The central bank of Ethiopia expects saving close to 100 million dollar per year, from the ban

imposed on selected import items. 

In a circular written on October 14, 2022, the Ministry of Finance ordered the National Bank of
Ethiopia (NBE) to stop approving Letter of Credit (LC) for 38 selected import items. As the
result, commercial banks cannot provide foreign currency for importers who request LC for the
selected 38 items, for indefinite period of time. The decision came after the macro-economic
team conducted studies.

Complete build up (CBU) automobiles, motorcycles, three wheels are among the items banned
from import. The others are processed food, beverages, artificial jewelry and flowers, make-up
preparations, whisky, postcards, fruit juices, chocolate, pork meat, household and office
furniture, vas, hats, bottled water, fruits, carpets, hand and wall watches, human and artificial
hair, perfumes, fireworks, bags, umbrella, sea foods, cigarettes and others are among the banned
items. Electric vehicles are exempted from the prohibition.

Import of these items, for which LC is already approved and their import is in process, cannot be
affected by the prohibition.

The ministry stated the prohibitions are made to channel the available foreign currency to most
needed items like medicine and basic commodities.

“Roughly we expect to save around 100 million dollar by stopping importing the selected items,
which are not critical items. The amount will be channeled to import of critical items especially
industrial inputs,” said Fikadu Digafe, chief economist and vice governor of NBE.

The selected 38 items are rather considered luxury items. Due to the chronic foreign currency
shortage the economy is facing, allocating the scarce foreign currency for import of such non-
critical items is deemed waste. The ban is also expected to improve the appetite for domestic
products.

“Vehicles that are used for working activities are excluded from the ban. The prohibition is
rather imposed on vehicles imported by individuals. This will also incentivize local car
assemblers. For instance, banks have been allocating foreign currency for import of beer, while
there is sufficient production of beer locally. Such practices are unfair and it has been costing the
economy,” said Fikadu.

Government also expects the new measurement will reduce the flow of foreign currency to the
parallel market. This is mainly because the foreign currency used to import the items is usually
sourced from the black market.

However, on the other end, the businesses of importers, wholesalers, supermarkets, and retailers
who were engaged in the business of the 38 items, will be negatively affected.
Especially since supermarkets in Addis Ababa sell imported items and most of the items are
included in the ban, supermarkets are in fear of facing shutdowns.

Last week, the central bank has also embarked on major crackdown over black market actors,
freezing bank accounts of over 665 informal hawala providers.

The foreign currency reserve of the country stood at 3.2 billion as of mid-July, covering only 1.7
months of import bill. The foreign currency shortage is exacerbated especially after price of
major import commodities like fuel, fertilizer, wheat and metal spiked in the global market, a
domino effect of the war in Ukraine.

However, compared to the country’s official import bill, which surpassed 18 billion dollar this
year, the 100-million-dollar saving is a drop on the ocean. Yet, the implication of the
measurement is incentivizing for local producers. It will also result in a major shift in Ethiopia’s
consumer behavior.

(Taye, 2022)

Addis Ababa October 14/2022 /ENA/ The National Bank of Ethiopia (NBE) has
ordered banks to suspend forex service to 38 non-essential items listed by the
Customs Commission as per the direction by the National Macroeconomic
Committee.

NBE Vice Governor and Chief Economist, Fikadu Digafe said today that the
suspension of forex service is the extension of last week’s announcement of
policy and administrative majors by the Governor to curb illegal foreign
currency transfers.
The suspension will remain for an unlimited time, he stated, adding that the
circular is dispatched to banks to be implemented starting from Monday October
17, 2022.

The non-essential items banned include less than 10 sitter non-electric private
vehicles, which he said, are the second most forex consumer.

“If we manage to suspend at least 50 percent of the car imports, you can
imagine how much forex we can save; which otherwise would be disbursed for
essential items and capital goods,” the vice governor said.

Three-wheelers, motor vehicles, and bicycles are also among the suspended
items.

Household and office furniture; alcohol, including whiskey, wine and beer;
cigarettes and substitutes; umbrellas; packed foods; fruit juices; canned fruits;
fireworks; artificial jewelry; and carpets are among the suspended items.

According to the vice governor’s estimation, the suspending of the listed items,
excluding vehicles, would enable the country to save between 100 -150 million
USD annually.

Some business people open LC from Commercial Bank of Ethiopia for the sake
of legality. However, they collect forex from illegal sources at exorbitant rate
and divert formal remittances to the informal sectors, he elaborated.

By doing so, they are affecting the formal inflow of remittances into the bank
system, diverting the import of these items.

Such activities have two negative impacts on the economy. First, it diverts
foreign exchange from formal sector to non-formal sector; and it also makes the
imported items debilitatingly expensive thereby exacerbating inflation. (Banks
Ordered to Suspend Forex Service to 38 Non-Essential Items, 2022)
Ethiopia has banned the import of 38 non-essential items for an indefinite period. A
letter from the Ethiopian Ministry of Finance (MoF) to the National Bank of Ethiopia (NBE),
the country’s central bank, stated that it had become necessary to restrict the use of
foreign currency to pay for non-essential imports. Commercial banks in the country
have been ordered not to issue letters of credit (LCs) for importing the 38 types of
goods. The ban is effective from 17 October 2022 until further notice.

