As the whereabouts of Ethiopia’s Prime minister Meles Zenawi remains unknown, Ethiopian government has suspended the provision of foreign currency in a decision that has been linked to the political uncertainties surrounding prime minister Zenawi’s deteriorating health.
A notice to this effect has been issued by the regulator, the National Bank of Ethiopia, to the country’s commercial banks as Addis Ababa also appealed for food aid.
The country’s foreign currency reserves are running alarmingly low and can only cover the importation of basic goods such as petroleum, medicine and food.
The measure is likely to lead to a black market boom that would further weaken the country’s import-export trade, observers say, with shortages already being experienced.
The country’s leading commercial bank has stopped issuing letters of credit–essentially a promise to pay–with fears of a rise in the cost of living.
Banking in the Horn of Africa nation of about 85 million people is highly centrally regulated.
Industry insiders argue that massive capital flight and illegal transactions are the main reasons for the rapid depletion of forex reserves.
One of the fastest growing sub-Saharan Africa countries, Ethiopia’s growth has touched seven per cent annually for the last nine years, according to the IMF.
Big businesses owned by Mr Meles’ ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) play a key role in the daily operation of the economy.
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