for Ethiopia until around 2005, but then
the trade data series starts to show significant degree of abnormality. If we
start with exports, the value of goods and services registered by Ethiopia as
exported have consistently exceeded the actual total export earnings
registered by the IMF. For instance, in 2011, Ethiopia exported goods worth
about $2.6 billion but IMF’s records show only $1.9 billion. For exports what
government have reported has consistently exceeded IMF records but the
reverse is true for imports. For example, in 2011 IMF records show three
times larger imports than the Ethiopian government records.
 The systemic and suspicious discrepancies in trade data points to the
existence of illicit trade for which Ethiopia is already known. Foreign trade
15
https://www.opride.com/2014/09/02/ethiopia-s-trade-data-and-the-effect-of-devaluation-on-
import-prices/
Market Research 37
Domestic currency
has been used as a vehicle to transfer finance abroad. This is commonly done
through trade mis-invoicing.
 The export revenue reported by the government have consistently exceeded
IMF records, implying that less than the full amount of export revenue was
actually been channelled back into Ethiopia. Besides, payments abroad in the
name of imports seem to considerably exceed the true value of goods and
services actually shipped to Ethiopia.
 In its 2014 report, the Global Financial Integrity estimated that the
cumulative illicit financial flow out of Ethiopia between 2002 and 2011 was
over USD 20 billion (GFI, 2014). That is an average of about USD 2 billion
per annum, nearly twice the average annual export revenue earnings from
commodity exports during the period.
 In 2010, at the time of the previous devaluation, the country export has
shown dramatic change with short period of time after devaluation. But
currently even after the devaluation the country export are still decreasing
and the import was not also successfully decline as expected. During the first
eleven months of 2017/18 FY exports of the country declined by USD 15.42
million (0.6 percent) compared to a year ago (USD 2.59 billion) (MoT, May
2018). By contrast, the import decline by only USD 227 million (1.6 percent)
during the same period (NBE, 2018). Similarly, the remittance inflow and the
foreign direct investment couldn’t show any significant improvement after a
time associated with domestic currency devaluation.
 Some of importers who are engaged in different investment activities mainly

on the export sector are complaining about the new directives which enforce
them to access a LC equivalent to the price of the selected imported items.
Banks are also not implementing the directive since it is difficult to list out all
commodities cost exactly. Instead, banks are using undertakings of importers
to give permission to open LCs.
 There is a condition that some importers get discount from senders from
abroad because of their long time relationship. This led to over-invoicing
which creates suitable condition for hard currency to flow out the country.
The directive is also only set minimum price, however doesn’t limit the
maximum price. This has become a cause for hard currencies to flow out.
Market Research 38
Domestic currency
 Importers argue that the hard currency shortage in the country forces hard
currency buyers to wait for several months to obtain the needed amount.
They say the new directive affects this and insist relevant government bodies
lift the directive implementation in their operation. Exporting companies are
producing below their potential because of shortage of the imports of raw
materials.
 Even though the directives leave a year, the foreign currency crunches are
still a problem in Ethiopia and even couldn’t minimize the problem as
expected. According to magazines like Ethiopian reporter and fortune
magazines published during 2017/18, manufacturing companies are
complaining and they said that they could not produce at the full potential
because of lack of raw materials imported from abroad because of the current
foreign currency crunch in the country. By inverse, the declines of production
of domestic companies again minimize the amount of export to abroad.
 Public investment decisions need to be based on potential returns. A dollar

invested in resource rich region generates much larger returns and more
quickly than if it is invested in resource poor regions. It pays to initially invest
in to subsidize poorer regions on equity considerations. After all, wealth
resource rich regions, recover the returns and then worry about ways has to
be created before it can be distributed. But, in Ethiopia most of resource rich
areas (exported commodity source) areas are underdeveloped and takes time
to transport commodities easily to world market.
 Still now Ethiopia’s export items are remaining highly dependent on primary
agricultural commodities (coffee, oilseeds and pulses and livestock products),
which are very sensitive to terms-of-trade shocks due to the international
commodity price fluctuation.
 The cost and time of importing and exporting process is still a great challenge
for investors in Ethiopia. Ethiopia is highly dependent on the Port of Djibouti
to handle its trade flows. At present 95% of total throughput is handled
through the port. Despite significant investment in infrastructure, including a
railway linking Addis to Djibouti Port, Ethiopia ranks 126th out of 160
countries according to the World Bank Logistics Performance Index, which
assesses the efficiency of the logistics sector.
Market Research 39
Domestic currency
 The ever increasing gap between export and import bill, which made the
country as a net importer country and thus has its own impact to pave the
way for the dominance of black market over official one in the foreign
currency exchange market.
 Still high appetite/demand for foreign currency by the public sector
infrastructure projects and absorption of the lion’s share of the available
capital, which might created a scarcity of capital for the private sector in
particular and at country level in general.
 The unsolved problem of logistical bottlenecks, high land transportation
costs, and bureaucratic delays in the import-export transaction at the country
level, which made the sector less competitive in the international market.
Market Research 40
Domestic currency
8. Conclusions
The soberest policy conclusion we reached is that devaluing the currency at the
moment seems neither necessary nor useful as it is unlikely to improve the
internal and external (trade) balances of the country. This conclusion is based on
the following: first, the spread between the actual and the equilibrium exchange
rates is minimal; second, our calculation shows that the response of Ethiopian
exports and imports to a change in exchange rate is very low or inelastic; and,
third, a minor spread does not necessarily call for a devaluation to improve
internal and external balance in economies of Ethiopia; and fourth, given the
pervasive information asymmetries, the net benefit of fine-tuning the exchange
rate to correct minor spread is uncertain in economies that are in transition.
Market Research 41
Domestic currency
References
CBE. (2018). Anual Performance Reports for 2017/18 FY.
GFI. (2014). Global Financial Integrity Financial illicit report between 2002 and
2011.
MoT. (May 2018). Ministry of trade Monthly Trade reports .
Muluken, K., & Melaku, B. (2018). Link between Foreign Currency Allocation And
Earnings: So Far And Way Forwards.
NBE. (2017/18). National Bank of Ethiopia anual report 2017/18.
Market Research 42

