Is the World Bank Duped like the Nobel Prize Committee?

By R. Weldemariam

Review of FOREIGN EXCHANGE DIRECTIVE No. FXD/01/2024 issued by the National Bank of Ethiopia

Colonel Abiy Ahemed has a remarkable talent for deceiving unsuspecting and gullible individuals. Let’s examine his records. Upon assuming power, he presented himself as a man of peace, even serving coffee and snacks to President Issayas Afeworki in a humble gesture that touched many. However, before the truth of his evil intentions became clear, he received the prestigious Nobel Prize.

Shortly after being awarded the Nobel Prize, Colonel Abiy Ahemed declared war on his own people where millions of people were killed.  He blocked the entire Tigray province as collective punishment of 6 million people whom he labeled as the enemy ethnic group. Now he is doing to the Amhara ethnic group which is  the second largest province.  Drones drop bombs on church, markets, and funeral services.  He is now training a million paramilitary Interahamwe genocidal army for his final solution to the semitic speaking people. When his time in office concludes and international investigators are allowed to examine his tenure, the Nobel Prize Committee will regret for unwittingly endorsing a genocidal figure—a stain that could tarnish the organization for generations.

Currently, World Bank CEO Mr. Ajay Banga and IMF Managing Director Kristalina Georgieva seem to have been failing to the same trap believing that Abiy has liberalized the foreign market, without thoroughly reviewing the 108-pages FOREIGN EXCHANGE DIRECTIVE No. FXD/01/2024 issued by the National Bank of Ethiopia. For the benefit of the World Bank, Ousmane Dione, Vice President, Middle East and North Africa and IMF country director Abebe Aemro Selassie, I have reviewed the document to show the hidden texts.

The world bank and IMF decision not only creates hardship but also kills the private sector all together. This directive criminalizes citizens for possessing foreign currency or maintaining foreign bank accounts.

Under the new regulations (No. FXD/01/2024), it is now a criminal offense to be seen with U.S. dollars in Ethiopia.

Article 22.8.5 under Prohibition states the following: 

“b. Unless otherwise provided by this directive or pertinent laws or without authorization of the National Bank, a person may not hold or carry foreign currency”

Hence, citizens risk confiscation of their dollars, and offenders may face imprisonment for taking a 10-dollar tip at the restaurant.  The laws governing foreign currency and drug control in Ethiopia are alarmingly similar. Previously, having a bank account abroad posed no risk; however, this has changed to the worst. 

Article 16.4 states:  

“Accounts abroad: Unless explicitly authorized by the NBE, no Ethiopian national, natural or juridical person, residing in Ethiopia is permitted to own, possess, or operate a foreign currency account abroad.”

Currently, most Ethiopians working for organizations such as the ECA, the African Union, the IMF, the World Bank, Peace Keeping, NGOs and various embassies receive payments outside the country. Under the new regulation, this practice will be considered a criminal offense. Similarly, an Ethiopian student who traveled  to Europe and returned  with a bank account in Germany, could face prosecution under Article 16.4. 

Mr. Mammo Meheretu, a former employee of the World Bank and the current governor of the Ethiopian National Bank, is a lawyer and he wrote this article to pave the way for the abuse of those who oppose the tyrannical regime in power and opens avenues for extortion.  So the World Bank and IMF officials are not only negligent in their duty but also incompetent in dealing with manipulative individuals like Colonel Abiy Ahmed.

Challenges to the Exports sector.

Article 6.2 After fulfilling the repatriation requirement set out in sub-article 6.1, exporters of goods and services shall immediately convert into Birr, at a freely negotiated rate, 50 percent (50%) of their export proceeds to the Bank used in processing their foreign exchange transaction, while keeping the remaining 50 percent (50%) in their Foreign Exchange Retention Account.

The directive poses significant challenges for exporters, particularly regarding the confiscation of earnings. Article 6.2 mandates that exporters must surrender 50% of their earnings to the government. They are prohibited from keeping their earnings in foreign currency accounts or transferring them to banks with better exchange rates. The government decides the fate of the exporter’s earnings without considering their business needs. 

