Ethiopia's exchange rate is not controlled! The price of coffee beans from the origin is starting to rise!

According to Ethiopian media reports, on August 9th, the National Bank of Ethiopia (NBE) held a foreign exchange auction involving 27 banks, while the average exchange rate of the dollar auction was 107.9 Ethiopians per US dollar.

The purpose of opening foreign exchange auctions is to narrow the gap between the official exchange rate and the parallel market exchange rate. as the gap narrows, it is expected that some merchants who trade in parallel markets (black markets) will turn to the formal market.

Although this can effectively narrow the exchange rate gap between the two markets, the biggest dilemma in Ethiopia at present is the rise in prices caused by the exchange rate. Since Ethiopia announced a major revision of its foreign exchange system earlier, a series of transformation measures have been carried out, resulting in a sharp decline in the Ethiopian Bill exchange rate. According to the Ethiopian Commercial Bank, the buying rate has changed from 1 dollar to 101.80 bill. The selling rate goes from $1 to 111.98 Bill.

According to local reports, Ethiopian Airlines international and domestic tickets have risen sharply on all major platforms, while according to Ethiopian Airlines, international flights will change according to Bill's exchange rate in the market. Ethiopian domestic airlines have not raised prices at present, but they may be slightly adjusted in the future due to foreign currency transactions such as the purchase, leasing of aircraft, aircraft maintenance and spare parts.

In addition, Ethiopia's national economy is mainly manufacturing, services and agriculture. Manufacturing is dominated by food, beverage, textile and leather processing, but about 40 per cent of manufacturing depends on imports, and the price of finished products produced in Ethiopia will rise as the processing of imported raw materials rises.

As for the service industry, in terms of tourism, as a result of recent conflicts and frequent kidnappings in Ethiopia, tourists and some coffee traders have reduced their visits to Ethiopia, coupled with the recent rise in international prices of Ethiopian airlines. fewer people go, followed by the transport industry, vehicles, fuel and spare parts are very dependent on imports.

Agriculture is the pillar of Ethiopia's national economy and export earnings, but the use of chemical fertilizers, pesticides, herbicides and seeds is very dependent on imports, which has also led to a rise in the price level of these industries, especially the country's coffee beans.

The Ethiopian Coffee and Tea Authority (Coffee And Tea Authority) and the National Bank of Ethiopia jointly issue minimum export prices for different producing areas and grades, so the contract price for export coffee must be higher than the minimum price.

According to the price released on July 28, the price of G1 coffee beans is about 3.75 to 3.83 US dollars per pound, and in August, after the exchange rate rose, the report issued on August 4 showed that the price of G1 coffee beans was between 3.94 and 4.02, up 5% from last week, while the price of some commercial beans increased by 14%. However, this is not the final transaction price, the price may rise due to shipping, taxes and other factors.

According to locals, Ethiopia's ability to earn foreign exchange is limited, and even if the Ethiopian government says it will subsidize necessities such as "fuel, fertilizer, medicine and edible oil", these are only a small number of products. and the government did not specify the subsidy plan, believing that government subsidies are unlikely to be substantive and lasting. Therefore, coffee and other export commodities will continue to rise in the future, but rising too high is not conducive to the development of industry and the country.