Serious shortage of hard currency in Ethiopia is paralyzing industries that import raw materials, according to Capital Ethiopia. The problem has already forced import based industries to slow down industrial activities.

Both state and private banks do not seem to have enough foreign currency reserve to meeting the growing demand. As a result biggest manufacturing industries in the area forced to halt production. These industries have not received any indication that they can purchase foreign currency from the central bank. There is a high risk of economic stagnation unless the situation resolved sooner.

Affected industries include biggest painting and chemical industry in Ethiopia. Even in Merkato, the biggest market in the country, products are increasingly becoming scarce on the market. However, so far there hasn’t been any notable price increment.

The hard currency shortage was significantly observed since the beginning of the Ethiopian New Year, in September 2012. Although signs of the shortage were started to be felt since the beginning of the budget year (July 2012).

Currently, governmental projects and export oriented businesses get priority to obtain foreign currency permit. Other foreign currency applications have been waiting for more than five months. This situation feeds upon itself as it pops up the exchange rate versus the birr on the black market, and forces purchasers to pay higher rate for access to currency. Hence the black market business has grown significantly in the last couple of months.

At present the government is undertaking mega developmental projects such as power generation and sugar production ventures that consume huge amount of hard currency for importing construction materials.

According to experts, one of the major factors for the hard currency shortage is the decrease in export volume seen in the past year, combined with the low price of coffee in international market.

Ethiopia earned 3.1 billion dollars from export in the last budget year, 15 percent up compared to the previous year. However, last budget year’s performance was roughly 70 percent of the target set which was 4.6 billion dollars.

Noting the dismal performance of coffee export during the last budget year, the Ministry of Trade envisions collecting 5 billion dollars in revenue for the current budget year.

Previously, private banks used to purchase hard currency through auctions from the National Bank of Ethiopia (NBE), but the practice has been suspended for the last several months. No official explanation has been given from the regulatory body. “This practice has also played a role to shrink the hard currency accessibility at private banks” experts explained. Meanwhile, Prime Minister Hailemariam Desalegn told parliamentarians in his latest address that the country has sufficient hard currency reserve that enables it to undertake activities for a period of three months.