This 50% surrender is not a permanent measure. It was only inserted to appease the world bank and IMF gullible experts. After receiving funds from the World Bank and IMF, Abiy Ahmed will revert to the previous requirement of an 80% surrender, as indicated in Article 6.6:  

Article 6.6, “The percent share of foreign exchange proceeds to be converted immediately, as specified in sub-article 6.2, may be modified from time to time by the NBE.”.  This only means the government can increase the surrender of export earnings back to 80% after taking the money from the world bank and IMF.

This is a loyal servant of Abiy Ahmed , Mr. Mammo Mehertu played with words to get the world bank money to continue the war of genocide and build palaces for his master. 

The regulation further restricts how the remaining 50% of export earnings can be utilized. Article 6.3 states: 

“Foreign exchange earners as specified in sub-article 6.2 above shall be entitled to utilize—only for their own use by the same legal entity—the foreign exchange balance in their Foreign” . 

If a person who earned foreign currency wants to establish a new firm or purchase other goods, they are not allowed to do so. For example, if a coffee exporter earns one million USD and surrenders half a million to the government, the owner cannot use the remaining half million for anything other than the coffee exporting business, even after paying all applicable taxes. They must return the funds to the bank to collect them in birr. If the exporter wishes to import a machine for a printing business, they are prohibited from doing so. 

All articles in the FOREIGN EXCHANGE DIRECTIVE No. FXD/01/2024 designed to serve to appropriate foreign currency earnings of the exporter by the government. Is this what the World Bank CEO, Mr. Ajay Banga and IMF Managing Director Kristalina Georgieva think of a private sector friendly agreement? 

Business can take Loans or Supply Credit 

Businesses can no longer secure loans without National Bank approval, shifting the risk-return calculation away from lenders and borrowers to the discretion of the National Bank. 

Additionally, companies can only obtain supplier credit in specific sectors with prior approval from the National Bank. This creates an environment where the National Bank controls all imports, requiring full payment in advance, which diminishes Ethiopia’s attractiveness to both local and international investors.

Currently, companies often resort to bribery to obtain permits, and World Bank loans may only serve to exacerbate corruption among Abiy Ahmed and Mammo Mehertu’s cronies.

Banks are not allowed to borrow. 

Article 4.1.8 states “may not enter into a loan or a guarantee agreement with banks or other lenders abroad unless authorized by the National Bank” 

The World Bank, for example, has a revolving fund for solar and clean energy. If a bank wants to access this loan from the World Bank to make funds available to clean energy companies, it would violate Article 4.1.8. Consequently, the bank must disclose all its confidential and competitive advantages to the National Bank employees, which is often shared to competitor banks for kickbacks. 

The loan could be for $1 million or $5 million.  The loan does not involve taking large loans that could expose banks to significant risk; rather, it concerns smaller amounts, such as 5 or 10 million USD. 

The problem is Mr. Mammo Meheretu and Prime Minister Abiy seem to believe that there is only one bank—the National Bank of Ethiopia—while treating the 30 private banks as branch offices with no rights to take risks or make their own decisions.  If the World Bank CEO, Mr. Ajay Banga and IMF Managing Director Kristalina Georgieva think this regulation is private sector friendly, I disagree. 

Article 22.1.1 restricts banks’ holdings of foreign currency, stating:  

“Authorized Banks can only hold up to 10% of their paid-up capital in foreign currency cash notes as a working balance at the close of each calendar month. Any excess holding shall be surrendered to the National Bank within 5 working days from the end of the calendar month.”

Does the World Bank expert know what it means? Have they looked at the paid-up capital of the Ethiopian banks? Do they know the paid-up capital of the banks have gone down by 100% due to devaluation in birr? Do the world bank experts know prepaid capital of the Ethiopian banks is the value of the share sold at the start of the bank some 25 years ago and does not reflect the value of the banks? 

For example, the biggest bank Awash bank prepaid capital of less than 100 million USD. That means it can only maintain less than 10 million USD in foreign currency. The medium size banks paid-up capital is less than 50 million USD which means they can’t hold more than 5 million USD foreign currency.  The small banks paid up capital is less than 20 million under the current exchange rate around 115 birr and as devaluation continues to slide the banks paid-up capital in birr goes down. Anyway that means the smaller banks cannot keep more than 2 million USD at the end of the month.  Is it what the World Bank and IMF experts consider a private sector friendly regulation?