The banned list includes furniture; perfumes; make-up; artificial flowers; headgear;
artificial jewellery; carpets; umbrellas; watches and clocks; soaps; fireworks; human and
artificial hair; and bags and wallets. A number of food and beverage products are also
targeted, such as canned fruit; sweet biscuits and waffles; seafood; chocolate; alcoholic
drinks; water and non-alcoholic drinks; and fruit juices. Non-electric vehicles are also on
the list. (ETHIOPIA: Import Ban Imposed on 38 Items Including Furniture and
Cosmetics)
the impact of import restriction on automobile importer In case of Ethiopia

Import restrictions can have a significant impact on automobile importers in Ethiopia. These restrictions may
limit the types and quantities of vehicles that can be imported into the country, which can make it more
difficult for importers to meet demand. This can result in decreased sales and profits for the importer.
Additionally, import restrictions may increase the cost of importing vehicles, as importers may have to pay
tariffs or other fees to bring vehicles into the country. This can make it more expensive for consumers to
purchase vehicles, which may impact demand and sales for the importer. In some cases, import restrictions
may also lead to shortages of certain types of vehicles in the market, which could negatively impact
consumer confidence and demand for vehicles.

Here are some bullet points outlining the potential impact of import restrictions on automobile importers in
Ethiopia:

Import restrictions may limit the types and quantities of vehicles that can be imported into the country,
making it more difficult for importers to meet demand.

This can result in decreased sales and profits for the importer.

Import restrictions may increase the cost of importing vehicles, as importers may have to pay tariffs or other
fees to bring vehicles into the country.
This can make it more expensive for consumers to purchase vehicles, which may impact demand and sales
for the importer.

Import restrictions may lead to shortages of certain types of vehicles in the market, which could negatively
impact consumer confidence and demand for vehicles.

The impact of import restrictions on automobile importers in Ethiopia can be significant. These restrictions,
which may limit the types and quantities of vehicles that can be imported into the country, can make it more
difficult for importers to meet demand. This can have a negative impact on the sales and profits of
automobile importers in Ethiopia.

One of the main ways that import restrictions can affect automobile importers is by limiting the variety of
vehicles that they can bring into the country. This can make it more difficult for importers to meet the diverse
needs and preferences of consumers in Ethiopia. For example, if a particular type of vehicle is in high demand
but is not allowed to be imported, the importer will not be able to satisfy this demand and may miss out on
sales as a result.

In addition to limiting the variety of vehicles that can be imported, import restrictions can also limit the
quantities of vehicles that can be brought into the country. This can make it difficult for importers to keep up
with demand, especially if demand for vehicles is high. As a result, importers may not be able to sell as many
vehicles as they would like, which can decrease their profit.

Import restrictions can also increase the cost of importing vehicles into Ethiopia. This is because importers
may have to pay tariffs or other fees in order to bring vehicles into the country. These additional costs can
make it more expensive for consumers to purchase vehicles, which can impact demand and sales for the
importer.

Finally, import restrictions can lead to shortages of certain types of vehicles in the market. This can negatively
impact consumer confidence and demand for vehicles. Consumers may be less likely to purchase a vehicle if
they are not confident that they will be able to find the type of vehicle they want.

In conclusion, the impact of import restrictions on automobile importers in Ethiopia can be significant. These
restrictions can limit the variety and quantities of vehicles that can be imported, increase the cost of
importing vehicles, and lead to shortages of certain types of vehicles in the market. All of these factors can
have a negative impact on the sales and profits of automobile importers in Ethiopia.

Ethiopia has a long history of implementing import policies as a means of protecting and
promoting its domestic industries. Some notable examples of import policies in Ethiopia include:
1. The Import Substitution Industrialization (ISI) policy: In the 1950s and 1960s, Ethiopia
implemented an ISI policy, which aimed to promote the development of domestic industries by
encouraging the production of goods that were previously imported. 2. The Trade and Investment
Policy Reform (TIPR): In the 1990s, Ethiopia implemented the TIPR, which aimed to liberalize
trade and investment by reducing import tariffs and other barriers to trade. 3. The Trade and
Industrial Policy (TIP): In the early 2000s, Ethiopia implemented the TIP, which aimed to
promote the development of a competitive export-oriented industrial sector by providing support
to specific industries and encouraging the production of exportable goods. 4. The Industrial
Development Strategy (IDS): In the 2010s, Ethiopia implemented the IDS, which aimed to
promote the development of a diversified and competitive industrial sector by supporting the
growth of small and medium-sized enterprises (SMEs) and encouraging the production of value-
added products. Import policies in Ethiopia have generally evolved over time to focus on
promoting the development of domestic industries and increasing exports.
10:01 AM
‫نجمية‬
ETHIOPIA Trade and Transformation Synthesis DIAGNOSTIC TRADE INTEGRATION
STUDY July 2004 Final Version.

