There is an increasing liquidity problem in the Ethiopian banking sector; it has been reported that construction companies are facing real constraints in sourcing financing for infrastructure and other projects; some exporters with commitments to overseas buyers also report that they are facing financing restrictions to acquire coffee to fulfil their contracts; rumours of defaults and delays for this and other reasons continue to circulate in Addis.

Having been quiet on the topic for the last few weeks, yesterday the Coffee and Tea Authority circulated a Minimum Price Control table based on average NBE registration prices; this resulted in some contracts not getting registered at NBE yesterday; we are unsure how in the coming days and weeks this policy will be implemented but it is hard to see how the regulator will be able to ignore supply and demand in the middle to longer term. Interesting to note that yesterday’s Minimum Price List had Sidamo 4 lower than Lekempti 4 and Lekempti 5 lower than Djimmah 5, where is the logic?

At the ECX this week we started to see much more volume of Djimmah and Lekempti, in particular; the increased supply resulted in lower prices and exporter offers have started to reflect this. However, offers will have to come off more to attract business in any serious volume.

The Birr continues to devalue at a steady rate, however, the daily depreciation during February is around 0.03% which is a very restricted pace, equating to +/- 10% per annum; Late 2019, in November and December, the daily depreciation rate was much higher, resulting in the birr depreciating 8% in the 2 months.

Weather continues to be normal and favouring crop development and processing.

by Charles Seara Cardoso

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