{"id":212991,"date":"2023-12-02T22:08:01","date_gmt":"2023-12-03T04:08:01","guid":{"rendered":"https:\/\/ethiopanorama.com\/?p=212991"},"modified":"2023-12-02T22:08:01","modified_gmt":"2023-12-03T04:08:01","slug":"mps-squeeze-regulators-over-parallel-market-bank-policies","status":"publish","type":"post","link":"https:\/\/ethiopanorama.com\/?p=212991","title":{"rendered":"MPs squeeze regulators over parallel market, bank policies"},"content":{"rendered":"\n
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Business<\/a> MPs squeeze regulators over parallel market, bank policies<\/p>\n\n\n\n

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By Ashenafi Endale<\/a><\/p>\n\n\n\n

December 2, 2023<\/p>\n\n\n\n

Central bank regulators faced harsh criticism from parliamentarians this week over their failure to bridge the yawning gap between the official and parallel market exchange rates.<\/p>\n\n\n\n

MPs grilled regulators including Governor Mamo Mihretu about a range of issues including devaluation, forex management, and concerns over local banks\u2019 competitiveness in light of the banking industry\u2019s pending liberalization.<\/p>\n\n\n\n

Mamo and his team from the National Bank of Ethiopia (NBE) were present before the standing parliamentary committee for Planning, Budget and Finance Affairs on November 30, 2023, to elaborate on the central bank\u2019s first quarter performance.<\/p>\n\n\n\n

During the nearly four hours of back and forth, several MPs demanded to know why the central bank has failed to bridge the gap between the official and parallel market exchange rates.<\/p>\n\n\n\n

\u201cBlack market operators are operating without fear, including in front of the central bank premises but the central bank is not controlling it. The forex cannot come to the official market while the parallel market is offering double the official exchange rate,\u201d said an MP.<\/p>\n\n\n\n

MPs asserted a dollar goes for up to 115 birr on the parallel market, while banks offer 56 birr for the same.<\/span>

\u201cIs the central bank considering devaluation to narrow the wide gap?\u201d asked another MP.Mamo and his colleagues shrugged off the questions before Desalegn Wodaje, chair of the standing committee, called for a renewed effort to fight the parallel market.\u201cThe central bank has to use all policy options including devaluation, if it is necessary to bridge the widening gap. We know the bank is taking measures to fight the black market but more effort must be exerted,\u201d he said.MPs also criticized the misallocation of scarce forex but Yenehasab Tadesse, director of forex monitoring and reserve management at NBE, deflected the question with an overview of the basic procedures in the LC approval process.Parliamentarians lambasted the failure to reconcile official and parallel exchange rates as the root cause for the forex crunch and trade imbalance problems gripping the country. The position matches that of the IMF and World Bank, who demand a devaluation as a precondition for supporting Ethiopia\u2019s post-conflict development endeavors.MPs have also criticized regulators for keeping deposit interest rates at seven percent, which they deem too low. They argue the rates discourage saving and push inflation and suggested regulators would be better off raising them instead of capping bank lending growth at 14 percent \u2013 a policy the NBE introduced a few months ago.\u201cLifting the lending cap and allowing unlimited loan disbursements might spur growth in the economy. But that growth cannot be sustainable. The growth would be like a house built on sand. We must avoid a \u2018growth at any cost\u2019 approach,\u201d responded Governor Mamo.The Governor also addressed concerns over perceived risks to local banks as the federal government prepares to liberalize the banking industry.\u201cWe serve the public, not the banks,\u201d said Mamo. \u201cLocal banks have been profiting from NBE protection but our priority now is access to finance and containing inflation.\u201dRegulators told MPs that several pieces of legislation are nearing completion, including a proclamation that would legally re-establish the NBE.\u201cThe proclamation will allow NBE to be re-established as a \u2018relatively independent\u2019 central bank, transparent and with a greater mandate in the inflation controlling mission. We will present the proclamation soon,\u201d said Mamo.The proclamation proposes the establishment of a separate regulatory agency for the insurance industry, replacing the NBE\u2019s insurance supervision department.\u00a0The proclamation and derivative legislation that will enable foreign bank entry is also nearly finalized, according to the NBE first quarter report.<\/p><\/div><\/div>

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Business MPs squeeze regulators over parallel market, bank policies By Ashenafi Endale December 2, 2023 Central bank regulators faced harsh criticism from parliamentarians this week over their failure to bridge the yawning gap between the official and parallel market exchange rates. MPs grilled regulators including Governor Mamo Mihretu about a range of issues including devaluation, […]<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[19],"tags":[],"class_list":["post-212991","post","type-post","status-publish","format-standard","hentry","category-19"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/ethiopanorama.com\/index.php?rest_route=\/wp\/v2\/posts\/212991","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ethiopanorama.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ethiopanorama.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ethiopanorama.com\/index.php?rest_route=\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/ethiopanorama.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=212991"}],"version-history":[{"count":1,"href":"https:\/\/ethiopanorama.com\/index.php?rest_route=\/wp\/v2\/posts\/212991\/revisions"}],"predecessor-version":[{"id":212992,"href":"https:\/\/ethiopanorama.com\/index.php?rest_route=\/wp\/v2\/posts\/212991\/revisions\/212992"}],"wp:attachment":[{"href":"https:\/\/ethiopanorama.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=212991"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ethiopanorama.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=212991"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ethiopanorama.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=212991"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}