The National Bank of Ethiopia and Abiy Ahmed did everything to channel all the world bank and IMF funds to the Commercial Bank of Ethiopia so that they could access the fund to build Abiy Ahmed’s  ten-billion-dollar palace.  As a result of the world bank and IMF incompetence, Ethiopia will be burdened with huge debt for the vanity palace of Colonel Abiy Ahemed. 

This will be remembered as the worst crime committed by World Bank CEO, Mr. Ajay Banga and IMF Managing Director Kristalina Georgieva on the poorest people on the planet. 

Limiting their capacity for significant transactions.

Foreign currency earnings are seasonal—particularly from agricultural exports— come between December to March and remittance around the New Year and Easter. It is this foreign currency that the banks have to spread over the 12 months. Under the new regulations, banks are compelled to relinquish their foreign currency earnings at the end of the month and cannot pass it to the next month. Is it what the World Bank calls market liberalization and private sector friendly?

Time Limits on Holding Foreign Currency Article 22.6:

Individuals may hold foreign currency for only 90 days after getting it from a bank for travel. For instance, if a traveler returns with leftover dollars, they could be prosecuted for violating this law.

Prohibitions

The restrictions and prohibitions on the banks and citizens are extensive and no one can read 108-page technical directives and prohibitions.  I have taken the responsibility to read it all and the restriction to few. . 

The Key prohibitions include:  

Article 16.4: No Ethiopian national may possess foreign currency accounts abroad without NBE authorization.  

Article 22.5: Authorized banks cannot ship foreign currency cash notes abroad.  

Article 22.6: Limits on cash holdings for individuals traveling to and from Ethiopia.

Article 4.1.8, banks cannot enter into loan or guarantee agreements with foreign lenders without National Bank approval

22.6.1 A person entering into and departing from Ethiopia may hold up to a maximum of Birr 3,000.00 (Birr Three Thousand) ( which is about 25 USD at current exchange rate) per travel to and from Ethiopia.

22.6.2 Notwithstanding the limit set under sub-article 22.6.1 of this article, a person traveling to Djibouti or other port cities in neighboring countries may hold up to a maximum amount of Birr 10,000 (Birr Ten Thousand, which is about 85 USD at today’s exchange rate) per travel.

22.8.5 Prohibition

a. Unless otherwise provided by this directive or pertinent laws or without authorization of the National Bank, a person may not transfer or pay foreign currency in cash to a third party either as donation or gift or to discharge any obligation. 

b. Unless otherwise provided by this directive or pertinent laws or without authorization of the National Bank, a person may not hold or carry foreign currency.

c. It is prohibited to undertake any cash transactions in foreign currency in Ethiopia, unless for

the specific cases authorized by NBE.

In conclusion, the current regulations represent a significant step backward for economic freedom in Ethiopia, raising serious concerns about their implications for both citizens and businesses. They also reveal the incompetence of World Bank experts and leaders who seem disinterested in the finer details, focusing instead on Abiy’s manipulative strategies, which involve hugging everyone into believing that he has no malicious intentions.

This agreement will be remembered as a pinnacle of incompetence by the World Bank and IMF. The two organizations have already transferred $3.4 billion to a regime that criminalizes holding foreign currency in Ethiopia. If a tour guide or a waitress receives a $10 tip, they risk violating national law, facing severe consequences.

It is shameful that the World Bank and IMF have financed this draconian regulation. 

R. Weldemariam is a consultant in the financial sector. He could be reached at : @rasselasimlac1@gmail.com

Editor’s note : Views in the article do not necessarily reflect the views of borkena.com


__

To Publish an Article On borkena , please send submission to info@borkena.com for consideration.

Join our Telegram Channel : t.me/borkena

Like borkena on Facebook

Add your business to Borkena Business Listing/Business Directory  Jobs

Join the conversation. Follow us on X (formerly Twitter ) @zborkena to get the latest Ethiopian news updates regularly. Ethiopia  To share information or for  submission, send e-mail to info@borkena.com