Import restriction on automobile

Import restrictions can have a number of impacts on automobile importers in Ethiopia. Some of
the possible effects include:
1. Reduced demand: If import restrictions are put in place, it may become more difficult or
expensive for people to import automobiles into Ethiopia. This could lead to a reduction in
demand for imported automobiles, which could negatively impact automobile importers.
2. Increased competition: If import restrictions are put in place, it may encourage domestic
automobile manufacturers to increase production in an effort to meet the demand for vehicles
within the country. This could lead to increased competition for automobile importers.
3. Increased costs: If import restrictions are put in place, it may become more costly to import
automobiles into Ethiopia due to tariffs or other fees. This could reduce the profitability of
automobile imports for importers.
4. Reduced access to a diverse range of vehicles: Import restrictions may limit the range of
vehicles that are available to consumers in Ethiopia, as importers may not be able to bring in
certain models or brands. This could reduce consumer choice and satisfaction. It is important to
note that the specific impact of import restrictions on automobile importers in Ethiopia will
depend on the specific details of the restrictions and the market conditions in the country.

Import ban on automobile

An import ban on automobiles would have a more severe impact on automobile importers in
Ethiopia compared to import restrictions. Some possible effects of an import ban could include:
1. Loss of business: An import ban would completely prohibit the import of automobiles into
Ethiopia, which would likely result in a loss of business for automobile importers.
2. Unemployment: If an import ban were to lead to the closure of automobile import businesses,
it could result in unemployment for the people working in those businesses.
3. Reduced consumer choice: An import ban would completely eliminate the availability of
imported automobiles in Ethiopia, which could reduce consumer choice and satisfaction.
4. Increased costs for domestic vehicles: If an import ban were to lead to an increase in demand
for domestic vehicles, it could result in price increases for those vehicles. It is important to note
that the specific impact of an import ban on automobile importers in Ethiopia would depend on
the market conditions in the country and the availability of alternative employment opportunities
for those who may lose their jobs as a result of the ban.

Imports are foreign goods and services bought by citizens, businesses,

and the government of another country.1
1
The Library of Economics and Liberty. "Balance of Trade and Balance
of Payments."

 It doesn't matter what the imports are or how they are sent. They can be shipped, sent by email,
or even hand-carried in personal luggage on a plane. If they are produced in a foreign country
and sold to domestic residents, they are imports.

Even tourism products and services are imports. When you travel outside the
country, you are importing any souvenirs you bought on your trip.

THE PRINCIPAL CATEGORIES OF NON-TARIFF IMPORT

RESTRICTIONS

It is obviously impracticable to attempt to enumerate all of the

various forms of non-tariff import barriers. Their possible number

is subject only to the limitations of human ingenuity. They may,

however, be conveniently classified into categories according to

their nature, their purpose, or the source from which they arise.

For present purposes, a further distinction exists between overt

and "hidden" barriers as it affects both the ease with which they

may be identified and the probable effectiveness of attempts to

remove them.

The most readily identifiable types of non-tariff import restrictions are those
which are formally imposed by national governments to regulate the entry of
goods. They include quantitative

restrictions, mixing and tying restrictions, import licensing controls, foreign

exchange controls, deposits required of importers, for-

mal customs provisions, and customs levies other than tariffs. Inter-

governmental commodity agreements, at least to the extent that

their purpose is to protect competing industries within the import-

ing country, may also be included in this category. In addition to

these formal import controls, there also exist numerous informal

types of restrictions which are considerably more difficult to iden-

tify. They result from customs administration and procedure and

from the administration of the formal import controls. Finally, there

exist certain other types of restrictions which are unrelated to the

entry of goods as such; these include government procurement poli-

cies, internal tax policies, subsidy programs which accord an advan-

tage to domestic industries, and various private practices.

These methods by which imports may be controlled should be

distinguished from the purposes motivating the restrictions. The

latter include protection of the national security, relief of injury

caused by trade concessions, conservation of foreign exchange,

encouragement of domestic industries, protection of public health,

safety or morals, prevention of unfair competitive practices, and

various other objectives which may be as numerous as the prob-

lems from which they arise. This distinction has considerable sig-

nificance, since the availability and efficacy of legal and diplomatic

procedures to remove such restrictions will depend both on their

nature and on the reasons for their imposition.

Exchange Controls

Since international trade depends upon the adequate availa-

bility of foreign exchange on reasonable terms, the manner in

which exchange controls are applied can sharply affect the volume

of imports. There are many forms of such controls, including

general restrictions on current payments, multiple currency prac-tices,

preferential regional treatment, and bilateral payments

arrangements.

The improvement in the payments and reserves position of the

industrialized countries of Western Europe has led to a general

relaxation of their exchange controls. A similar trend has been

evident in Japan, although that country incurred a marked pay-

ments deficit in 1961 which was not reversed until early in 1962.

Controls remain common in the less developed nations, many of

which have substantial and continuing payments deficits as well

as serious internal economic problems.35

Practices common throughout Latin America illustrate the

exchange control difficulties faced by importers located in less

developed regions who seek to do business with United States

firms. Bilateral payments arrangements among Latin American

countries, although less prevalent than in the past, are still en-

countered. Member countries of the Latin American Free Trade

Association frequently accord reciprocal exchange control prefer-

ences which are not available to imports from other sources.

Moreover, multiple exchange rates exist in many countries.36

85 For a recent review of exchange restrictions by country, see INT'L

MONETARY FuND

14TH ANN, REP. ON EXCHANGE REsnuCTIONS pt. 2 (1963).

