Fertilizer procurement for the following year faces hurdles as acute forex shortages cause the Ministry of Agriculture to experience delays in the opening of letters of credit (LCs).
Over 7.7 million quintals of fertilizer have been left stranded as the Commercial Bank of Ethiopia (CBE) has yet to open a letter of credit, which is required to pay suppliers.
The delay is a big blow for the Ministry, which has been planning ahead of time in order to avoid delays like last year.
Around 15 million quintals of fertilizer will be distributed in the coming fiscal year, according to the Ministry. About 12.8 million quintals are likely to be procured this year, with the balance coming from stock.
“We want MPs to put pressure on the government to open LCs for the remaining fertilizer that is expected to be supplied this year. Otherwise, agricultural output will suffer,” stated Sophia Kassa (PhD), state minister for agriculture in charge of investment and inputs.
Over 400 million quintals of crop is expected to be harvested this year.
With 24 ships set to bring fertilizer to Ethiopia via Djibouti Port this year, she says a letter of credit must be opened for each vessel. “Of this, only 13 LCs have been opened, accounting for 6.9 million quintals,” Sophia noted.
CBE is tasked with the responsibility of opening the LC, with an instruction given by the National Bank of Ethiopia (NBE), which has allotted USD one billion for this year’s procurement.
The bill for fertilizer imports has skyrocketed in recent years. It has more than doubled in the last year to USD 1.2 billion.
The rise first began as a result of the coronavirus pandemic, with the Ukraine-Russia conflict worsening the situation because the two countries account for the majority of inputs for fertilizer production in the global market.
“We have already started a discussion with CBE to at least ensure the opening of the LC for the NPS fertilizer that needed to come as soon as possible,” Girma Amente stated. “Given the urgency of importing the fertilizer, we urged them to expedite the process.”