- By Admin
- 11 Feb, 2021
Central Bank Grants Edible Oil Input Imports Top Priority in Forex Allocation
The central bank has changed the
list of items imported to the country that are prioritized for foreign currency
allocation from commercial banks. Inputs for edible oil production are included
in the first tier alongside medicine, pharmaceutical manufacturing, and
laboratory reagents. The National Bank of Ethiopia (NBE) issued a directive on
December 1, 2021, tinkering with the list first developed in October last year.
The revised list officially
reinstates petroleum products to top-priority status. The previous directive
had downgraded fuel products to the second tier before the central bank issued
a circular reversing the decision a few months later. Second priority items
include inputs for agriculture (fertilizer, seeds, and pesticides) and
manufacturing (raw materials and chemicals). The third priority category
comprises 10 sectors, including education materials, manufacturing and
agricultural machinery, and the repatriation of profits and dividends.
Commercial banks are mandated to
allocate 15pc from half of their foreign currency reserves for all imports
classified as priority essential goods. The decision put the previous threshold
five percent higher. Items listed in the second and third priority categories
get 40pc and 45pc, respectively, from half of the banks' foreign currency
reserves.
“The inclusion of edible oil is
in line with the need to stabilize the market,” Yenehasab Tadesse, director of
foreign exchange monitoring and reserve management at the central bank.
Officials of the Trade Ministry
had submitted a request before the central bank to secure 600 million dollars
allocated to edible oil manufacturers. The Ethiopian Edible Oil Manufacturer
Industries Association has been lobbying the central bank to include the
industry in the top priority list of imported items. The Association submitted
a letter of appeal to the central bank six months ago, pleading with the
regulators to include inputs for edible oil manufacturing in the priority list.
As the production of oilseeds cannot keep up with manufacturing demand, the processing plants are forced to source crude oil from abroad, according to Addise Garkabo, general manager of the Association, which represents many of the 232 small and medium palm oil processing plants.
“The move would help stabilize the market and allow the plants to create more jobs as they kick up their production capacity,” he told Fortune.
The banking industry appears to
welcome the news. The revised procedure requires importers of non-priority
goods to deposit half the amount of the import value in blocked accounts.
According to a senior executive at a private commercial bank, this can help
filter out importers who submit proforma invoices to get ahead of the
application queue.
Major difficulties noticed in the
revised forex allocation rules are operational issues in the delay of forex
approval and the need to control import prices, according to Yenehasab.
Commercial banks bought 42.7
million dollars in the last quarter of last year, a sharp fall by 53pc compared
to the previous year's period, impacted mainly by the COVID-19 pandemic. They
sold 17.3 million dollars over the same period, surging by 108.7pc.
"This has to do with the
length of the queues," she said.
Officials at the central bank
have changed the number of imported items and the approval process for requests
to change products. Price adjustments above five percent of the import value
were unacceptable in the previous regulation. However, the revised directive
allows the president of a commercial bank to approve an adjustment considering
the changes in the international market supported by data.
Making price adjustments justifiable due to fluctuations in the international market is reasonable, according to the executive of the private bank. "It would help address the complaints from importers," said the executive.
The revised directive will enable
changes in the items listed in the proforma invoice when forex approval takes
more than six months for non-priority and three months for priority sectors.
These were requests denied. This was part of the problem, according to the bank
executive. As demands in the domestic market shift while forex requests are
processed, importers should be allowed to change the volume of goods they
import without affecting the aggregate price, he said.
"It has no significant
effect on the operations of banks," said the executive.
Banks operate under a strict
forex allocation quota, and the central bank is supervising closely, said
Yenehasab.
Reference: https://addisfortune.news/