86 In Brazil, for example, two foreign exchange categories are used.

Commodities

considered essential, and virtually all commodities from the other

members of the Latin

American Free Trade Association, are included in the "general

category." All other

commodities appear in the "special category." Importers of articles in

both categories

must contract in advance for foreign exchange, but importers of special

category items
must also obtain an import license. For this purpose, it is first necessary
to obtain a

"promise of license." These promises are made available at public

auction by the Super-

intendency of Money and Credit. Because the amount of foreign

exchange available for

special category imports is restricted by the government, the prices of

promises to license

are ordinarily bid up to a level which effectively discourages the

importation of these

items. Reference

IMPORT BAN

Addis Ababa November 15/2022/ENA/ The ban on importing of 39 different

products which are considered as luxury items will save about 1 billion USD per
year, Prime Minister Abiy Ahmed said.

The Government of Ethiopia (GOE) has banned 39 different products which are
considered as luxury items which include packaged food, household items,
furniture, beauty products and automobiles, and different type of liquor imports
in a circular order written by the Ministry of Finance to the National Bank of
Ethiopia (NBE) on October 14, 2022.

It is to be recalled that the government has reached to the decision to ban

those items to utilize the limited hard currency available for import of important
items like medicines, agricultural inputs, capital goods and raw materials for
local industries.  
Accordingly, banning such items will benefit to prioritize other essential basic
agricultural products as some of the stated luxury products are exposed for
black-market.

Prime Minister Abiy Ahmed said to the House of Peoples’ Representative today
that as per to the national bank, Ethiopia spends 18 billion USD on 6,000
imported goods. Only 39 of these commodities have been prohibited.

Abiy said last year alone, the nation has spent 1 billion USD on imported
products, the same amount it spent on fertilizer.

The decision was made to give domestic products a chance as the commodities
are vulnerable to the black market and are not essential commodities.

“As a country, we gain more than we lose through the decision. The prohibition
could be improved in the future.” (Ban on Importing of Luxury Items Saves
about 1 Biln USD per-Year: PM Abiy)

Import ban
Description
An import ban is a complete prohibition on imports of a certain product. An import
ban can be general, i.e. it prohibits imports of the product from any other country
(e.g. because the product is forbidden in the home country), or it can be directed at
imports from a certain country (e.g. because of an animal disease in the exporting
country).

In the WTO context, import bans are regarded as non-tariff trade barriers and are
therefore only permitted in certain circumstances, e.g. to protect health. Many
disputes put before the WTO arbitration panel concern the question of whether
import bans (such as bans on genetically modified foodstuffs) are justified
scientifically or are simply a form of protectionism. Countries applying import bans
are expected to gradually convert them into tariffs.

Import bans can promote smuggling and do not generate revenues for the
government. The lack of competition can prevent productivity and quality from
improving. The goal of protecting and promoting domestic production can also be
targeted by introducing tariffs.

Possible Negative Effects

 Higher prices for consumers and higher costs for processors

 Importers are weakened and may have to abandon business relationships

 Smuggling and black market

(Desta, 2007)Ethiopia, being one of the African Countries, requires continuous improvement in
agriculture, manufacturing and service sectors. In accomplishing the development on these sectors,
the role of infrastructure is vital. The developments of the infrastructure in turn highly depend on
the availability of various types of vehicles (Cars, pickups, trucks, etc...), construction machineries
and agricultural equipments. In addition, Ethiopia is one of the land-locked countries in Africa. It uses
mainly Djibouti Port, which is located about 1000 km away from the capital city for import and
export of goods. The transportation of goods from Djibouti port to various parts of Ethiopia and from
various parts of the country to the port is done using trucks. Since Ethiopia doesn’t manufacture
automotive, construction machineries and agricultural equipments locally at present, it imports
those from various countries of the world. Automotive importing companies in Ethiopia are
importing different types of vehicles to the country’s vehicle market. In doing so, a predictive study
on the marketing trends of imported automotive is necessary to clearly see the demand supply gap
and for the growth in sales of automotive in Ethiopia. The Automotive Industry and Trend Analysis in
Ethiopia 2 This project is mainly prepared to reveal the truck market trend in Ethiopia and to indicate
ways of increasing the contribution of the automotive sector to the Ethiopian economy. The project
covered briefly the overview of Ethiopia’s economical, geographical and cultural conditions including
investment opportunities in relation to the automotive industry. The project reveals the actual
market trend of different types of trucks classified according to their operation in general and freight
transport sector in particular. Having taken reliable data from different private companies and
governmental institutions, efforts have been made to predict the Ethiopian truck market.
Ethiopia imports all of its automotive needs. It does not manufacture automotive. Some
companies only assemble and build bodies of buses and dry and wet cargo on chassis imported
with cab. In the past 10(ten) years, the market for vehicles shows significant improvement and
growth. “On average, during the last five years (2002-2006), the number of vehicles imported has
been 1 UD Sales Business Plan. Nyala Motors.(2007, January). Addis Ababa The Automotive
Industry and Trend Analysis in Ethiopia 3 increasing by about 27% per annum”.2
With the on-going expansion of road construction and consequent increase in access to roads, the
demand for vehicles shall also grow significantly. At present, the total vehicle population reaches
around 200,000.3 2 UD Sales Business Plan. Nyala Motors.(2007, January). Addis Ababa 3 IBID

