Banking Sector Generates 88 Million US Dollars to Ethiopia

BY NEW BUSINESS ETHIOPIA REPORTER

Ethiopian government has collected a total of one billion and 458 million birr (88.2 million US dollars at the current exchange rates) in profit tax from both private and government banks operating in country in 2009/10 fiscal year (July 8, 2009-July 7, 2010).

Ethiopian Government revenue from banking sector as Illustrated by newbusinessethiopia.com

The income of the east African country from private banking sector has grown by 39 percent for the fiscal year 2009/10 compared to the preceding year.

Ethiopia’s income in profit tax from the ten private banks in the country, which have began making profit, has increased by 162 million birr in 2009/10 fiscal year from the previous fiscal year. It reached 580 million birr (around 35 million US dollars at the current exchange rates).

Ethiopian banking sector data collected by newbusinessethiopia.com shows that the giant state-owned bank in the country, Commercial Bank of Ethiopia, has paid 840 million birr (50.8 million US dollars at the current exchange rates) profit tax in 2009/10 fiscal year which is 46 million birr higher than the preceding fiscal year. 

Banking sector in Ethiopia has also created jobs for a total of around 24,000 citizens. Out of which 13,000 are employed by the ten private banks that already began declaring profit.

The number of employees in the sector and government earning is also expected to increase next year as the new banks such as Abay, Debub global, Hawassa, Enat and Noah banks will go fully operational.

As almost all banks in the country began start making profit during their second year of operation, Bunna International Bank is also expected to contribute for the 2010/11 fiscal year tax income increment of the country from banking sector. 

IMF Welcomes Devalued Birr

Sukhwinder Singh, IMF representative in Ethiopia.		The International Monetary Fund (IMF) has welcomed last week’s move by Ethiopia’s central bank to devalue the Birr by 16.7pc on Wednesday, September 1, 2010. The Birr was quoted at a weighted average of 16.3514 against the dollar compared with 13.6284 on Tuesday, August 31, by the National Bank of Ethiopia (NBE). The new rate was confirmed by an NBE official who was not authorised to make further comments. The IMF welcomes this move given that it will help bolster Ethiopia's competitiveness, Sukhwinder Singh, IMF representative in Ethiopia, told Reuters. “It will need to be supported by an appropriate monetary policy,” said Singh. An ambitious five-year economic plan, which aims to achieve average annual economic growth of 14.9pc over the period and to end the Horn of Africa nation's dependence on food aid, was unveiled by the government last month. Ethiopia is Africa's biggest coffee exporter and the world's fourth largest exporter of sesame. With a population of 80 million, it is also one of Africa's biggest potential markets and most of its people have no telephones or bank accounts. The devaluation is the country’s fourth since January 2009. Devaluations can spur economic growth and reduce current account deficits to the extent that they boost exports and discourage imports, although they carry the risk of importing inflation.
“I think it is related to the new five-year plan and a strategy of export promotion and import substitution,” Tewodros Mekonnen, an economist with the Ethiopian Economics Association (EEA), a local think-tank, told Reuters. “There is a risk that it could cause inflation but it will probably also boost foreign direct investment and remittances.” Inflation hit a high of 64.2pc in July 2008. After the peak, the country's central bank instructed private banks to restrict borrowing, the government halted state borrowing and increased bank reserves to drive the rate down. It slowed to 5.7pc in July 2010. “Years of high inflation have eroded the country's export competitiveness, and the government has continually favoured sharp currency depreciations to counteract this,” Joseph Lake, an analyst at the Economist Intelligence Unit (EIU), told Reuters. “Although inflation has eased in recent months, this pattern of currency depreciation is likely to continue. Low levels of foreign exchange reserves, and twin fiscal and current-account deficits, will continue to put pressure on the Birr.” Ethiopia, one of the world's biggest recipients of foreign aid, is keen to attract foreign investment in agriculture and mineral exploration. The country has operated a managed floating exchange rate regime since 1992.