Ethiopian horti exporters challenge forex rules as new directive strains operations

ETHIOPIA – Ethiopia’s horticulture sector is grappling with a new directive from the National Bank of Ethiopia (NBE), which requires exporters to convert half of their foreign exchange earnings into Birr within 30 days.

The directive, part of a broader overhaul of foreign exchange regulations, has sparked concern among exporters, particularly in the flower industry, who argue that the tight deadline complicates their already challenging business operations.

Exporters have voiced frustration over the directive’s impact on their ability to maintain the flow of essential imports.

Tewodros Zewdie, president of the Ethiopian Horticulture Producers & Exporters Association (EHPEA), which represents 126 members, highlighted the challenges posed by the directive.

“The time is not enough,” he stated, pointing out that the process of importing critical inputs often takes longer than the 30 days allowed by the new rule.

The directive has been introduced as part of NBE’s efforts to inject more liquidity into the foreign exchange market by ensuring that idle foreign currency earnings are converted promptly.

Abebayehu Dufera, NBE’s deputy director of foreign currency monitoring and reserve management, acknowledged the exporters’ concerns but emphasized that the measure is temporary.

“It’ll only stay in effect until there is enough inflow into the banks,” he noted, suggesting that the directive is a stopgap solution aimed at stabilizing the market.

The challenges facing the horticulture sector are not limited to the new forex directive. The industry has been dealing with a decline in export earnings, with a 22% drop in horticulture exports this year, the first decline in over a decade.

Flowers remain the dominant export product, accounting for 86% of the sector’s earnings last fiscal year, but the overall performance has been disappointing.

The Ministry of Agriculture has responded by launching a 10-year strategy to revitalize the sector, with a significant investment of USD 24.5 billion over the next decade.

The strategy aims to increase the horticulture sector’s contribution to GDP from 4.5% to 12% and reduce post-harvest losses to 20%. However, the immediate challenges posed by the forex directive threaten to undermine these long-term goals.

Industry voices call for revisions

Industry stakeholders are hopeful that ongoing discussions with NBE officials will lead to a revision of the directive. Tewodros Zewdie expressed optimism that the concerns of exporters would be addressed. “We’re hopeful it will be addressed soon,” he said, stressing the importance of continued dialogue.

Exporters like Joytech Plc and VegCrop Plc, which operate large farms in Ethiopia, have already started to feel the pinch. Bisrat Haileselassie, General Manager of Joytech Plc, revealed that the company has suspended imports due to the risks involved. “It’ll be impossible to import this way,” he stated, citing the lengthy process that can take up to 60 days.

VegCrop Plc’s General Manager, Mehandira Patel, echoed similar concerns, criticizing the bureaucratic hurdles that further complicate the import process.