2. Central Statistical Agency.(2006, November). Report on large and small scale manufacturing and
electricity industries survey(Statistical Bulletin No. 380).Addis Ababa: Central Statistical Agency 3.
Council of Ministers Regulation No. 84/2003.
In Ethiopia, the history of vehicle traced back to the regime of emperor Minilik II. As the Ethiopian
transport authority has shown, currently the total number of vehicles which had got codes in
Ethiopia is 344,131.1 Out of which 70 % of them are found in Addis Ababa town and the rest 30% are
found out of Addis Ababa. Eskinder (2007), on his study of the automotive industry and trend
analysis in Ethiopia, stated Ethiopia‟s automotive industry as one of the major contributors to the
national economy. In addition as he stated Ethiopia imports all of its automotive (vehicle) needs, it
does not manufacture automotive. In Ethiopia the key suppliers of commercial trucks with respective
mark of trucks are AMCE (IVECO), ElG (SCANIA), EBG (VOLVO), ORBIS (MERCEDES), Nyala Motors
(Nissan Diesel), National Motors (ISUZU), Ethio Nippon (MITSUBISHI) , HAGBES (DAEWOO) and
MOENCO. As shown in the figure below, the number of imported vehicles increases from 2007-2010

Recently some companies assemble and build bodies for buses and dry and wet cargoes. Companies
like Holland Car PLC, Lifan Motors, Mesfin Industrial Engineering and Maru Metals PLC are
automotive assemblers in Ethiopia. Currently in Ethiopia the competition between those companies
is tough. According to Eskinder (2007), the competition is on many factors including price,
dependability and performance, after sales service support, resale value and good will. Ethiopia is
characterized with low car penetration and old cars, new car market is estimated at less 4000 units
of car penetration among the lowest in the world and the average age of the cars in the country is
estimated at 15 years. In Ethiopia TOYOTA has large market share and clear leadership position
(market share around 50%)3 .
1 Data collected on 22/07/2003 E.C
2 Data collected on 1/08/ 2003 E.C
3 http://www.moencoethiopia.com
(Sterzer, 2021)
Effect of Import Restrictions on the Automobile Industry
The measures of exchange restrictions and on imports in general have generated complications
in the automobile industry. The deepening of currency restrictions puts the industrial sector in
5 See Dulcich, F.; Otero, D.; & Canzian, A. Trayectoria y situación actual de la cadena automotriz en
Argentina y Mercosur. Ciclos en la Historia, la Economía y la Sociedad. 54, 2020.
6 See Argentina tardaría por lo menos 10 años en volver al PIB per cápita de 2011. El Economista,
2021.
Also, de Pablo, J.C. Restricción externa: mismo problema, dos escenarios diferentes. Documentos de
Trabajo, 760:1-20. 2020; Estancamiento del comercio exterior a pesar del superávit. Mercado,
2021an extreme situation. More than 80% of imports go to production, which, in turn, is largely
exported. A vehicle that is produced in the country has around 70%, on average, of imported
parts (see Figures 3.1 and 3.2)7. I have personally experienced these import restrictions and their
negative effects on the automobile industry, when between 2012 and 2014 he worked in the
Foreign Trade area of the Japanese company Honda. Those restrictions affected the production
process of that company in terms of the delay in authorizing and releasing imports not only of
parts and spare parts to produce motorcycles and vehicles, but also of capital goods that
 represent investments to improve the production.
Figures 3.1 and 3.2: Automobile production and auto parts imports (Figure 3.1) and Imported
parts on production. In units (left) and dollars (right) (Figure 3.2)
Source: Pérez Ibáñez based on data from SCCE and ADEFA
The situation of the automobile sector and its influence on the trade balance is not easy: on the
one hand, the automobile production, after the productive transformations associated with
global value chains, necessarily implies the presence and communication with the international
market and, therefore, the local automobile manufacturing is incompatible with extremely
protectionist trade policies. On the other hand, Argentina has been suffering losses in its
reserves and, when the deficit sectors are looked at in the trade balance, the magnifying glass is
placed on the automobile sector, because it is precisely one where historically there were greater
imports than exports8 as it can be seen in Figure 4:
Figure 4
Trade balance of the sector. In billions of dollars
7 See Alonso. Restricciones más duras: advierten por impacto en industria automotriz. Á mbito,
2021
8 See Gabin, L. En una semana, el BCRA quemó los dólares que compró en un mes: presión para
endurecer el cepo. iProfesional, 2021. Also, Pérez Ibáñez, J. Industria automotriz argentina: triple
estrategia de inserción en las cadenas globales (1990-2019). Realidad Económica. 342(51):9-42.
2021Source: Pérez Ibáñez based on data from SCCE and ADEFA
The biggest obstacle that buyers will face is finding the vehicle they want available since, due to
lack of stock, or change in marketing policy, fewer and fewer models remain in the brands'
product portfolio. Due to limited imports, automakers began to prioritize some vehicles when
defining purchases abroad and replace those segments with models produced in the country or
with others that have a more active demand. It is estimated that due to a lack of dollars and a
shortage of 0km, 40,000 fewer cars will be sold in 2021. In addition, they prefer to prioritize the
quota of dollars to import parts for local manufacture, which then leaves more revenue through
export. Based on this situation, nationally produced models are gaining market share and 7 of
the 10 best-sellers in July were of national origin. On the other hand, another consequence of
these import restrictions is the notable revaluation of used cars, which from the shortage of 0km
cars began to increase their sales numbers and, also, their prices.
Forex approval