Directive Issued by NBE and Its Implication2

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Directive Issued by NBE and Its Implication2

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COMMERCIAL BANK OF ETHIOPIA

Implications of NBE Released Directives after

2. Problems that Led to the Issuance of the Directive .................................. 2

3. Key Contents of the New Directives ........................................................ 4

3.1. Interest rate directives No. NBE/INT/12/2017 ...................................... 4

3.4. External loan and supplier’s credit directive No REL/05/2002 by new

3.7. Setting of Indicative Minimum Price for selected Import items

3.8. Transparency in Foreign Currency Allocation and Foreign Exchange

4. Implications of New Directive to the Economy and Banking Industry ........ 8

4.1. Impacts of Birr Devaluation ................................................................. 8

4.2. Impacts of Interest Rate Rise ............................................................ 22

4.3. Impacts of Limiting Outstanding Loan Growth Rate............................. 25

4.4. Impacts of Banks to Sell 30 Percent of their Hard Currency to NBE...... 27

4.8. Impacts of Setting of Indicative Minimum Price for selected Import

4.9. Impacts of Transparency in Foreign Currency Allocation and Foreign

5. Implications of Introductions of New Directive to CBE ............................ 31

6. Changes and Improvements Brought about as a Result of the Directives 35

7. Challenges Remained ........................................................................... 35

 Interest rate directive;

 Limiting the outstanding loan growth rate of banks;

 All banks have to sell 30 percent of their hard currency to NBE;

 External loan and supplier’s credit directive;

 Retention and utilization of export earnings and inward remittances

 Setting of Indicative Minimum Price for Selected Import Items directives

 Transparency in Foreign Currency Allocation and Foreign Exchange

2. Problems that Led to the Issuance of the Directive

boarders2 . This transaction is specifically done when hard currencies are

3. Key Contents of the New Directives

Following the 15 percent devaluation of Birr, NBE increased minimum saving

3.2. Limiting the outstanding loan growth rate of banks to 16.5

3.4. External loan and supplier’s credit directive No REL/05/2002

As a result of the shortage of hard currency, this amended directive objective is

According to the directive, exporter and domestic investors who is engaged in

The objective of this amended directive is to resolve unfair competition between

The new directive increased the amount of FCY to be retained in retention A

3.6. Limit on the Birr and Foreign Currency Holding in the

3.7. Setting of Indicative Minimum Price for selected Import

3.8. Transparency in Foreign Currency Allocation and Foreign

Since foreign exchange is a scarce resource that should be managed carefully

In the new directive, the import of petroleum, fertilizer, agricultural machines,

4. Implications of New Directive to the Economy and Banking

Impacts of birr devaluation on trade balance

Figure 1: Quarterly trade balance of Ethiopia from 2016/17Q1 to 2018/19 Q1

Source: NBE (2018)

 The revenue from export of gold showed 52 percent reduction, driven

 Earnings from electricity export increased by 14.9 percent from last

the completion of key infrastructure (electricity generation and transmission,

The Impact of Devaluation on Banks Foreign Assets and Liabilities

 A depreciation of a country's currency is expected to increase both the value

the increment of liabilities since October 2017 to December 2017. Because of

Source: NBE, 2018

Table 3: Individual cash remittance inflow (in millions of USD)

Months before Remittance in Months After Remittance in Year on year

Figure 3: Individual Remittance inflow 2012/13 to 2017/18

Source: NBE, 2018

The Impact of Devaluation on Tourism Revenue

Source: Ministry of Culture & Tourism (2018)

expected to increases for domestic consumers. Doubled with the domestic

Figure 5: Ethiopia inflation rate from January 2017 to January 2018

Source: December 2017 & January 2018 CSA Price report

The Impact of Devaluation on External Debt Burden of the Country

Table 4: Public Sector External Debt, Outstanding, Disbursements and Debt

 Meanwhile, the outstanding balances and debt services in domestic currency

 For example, at March 03 2018, the black-market exchange rate was