Ethiopia is likely to spend USD 5.6 billion to import fuel next year, twice the amount recorded this year, the Ethiopian Petroleum Supply Enterprise said. It is significantly higher than the USD three billion in export proceeds registered this year.
The Enterprise picked Vitol Bahrain to supply 1,600 metric tons of diesel and 860,000 metric tons of benzene for the upcoming budget year, adding to an estimated over half a million ton of jet fuel.
Even though the aggregate amount that is going to be paid to the oil supplying company depends on the global price of oil, an agreement has been reached on the profit margin it would get for the whole year.
Based on the current market price of oil, Vitol is going to be paid USD 2.8 billion to import the agreed volume of petroleum products. An equivalent amount will also be paid to the Kuwait government, which has a deal with the Ethiopian government to supply oil to Ethiopia.
The two sources share the oil supplied to Ethiopian market equally.
“The global spike in price of oil has inflated our import bill and that is going to be very challenging given the forex shortage in the country,” said Tadesse Hailemariam, chief executive officer of Ethiopian Petroleum Supply Enterprise (EPSE), adding, the impact on the economy would be “catastrophic.”
Ever since Prime Minister Abiy Ahmed (PhD) came to power, there has been an effort to curb growth of imports, which has reached USD 14 billion last year, down from the USD 17 billion historic-high registered in 2017. The fall in imports was meant to curb the widening trade deficit, though the change in the global market undermined the efforts of policymakers.
Imports of goods spiked to USD 14.2 billion during the last fiscal year, a jump from USD 13.8 billion in 2020/21. Exports of goods, on the other hand, showed an increase of over half a billion dollars to USD 3.6 billion.
Even though this has narrowed the trade deficit by two percent to USD 10.6 billion, the global surge in price of commodities, including oil, fertilizer and major food items, inflated the import bill of the country.
The increase in cost of shipping also inflated the price of commodities, which is already seen in the latest procurement of petroleum products by the Enterprise.
“The profit margin to be paid to the oil supplying company showed a significant jump because of rising shipping costs. With the growing demand for oil produced by gulf nations, including Saudi Arabia, we are likely to incur more shipping costs, as the supplier might be required to buy from countries in East Asia,”