4.4. Approval for Forex payment and Precarious situation of Foreign

Currency availability

Payment of foreign currency is an important step in international trade transaction which

might be through a bank or franco-valuta. Payment through a bank requires two tasks. First, a

foreign currency approval must be obtained. This approval is necessary due to the foreign

exchange controls in place and will allow the importer to pay for the imported goods in foreign

currency. A foreign currency approval is not required if the goods are being imported on a

franco-valuta basis, which is possible only in exceptional cases and where no foreign exchange is
payable. Second, the payment arrangements have to be agreed with the importer’s bank. Foreign

currency approvals must be requested through the bank at which the importer has the account

which is to be used for the import. As part of the request, the importer must present his/her valid

business license and a pro-forma invoice from the supplier. It follows that having a bank account

is a precondition for importing. Alternatively, the investment, manufacturing or mining license can be
presented. The pro-forma invoice should describe the imported goods, state the unit

price, quantity and total price, as well as list additional charges that may be applied on the

transaction.

Currently, foreign currency approvals are issued by Commercial banks and are processed

manually; the time required for the approval depends on the availability of foreign currency

requested. The second task within the payment issues is to arrange with the bank for the method

of payment and obtain a bank permit. In this regard, the methods of payment for imports used

in Ethiopia are the following:

• Letter of credit (L/C), in which the bank undertakes to pay the supplier a stated sum of

money within a prescribed time limit and against the hand-over of the documents needed for

the release of goods from customs; (Sadiq, 2020)

• Cash against document (CAD), where the importer’s bank hands over to the importer

the documents needed for the release of goods from customs against full payment;

• Advance payment, i.e. the importer orders the bank to pay the seller via SWIFT transfer

prior to shipment or rendering the service.

For all methods of payment, the importer needs to have an account with the bank, the

required approved foreign currency (as obtained in the previous task).

Due to precarious foreign currency reserves with the National Bank of Ethiopia the foreign

currency approvals suffer from un-necessary delays.

4.5 Paying VAT on imports

Value added tax (VAT) is levied at a flat percentage rate of 15% on the sum of CIF value,

customs duty, and excise tax, however it is burden on the importer and are applicable to imports

from all sources hence cannot be treated as NTB. Some

types of supplies of goods, services and
imports are exempted from payment of VAT
too.Conclusion
Major macroeconomic effects of Russia’s current geopolitical and economic crises are
severe depreciation of the ruble against the US dollar and other major currencies, high
inflation, and serious recession, including declines in GDP and consumer income.
Before the crisis hit in 2014, Russia was a much larger importer of agricultural products
than exporter. The crisis, which includes the ban on major agricultural imports (such as
meat and other livestock goods) from the United States, EU, and other Western
countries, has reduced Russia’s agricultural imports substantially. Total Russian
agricultural imports dropped from US$43 billion in 2013 to US$25 billion in 2016.
The crisis has hurt Russian consumers mainly by generating inflation, especially for
food. The crisis raised total price inflation from 7% in 2013 to 16% in 2015, and inflation
for food from 6% to 21%. However, given that Russia imports mainly high-value
products, such as meat, fruit, and vegetables, the import ban has not reduced the
availability of staple foodstuffs such as wheat and other grains, nor has it threatened the
country’s overall food security.
Just as the crisis (especially the import ban and ruble depreciation) has hurt food
consumers, it has helped producers. Total agricultural production in 2015 was 11%
higher than in 2013, and livestock product output was greater by 5%. However, the
average annual growth rate for total livestock production in 2014–2015, and for meat
(beef, pork, and poultry broilers) output in 2014–2016, was lower than the
corresponding rate during the pre-crisis years of 2011–2013. This shows the difficulty of
raising the long-term growth rate within the livestock sector, which will be hurt by the
crises’ longer term effects from the drop in investment (including foreign direct) and
technology transfer from the West.
The crisis reinforced a longer term drop in Russian meat imports, which peaked in 2008
at 3.5 million tons, and more generally strengthened the country’s move, supported by
state policy, toward agricultural import substitution and self-sufficiency. Projections from
USDA’s long-term modeling system for world agriculture indicate that, even if Russia
completely comes out of its current crisis, meat imports will continue to fall. Net meat
imports in 2026 are projected at 0.58 million tons, a 57% drop from the average annual
level during 2014–2016 of 1.37 million tons. Using more optimistic assumptions about
Russia’s future macroeconomy (higher world oil prices and domestic GDP growth and a
stronger ruble), Russian net meat imports in 2026 are projected at 1.08 million tons,
while more pessimistic macro assumptions generate a 2026 net meat import projection
of only 96,000 tons. The more pessimistic scenario rests on assumed lower world oil
prices and Russian GDP growth and a weaker ruble, and thereby has features of the
current economic crisis lingering into the future.
(William M Liefert, 2019)

The applied of clove import policy impact on the supply

of clove dropped and demand of clove rose. Domestic clove

price decreased both on industry by 3.02 percent and on

farmer level by 3.96 percent and it cause the production of

cigarettes increased by 0.31 percent. In the long run, the area

of clove will decrease by 0.1 percent and impact to the

decrease on clove production by 0.03 percent. Impact of this

policy more beneficial for cigarettes industries than for

clove farmers. The decrease of clove price in the long period

can impact on the sustainability of Indonesian clove

production and can threaten the existence of Indonesian

clove in the next future.

