Ethiopia Allows Import of Goods Without Foreign Currency Payment

The government of Ethiopia has announced that it will allow the import of goods, excluding petrol cars and security goods, without requiring payment in foreign currency. This measure will be implemented through the Franco Valuta system.

The Franco Valuta system in Ethiopia allows importers to bring in goods without relying on traditional foreign currency transactions through the banking system. This system aims to address foreign currency shortages by enabling businesses to use their own foreign currency deposits for imports.

Over the years, authorities have updated the system to include a broader range of goods, particularly essential items like food and medical supplies. This approach facilitates trade and alleviates the burden of foreign exchange constraints on importers.

However, some critics argue that the system may inflate the parallel currency market and limit the government’s customs revenue due to duty exemptions linked to Franco Valuta licenses.

Moreover, the Ethiopian Ministry of Finance has issued instructions to the Customs Commission and other relevant authorities regarding this new policy. The aim is to restrict the entry of some goods into the country to prevent excessive outflows of foreign currency.

It’s important to note that this development comes in the context of a broader macroeconomic policy reform recently adopted by the Ethiopian government. As part of this reform, the National Bank of Ethiopia has decided to let the market determine the value of foreign currency.

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