ETHIOPIA – The Ethiopian Ministry of Trade & Regional Integration (MTRI) have embarked on strategies to reduce “imported inflation” by narrowing the margin between the purchase and sale price of pulses and oilseeds.
According to officials, exporters of pulses and oilseeds are mandated to match or exceed their purchase prices with the costs of buying from the Ethiopian Commodity Exchange (ECX) in their international sales contracts.
The directive, effective a month ago, seeks to tighten control over the export sector’s pricing strategies to ensure a fair valuation of commodities on the global market
In addition, the policy is envisioned to boost export revenues by curbing the widespread practice of reporting sales of discounted exported items, designed to fund imports.
In Ethiopia, many exporters depend on the Ethiopian Commodity Exchange, now 15 years in operation, to access 23 types of commodities. The Exchange is crucial in the agricultural sector, offering a transparent and efficient market transaction platform.
According to Kassahun Goffe, state minister for MTRI, the federal government is concerned over the growing trend of export losses, which prompted it to explore three options before settling on the current approach.
“This will create room for flexibility,” said the State Minister.
He believes the strategy has the potential to address the issue without harming the interests of farmers and exporters.
The policy is a departure from previous attempts to regulate the market, including establishing ceiling and floor prices two years ago.
This practice was later abandoned due to its adverse impact on farmers. The Ministry also tried to customize forward sales contracts for the fourth quarter of last year but ditched this approach when it led to sales without securing a reliable supply chain.
“We believed it could have helped in times of commodity shortages,” Kassahun said.
The Ministry anticipates that the new measure will enforce compliance with the commercial code, prohibiting the consistent reporting of losses, and thereby enhancing export revenues.
“Exporters will have to think deeply before entering into sales contracts,” said Kassahun. “The policy intends to encourage prudent business practices among exporters.”
According to industry insiders, selling sesame at US$ 1,850 for a ton, despite a market cost of around US$2,500, is primarily driven by the necessity to acquire foreign exchange solely for imports.
Bereket Meseret, a senior advisor at the ECX, noted that the measure enforces existing laws that had been loosely applied in the past, revealing a discrepancy in the export of sesame this year, with inflated purchase prices of 13,000 Br (US$2,624) for a ton on the exchange floor not reflected in export sales.
The authorities viewed this practice as threatening the country’s export earnings. They tried to enforce compliance through administrative measures for those failing to adhere to the new pricing guidelines.
They pledged to “ensure a fair valuation of commodities on the global market.”
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