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* The Ethiopian economy is facing a shortage of foreign exchange
* The new Prime Minister has changed politics, with the economy in mind (ADB President's Additions)
By Maggie Fick
ADDIS ABABA, July 20 (Reuters) – A "hard currency amnesty" and confidence reforms in the Ethiopian economy, both at home and abroad, have helped to to close a gap between the exchange rate of the official market and the black market for its currency birr.
As cash – in some cases full-size briefcases – pour into banks, local businesses say that they finally feel relieved by a currency crisis that paralyzed some segments of the economy. 39; economy.
Businesses and analysts in the capital Addis Ababa told Reuters on Friday that the Birr traded on the parallel market around $ 28, close to parity with the official rate and 25% firmer than $ 50. three months ago.
"Suddenly, that's what happens," said a real estate agent whose business has stopped over the past year because the construction industry has no business. Does not have access to dollars to import building materials.
"I'm not sure of the source of the currencies, but psychologically, the scarcity mentality changed overnight," said the woman, who asked not to be named, to Reuters.
In a televised address earlier this week, 41-year-old reformist Prime Minister Abiy Ahmed called on those who hoard hard currency to deposit them in banks.
The appeal, known locally as the amnesty for hard currency, came with a warning: those who refused would be hunted down.
This week's government has also opened a bank account for diaspora funds and is asking Ethiopians abroad to contribute. And the United Arab Emirates last month agreed to deposit $ 1 billion into the Ethiopian central bank. Although the Ethiopian economy is one of the fastest growing economies, the Ethiopian export sector – mainly garment and agricultural products – is struggling to take off and the economy is not generating not enough money to pay for imports.
A ten-year infrastructure push to industrialize the predominantly agrarian nation to create jobs has the side effect of exacerbating the dollar shortage.
Since the beginning of the year, essential items like insulin, hypertension drugs and infant formula have become scarce. The shortage of dollars has also deterred international companies from investing for fear of having to fight to repatriate profits.
This could now change.
Since taking office in April, Abiy has tipped politics and the economy into the nation of 100 million people.
His efforts to liberalize the economy by opening lucrative public assets for foreign investment have been applauded by his people as well as by outside investors eager to enter any of last untapped markets of Africa.
In addition to his declared desire to attract foreign capital to one of the most closed states in Africa, Abiy negotiated peace with Eritrea, with whom he was able to negotiate peace with Eritrea. Ethiopia fought a border war two decades ago.
The rapprochement between the neighbors should also allow better economic relations, essential for the economic growth of the two countries, said Friday the president of the African Development Bank (ADB), Akinwumi Adesina.
"From the African Development Bank, we are looking at how we are going to make investments to support this, so that we can transform the new commitment they have into a partnership in which they will benefit from the dividends of peace between these two countries. country, "said Adesina to Reuters in Nairobi.
On Thursday, the new governor of Abiy Central Bank, Yinager Dessie, is committed to meeting regularly with business and business people. promised that their main concerns – limited access to credit and foreign currency – were a priority for the government.
Capital companies said their letters of credit, which banks had refused to honor for months were finally approved.
It remains to be seen whether the government is now ready to relax its grip on access to the foreign exchange market and the exchange rate itself.
Some remain skeptical, but at least for the moment, the Ethiopians breathe a sigh of relief.
"This morning, I was talking to a director of the Commercial Bank of Ethiopia who said to me," We are very liquid right now. Let me show you an example, "said Zemedeneh Negatu, president of Fairfax, a US-based investment firm focused on Africa.
Nearby, three bank employees counted the bills of a briefcase filled with $ 1 million in cash that a customer had brought earlier in the day. (Additional report by John Ndiso in Nairobi, edited by Joe Bavier and Hugh Lawson)
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