The National Bank of Ethiopia (NBE) revises the external loan and supplier’s credit directive for the third time in less than 15 months. The agricultural development sector in line to benefit from the credit based import.
In June last year, the regulatory body had reviewed the 2017 directive on the aim to include the manufacturing industry in gaining access to credit for their import. However as per the 2017 directive, foreign investors were included on the scheme to which the preceding similar directive was only exploited by businesses which were engaged on export earnings sector.
The newly amended directive that became effective on September 7, ‘external loan and supplier’s credit directive no FXD/82/2022’ has included the agriculture sector to be part of the scheme.
The newly included article 4.4 indicated that agricultural machines/inputs imports shall benefit from the credit import that will be settled by local banks in the future.
Besides the agriculture sector, the LGP gas import has also been backed by the new directive to access supplier’s credit scheme.
Unlike FDI and manufacturing sectors which were included on the directive, the newly added sectors only need pro-forma invoice with a minimum one year credit period.
While to access the scheme for the manufacturing sector it required a pro-forma invoice with a minimum one year credit and a minimum of one year for external loan repayment. However, the pro-forma invoice for the FDI was 180 days, which angered the manufacturing sector who claimed that the central bank just revised and included the manufacturing industry in order to say it has benefited from the scheme.
“In real terms, it is difficult to come up with potential suppliers on pro-forma invoice with a minimum of one year,” manufacturers expressed their anger towards NBE.
Some experts stated that the current move of the government to include the agricultural machines /inputs import on the credit import is part of the initiative that was embarked by the government to improve production and productivity.
It had been stated that the agriculture sector was neglected from access to finance, tax incentive and hard currency, despite being the major source for the economy and hard currency earnings.
About three years ago, the government changed its course and allowed every toll starting from small pumps and relevant agricultural inputs to be imported on a duty free scheme.
It has also fully supported the agricultural mechanization to expand the agricultural output with modern farming that is showing change.