The impact of policy should be beneficial for all the

stakeholder. Therefore, cooperation between farmers and

cigarette industries is needed to keep existency of clove

cigarettes. The clove policy must take into account the clove

farmer concerning clove price. The government has to

support development of Indonesian clove products. The

research and development for diversification of clove

products such as clove for essensial oil, preservatives and

others must be more intensive. So the dependency of farmer

clove on the clove cigarettes industries can be minimized. (Bonar M. Sinaga, 2018)
Automotive

The automobile industry is a pillar of the global economy, a main driver of macroeconomic

growth and stability and technological advancement in both the developed and developing

countries.

The core automotive industry( vehicle and parts makers) support a wide range of business

segment both up streams and down streams along with the adjacent industries. The industry also

contributes to the job creation and skill development, its numerous forward and backward

linkages brings both direct and indirect employment.

Source: AT kearnaay, the contribution of automotive industry for the technology and value

creation

The automotive sector did not show satisfactory growth in Ethiopia. The sector is at low level of

development in comparison to other countries including in Africa. Ethiopia imports all of its

automotive needs. It does not manufacture automotive. Only some companies assemble sedan

cars, buses and trucks.

Given the current limited disposable income, Ethiopia‘s automotive market is dominated by

second-hand imported vehicles –particularly commercial vehicles.

Source: Deloitte Africa 2016

Second-hand vehicles dominate the market. Approximately 85% of vehicles are second-hand

imports, of which almost 90% are Toyotas. These vehicles are imported primarily from the Gulf

States, through the Port of Djibouti. The vast majority of Ethiopia‘s vehicles are concentrated in

Addis Ababa, while the number of vehicles in rural areas remains low. The Ethiopian Investment Commission
(EIC) reports that 31 foreign vehicle investment projects

(largely Chinese projects but also some involvement of European companies) and 73 domestic

vehicle assembly investment projects have been licensed since 1998.

Source: Deloitte Africa 2016

This means that a total of 104 companies have been licensed for vehicle assembly in the country

over the past two decades. However, only a few of these are operational, with the vast majority

licensed at the pre-implementation stage

Even though domestic vehicle production and assembly may have substantial multiplier effects
for Ethiopian economies, and could act as a catalyst for industrialization and economic

diversification. This is at a lesser stage of development. As a result the sector has been an

attractive option for policymakers seeking to boost manufacturing employment, diversify export

revenue sources and ultimately industrialize their economies.

Automobile

In Ethiopia, road transport is the major means of passenger and freight transport. In 2006, Ethiopia had
33,300 km of roads (5,400 km paved and 27,900 unpaved) as against 681 km railways and 18 airports with
paved runways. Still a low percentage of the population has access to roads. As a result, Government gives
top priority to infrastructure construction, in general, and road construction, in particular. Ethiopia imports all
of its automotive (vehicles and machinery) needs. It does not manufacture automotive. Some companies only
assemble and build bodies for buses and dry and wet cargoes on chassis imported cabs. 27 Due Diligence
report on Bekelcha Transport Enterprise. Ernst & Young (2004) The Automotive Industry and Trend Analysis
in Ethiopia 35 In the past 10 (ten) years, the market for vehicles shows significant improvement and growth.
On average, during the last five years (2002-2006), the number of vehicles imported has been increasing by
about 27% per annum. With the on-going expansion of road construction and consequent increase in access
to roads, the demand for vehicles shall also grow significantly. At present, the total vehicle population
reaches around 200,000.

Forex

Foreign exchange rates Ethiopia has been operating a market based exchange rate system since 1991. On
average the exchange rate has been depreciating at 5% per annum. The Br has depreciated from a 1996
exchange rate of US$ 1.00 = Br 6.3 to US$ 1.00 = Br 8.2 as of 23 March 2000. The depreciation of Birr will
affect the import of trucks since the price in birr increases as the exchange rate increases. Since Ethiopia
imports all the automotives the increase in foreign exchange rates (depreciation of Birr against major hard
currencies) directly impacts the price of automotives.

