Bank statement from source country mandatory for Franco-Valuta imports
The National Bank of Ethiopia (NBE) will soon place a ban on some items that have been permitted to be imported under the Franco-Valuta scheme, in the event that it found the scheme is not economically viable.
A study to place a ban on items that are permitted to be imported under the Franco-Valuta scheme is underway, it said. This comes as the regulatory body introduces some restrictions on the privileges given to traders.
Yinager Dessie, governor of the central bank, said each Franco-Valuta application has to pass through the NBE, a measure targeted at weakening the parallel market.
“The forex source of each trader applying for Franco-Valuta will be checked in order to make sure that it is not bought from the parallel market, which is illegal,” Yinager said.
Lately, the gap between the official and the parallel market has reached a historic high. Earlier this week, it climbed to 100 percent but lowered to below 70 percent after the central bank’s crackdown against 392 individuals suspected of being involved in trading foreign currencies in the parallel market.
The Ministry of Finance greenlighted the use of Franco-Valuta privileges for basic goods, including edible oil, pharmaceuticals, and cement, to alleviate shortages. A report by the central bank also indicated that industrial inputs, fertilizer, petroleum products, clothing, and beverages, among others, were imported under similar privileges.
Imports of Franco-Valuta totaled USD 1.6 billion in the third quarter of the previous fiscal year, showing a nearly 10 percent decrease from the same period in 2020/21. Food and live animals take the lion’s share of the imports with a 30 percent share. It is followed by capital goods, which constituted eight percent, and industrial raw materials, whose share is around six percent.
Officials at the central bank have a fear that some traders source forex from the parallel market for Franco-Valuta imports.
“We have credible evidence indicating the parallel market is now a major source of forex for the beneficiaries of the scheme,” Yinager said.
Each trader is expected to bring a bank statement from the external financial institution where the forex is sourced and get a validation from the central bank for Franco-Valuta imports to get the approval of the Customs Commission.