Why are Ethiopian Banks facing a shortage of cash?

 

Why are Ethiopian Banks facing a shortage of cash, Ethiopian Banks are not  providing services as they are expected to do so or as they are used to. Recently it has been witnessed that  banks are not providing services to their customers, especially to those who requires to withdraw large amounts of cash from their account.

 

It has been seen in the previous week that customers are having a hard time getting the service they want, according to Alain news Amharic and their time spent with the brunch managers confirmed that except few Banks most of the Banks in Ethiopia are now facing cash shortage and has temporarily stopped providing loan services.

 

On the other hand, the customers who visited their nearest branch of the Banks that they are a customer to commented that they are experiencing difficulties in keeping up there day to day tasks because of this problem, according to their words, the Banks exaggerated reasons when the customers request a withdrawal of a large amount of cash or to get a loan.

 

 

What is the reason behind Ethiopian Banks facing a shortage of cash?

 

It has been previously predicted by Ethiopian Economists that Ethiopia’s ability to purchase cash might face a fall following the inflation that the country is facing in addition to the socio-political situation the country is going through

 

One of the known Ethiopian Economist Ato Wasihun made a statement on the situation of Ethiopian Banks facing a shortage of cash by stating the leading causes for the situation, Ato Wasihun said one of the reasons that banks are facing a shortage of cash is the fact that it is the season of closing the budget and paying annual taxes and the large amount of money at private Banks is diverted to government banks.

 

The second reason would be the inflation that the country is facing is due to the high circulation of cash in the market and it may be a step taken to correct this. The third reason is that the cash in the market is returned to the bank for various reasons

 

Ato Wasihun also commented that the third reason may be a measure taken based on the discussion between the banks and the National Bank of banning cash supplies and loans so that the cash in the market can be returned to the bank for various reasons.

 

And last reason for Ethiopian Banks facing a shortage of cash  is that the industries and commercial institutions in operation that have previously taken a large number of loans from the banks are unable to pay their loan on the expected time due to many reasons where one of which is the institutions being unable to earn enough income to cover their debt.

 

according to the economist Mr. Shewafera, the government of Ethiopia has been sending more money to the market than its ability to generate and carry cash in the past years.

 

Banks have banned cash and loans because the National Bank has taken the right steps to deal with inflation and the cost of living said  Another economist, Mr. Shewafera Sthahun,

In particular, the government has been printing large amounts of money, spending large amounts of money on projects that are not helpful to the economy, the political unsettlement has made its contribution to Ethiopia’s economy, said Mr. Shewafera.

 

As a result, not only are citizens exposed to undue inflation, Mr. Shewafera pointed out that the fact that banks continue to give excessive loans has caused additional and complex damage to the economy.

 

The experts stated their positive point of view on the National Bank’s decision to not announce the decision to the public in order not to harm the country’s economy and said that if the cash ban is studied and implemented for a certain period, it will stabilize the inflation. Although the banks’ decision upsets their customers, it will benefit the country by stabilizing inflation.

 

It is also highly pointed out that although Ethiopian Banks facing a shortage of cash  and the  banks’ decision may upset their customers, it will benefit the country by stabilizing the inflation rate, and that the credit ban should be implemented in a manner that does not harm urgent operations.