Un-balanced imports and Exports Most freight business is concentrated on Addis Ababa-Djibouti route.
Unfortunately, most of the cargo is imports with exports being only general below 30% of the imports and
exports. For example, in 1998 exports were 241,484 tons as compared to 3,557,015 tons of imports. As a
consequence of this freight imbalance the average loading to and from Djibouti is very low as sometimes
trucks drive empty or partially loaded on the way to Djibouti. This freight imbalance threatens the
profitability of the industry given the concentration of freight business on this 16 Due Diligence Report,
Bekelcha Transport Enterprise, Ernst & Young The Automotive Industry and Trend Analysis in Ethiopia 18
route. There is an imbalance in imports and exports on the Addis Ababa - Djibouti route, which constitutes
about 70% of the freight market, leading to low average loading and high operating cost per tone-
kilometer.17 17.Sisay A. (2007, May 13) Vehicle assembly needs support. Capital Newspaper. P. 8.

Import restriction

Restriction on importation refers to measures, normally adopted by governments, which restrict the
ability of firms to enter foreign markets via imports.
Reference

Liefert, W. M., Liefert, O., Seeley, R., & Lee, T. (2019). The effect of Russia’s economic crisis and import ban
on its agricultural and food sector. Journal of Eurasian Studies, 10(2), 119–135.
https://doi.org/10.1177/1879366519840185

A hard currency refers to a currency that is generally issued by developed countries, globally traded, and seen
as politically and economically stable

Ethiopia has ordered banks to deny foreign currency to businesses importing non-priority goods, in an effort
to shore up dwindling foreign reserves in one of Africa's major economies.

The move effectively freezes the import of dozens of items such as alcohol and cars, as businesses must
register with banks to obtain the foreign currency needed to bring goods into the country.

In a letter to Ethiopia's central bank, the Ministry of Finance said it had become necessary to restrict the use
of foreign currency to importing food, medicine and medical equipment, and raw materials for
manufacturing.

"Therefore... we are sending a list of goods that will not be allowed forex for an indefinite period of time,"
said the letter posted Saturday on the Twitter account of Industry Minister Melaku Alebel Addis.

The list of some 40 products includes vehicles and motorcycles to wall clocks, umbrellas, carpets and soaps,
alcohol, perfumes and cigarettes.

No recent public figures are available regarding Ethiopia's reserves of foreign currency.

In late March, the National Bank of Ethiopia indicated reserves had fallen to $1.6 billion at the end of 2021,
covering less than 2 months' worth of imports, according to the local newspaper the Reporter.

A largely importing country, Ethiopia is in structural shortage of foreign currency", the French Treasury said in
a periodic bulletin this month.
Ethiopian authorities have also recently tightened laws on foreign currency holdings for individuals and
businesses and banned all foreign currency transactions in Ethiopia.

There was also a crackdown this month on the black market exchange of foreign currency, where the US
dollar can fetch almost twice the official exchange rate amid a surge in demand.

The central bank also announced this month it had blocked nearly 400 bank accounts believed linked to illicit
currency trading, and promised financial rewards to those who denounced players in the parallel market.

Report Highlights:

The forex shortage in the country is becoming critical and the Government of Ethiopia (GOE) has

banned 38 different products which are considered luxury items which include packaged food,

household items, furniture, beauty products and automobiles, and different type of liquor imports in a

circular order written by the Ministry of Finance to the National Bank of Ethiopia (NBE) on October 14,

2022. The GOE has reached to this decision to utilize the limited hard currency available for import of

important items like medicines, agricultural inputs, capital goods and raw materials for local industries.

Government of Ethiopia (GOE) has banned import of 38 different products which are being

considered luxury items

The items listed by the Ministry of Finance as banned from getting hard currency for importation

include food items except children’s formula, ceramics, kitchenware, sweets, biscuits, chocolate, meat,

cigarettes, fruit juice and canned fruits, potato chips, tomato paste, wine, beer, and all other alcoholic

drinks including whisky and vodka, as well as non-alcoholic drinks including water, and soft drinks. The
large number of business communities who are engaged in imports, wholesaling, supermarket business,

and retail of the listed 38 items will be negatively affected by the new law. This may create

dissatisfaction among business communities and consumers about the import ban especially on food

commodities. The business community reportedly is lobbing government officials and politicians

through the Ethiopian Chamber of Commerce for a reconsideration of the banned food items listed.

Import of these items, for which LC is already approved and their import is in process cannot be affected

by the new banning order. According to the IMF forecast in 2023 Ethiopia’s hard currency reserve can

only allow the country to import critical items such as, fuel, fertilizer, and medicines only.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF

AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY

The National Bank of Ethiopia has informed all banks to freeze issuance of Letters of Credit (LC) to

import 38 types of products as of October17,2022 for indefinite period time. The bank expects saving

close to 100 million dollars per year from the ban imposed on the items listed.

Ethiopia’s trade deficit has been widening in the past years as the country imported $18 billion in goods

in 2021 and exported approximately $4 billion in commodities, most of which was raw agricultural

products. The central bank of Ethiopia expects saving close to 100 million dollar per year, from the ban

imposed on selected import items. However, compared to the country’s official import bill, the 100

million dollar saving is very small. Off course, it incentivizes the local production of some items.
According to a senior official from the National Bank of Ethiopia, the products that are banned from

being imported have been researched and were found to be not priority items to obtain foreign currency.

Some of the products were also identified as reasons for illegal money transfer out of the country. On

October 10, 2022, the National bank has also embarked on major crackdown over black market actors,

freezing bank accounts of over 665 informal hawala providers. This decision came after the macro-

economic team conducted studies.