|
The National Bank of Ethiopia (NBE) has requested
all state and private commercial banks to send it a
list of names of clients who request to be the only
beneficiaries of the foreign currency from their own
export proceedings to open letters of credit (L/Cs)
for their imports.
In a circular sent out to the chiefs of the 14
commercial banks, including the state owned
Development Bank of Ethiopia (DBE) and the
Construction and Business Bank (CBB), the central
bank stated that it has been alerted of an alleged
abuse of the incentive privilege it has allowed to
exporters who also are either involved in import
business, or need to import commodities to support
and expand their export business.
A
directive issued by the central bank in 1998 has
entitled exporters who bring in foreign currency
from their export business to retain and utilize
part of it to process L/Cs for their imports. But
NBE alleges that the privileges have been abused.
“Not only exporters but remittance service providers
also request for foreign currency for their imports;
and they demand to be served first or threaten
terminating their relations with their client banks
and switch to other banks,” reads the letter issued
on April 13, 2009, signed by Alem Woldegerima,
acting manager of the Forex Statistics and
Monitoring Department of the central bank.
“If we take the directive verbatim, it is clear that
the exporters will benefit from the system,” chief
of one of the youngest private banks told Fortune.
NBE’s move has come at
a time the country’s import business has been in a
debacle due to the acute shortage of foreign
currency reserves; the forex available in the
financial conduits of the country has been so
limited that financial authorities have been busy
looking for ways to make sure they regulate its
allocation. For its part, government has decided to
spend forex only on key projects and strategic
commodities. It also wants to enforce prudence on
the access to forex and spending by private
businesses. But the motive behind NBE’s circular
goes beyond just managing the foreign currency
within the economy, according to a senior source at
the central bank.
“Authorities at the central bank have concerns that
the trend against which the central bank has alerted
the commercial banks has become a means for those
who have the privilege [exporters] to have
competitive advantage over other importers,” the
source told Fortune.
The 1998 directive that first introduced the system
which the authorities say is to encourage exporters
by allowing them to use the value of their export
volume in two regulated ways to get L/Cs and process
their imports without going through the regular
procedure is being abused by the very beneficiaries,
according to the central bank. Processing L/Cs takes
some time that has now reached as long as more than
three months.
For instance, a coffee exporting company can use the
foreign currency either to import coffee bean
cleaning machineries to expand the same business
(for own development purpose) or, in case the
company is also involved in import business, to
import commodities to sell in the local market (for
related businesses).
The directive requires an exporter to put the export
earning in two accounts in a local bank: 10pc of the
value should go to “Account A” and 90pc to “Account
B”. The exporter can retain and utilize the 10pc
kept in foreign currency for his/her own business
with no time limit, while the 90pc foreign currency
is allowed to be kept and utilized within 28 days.
If the exporter does not utilize the latter for
his/her own business in within the time allowed, the
money in “Account B” will be exchanged into Birr and
the foreign currency becomes public resource.
The controversy began when the exporters demanded to
use the 90pc forex in “Account B” with no time
limit. Authorities at the NBE also allege that the
exporters even have gone as far as transferring the
foreign currency in their account to another
importer, yet they are only allowed to use it only
for their own business.
Add to that, the industry consensus and practice is
that the banks mostly try to accommodate the
interests of their clients, especially those
considered important, of which exporters are in the
group on the top of the list. Thus, the banks mostly
go the extra mile to make these clients happy,
according to industry actors. This includes allowing
them the retention and utilization of the foreign
currency that comes into the country through the
exporters’ business, even to the extent exceeding
the limits set by the central bank. Industry
observers say the banks do this because they do not
want to disappoint their clients and subsequently
lose them; they fear this trend will affect their
business. Hence, NBE’s latest move is expected to
have brought about what the bankers have been trying
to avoid. But not so for all of them, though.
“We are not affected that much; most of our clients
are not that kind [exporters],” the chief of the
young bank told Fortune.
Nevertheless authorities at the central bank believe
that the privilege is being abused so much so that
the exporters have developed an attitude that they
are the sole beneficiaries of the foreign currency
they bring into to the country at the expense of the
majority of the business community, according to
Alem’s letter.
“In addition, it is believed to have encouraged the
franco valuta trading and parallel (black)
market practice,” the letter reads. “Thus, as it has
become absolutely impossible to accommodate these
interests, considering their negative impacts on the
forex transaction, we [NBE] would like to remind you
[the banks] that the requests of such individuals
and organizations should not be entertained,” the
letter reads. “Lists of names of individuals and
organizations who make such requests should also be
sent to the Forex Statistics and Monitoring
Department of the NBE.”
The move is a result of the perception in the
government that the privilege through NBE’s
directive has been misused as has been the case with
the privileges for franco valuta and the
duty-free importation of vehicles. |
