The parallel market that has shown a sudden sharp spike about a week ago is now registering shrinkage this week, Capital has learnt.
The illegal market that had spiked close to 70 birr per a USD early last week is showing a drop in this week’s comparison according to actors involved on the issue and others who closely follow the case.
One source who is closely assessing the situation told Capital that the demand for foreign currency has decreased, which is a reason for the parallel market rate reduction.
“The government’s effort to dry the smuggling hubs like Tog Wajaale might be a reason for the reduction in the interest of accessing the foreign currency,” one of the sources said giving his evaluation and added that following the demand reduction, the players in town collecting the foreign currency through black market has also shown less interest to buy the currency with the exaggerated rate that was seen in previous weeks.
“We speculate that the rate might be reduced due to that we don’t want to pay the amount that we did in the past days,” one of the illegal market players said.
As of the information Capital obtained from the parallel market players and observers on Thursday August 12 show that the rate has dropped to around 62 birr per a USD.
They added that there is information that states that the amount is not reduced which is quite false as in the market it has bottled from the 70 birr mark to 62 birr per a USD range.
“The reality now is that those who considered demanding the foreign currency through this illegal channels are now not interested due to that the rate is also expected to drop further,” they reaffirmed their speculation.
The foreign currency shortage is stated as one of the major reason for the mushrooming for parallel market and for the widening between the legal markets. According to the sector experts, the gap between illegal currency market and formal bank rate is started to expand for about 8 years. “The economy is growing with out adequate generation of hard currency or the foreign currency earning is not proportional for the economic growth that needs more foreign currencies to build industry, buy machine or undertake any projects since the country local product and supply to the market is very limited,” they said.
The scarcity has forced some legal businesses to see alternative ways to access foreign currency to do their businesses due to that most of them buy the foreign currency through the banking system from exporters with high rate and use illegal transfer sources to access the foreign currency abroad to pay for their import.
Experts argued that the government decision to lift a customs duty for some basic commodities like cloth, housewares and similar items have also played its own role to widen the difference between legal and illegal market. Individuals are making this opportunity as a source of income and business, but they accessing the foreign currency through illegal way including black market and illegal money transfer schemes, “these illegal ways have contributed to expand the gap between form and informal currency markets, while the latest incident is completely unrelated with the cases mentioned above.”
The illegal transfer has also contributed for the scarcity of foreign currency in Ethiopia because it shrunk the remittance that the country is supposed to generate, while the legal hawala is now showing improvements particularly for the past budget year.
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