Ethiopia, a country known for its rich history and diverse culture, has been grappling with a concerning decline in its export sector’s revenue. As the fiscal year 2022/23 draws to a close, official reports paint a stark picture of a sector facing significant challenges. The export earnings for this period have plummeted by a substantial 12%, reaching $3.6 billion – a staggering $1.6 billion short of the targeted $5.2 billion. This decline not only marks a setback from the previous fiscal year but also raises questions about the factors contributing to this decline.
Previous Success and Notable Contributors:
Just a year prior, Ethiopia’s export sector was thriving, generating a record $4.1 billion in revenue during the 2021/22 fiscal year. This impressive surge was largely attributed to the surge in global prices for commodities like coffee arabica and gold. In fact, the export of coffee alone contributed a significant $1.4 billion, constituting over one-third of the total earnings during that period.
Dominance of Agricultural Commodities:
Agricultural commodities have long been the backbone of Ethiopia’s export trade, and this trend continued into the 2022/23 fiscal year. A staggering 79% of the country’s export earnings were derived from this sector, according to data from the Ministry of Trade and Regional Integration. While revenue from the green bean alone reached $1.3 billion, it fell short of the government’s target by $500 million. This decline is partially attributed to a 20% decrease in coffee exports compared to the previous fiscal year. The Ethiopian Coffee and Tea Authority revealed that only around 240,000 tons of coffee were exported in the just-concluded fiscal year.
Challenges in the Industry Sector:
The industry sector, while contributing $400 million (11.8% of the total), experienced a notable 23% decrease compared to the previous fiscal year. A shortage of raw materials resulting from the foreign currency crunch has plagued the manufacturing sector for years. As a result, the average capacity utilization rate of manufacturing industries plummeted to below 45%. Nevertheless, there is a glimmer of hope, as Melaku Alebel, the Minister of Industry, reported an improvement in the capacity utilization rate to 56% in May 2023. However, the exclusion of Ethiopia from the African Growth and Opportunities Act (AGOA) by Washington had a negative impact on the sector’s ability to export products.
Mineral Sector Challenges:
Earnings from minerals reached $251 million, constituting 6.9% of the overall revenue. This represents a significant decline of $323 million from the previous fiscal year. The decrease is primarily attributed to a notable reduction in gold supply from major gold-producing regions like Oromia and Benshangul Gumuz. These areas traditionally contribute nearly 90% of the country’s mineral earnings, with gold being the dominant contributor. Additionally, the flourishing contraband trade along Ethiopia’s borders with Sudan and South Sudan has played a role in diminishing the export revenue generated from gold.
Conclusion: Ethiopia’s export sector is facing an uphill battle as it grapples with a substantial decline in revenue for the 2022/23 fiscal year. The shortfall of $1.6 billion from the targeted earnings highlights the magnitude of the challenge at hand. While previous successes in commodities like coffee and gold were significant contributors, challenges in the agricultural, industry, and mineral sectors have collectively led to this decline.
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