Article Review

 Title: Causes for Foreign Currency Liquidity Gap: a Situation Analysis of the Ethiopian
Economy
 Name of researcher: Tesfaye Boru Lelissa
 Journal name: Journal of Poverty, Investment and Development; An International Peer-
reviewed Journal Vol.15, 2015
 URL: www.iiste.org ISSN 2422-846X
 Company: Manager, Risk and Compliance Management Department, Zemen Bank PHD
Candidate, University of South Africa

Introduction:

The introduction of the survey seeks to widen the foreign exchange gap experienced in Ethiopia
for many years. According to the analysts, these changes led to a scarcity of foreign investment
in the country. This situation has had a significant impact on the economic growth and
development of the country. Thus, the objective of this study is to determine the reasons for the
gap in the use of foreign exchange in the Ethiopian economy. The introduction provides a clear
and concise overview of the topic, emphasizing the importance of understanding the causes of
the foreign exchange gap in Ethiopia

Objective:

The researcher attempted to analyze the reasons for the economic disparity in foreign currencies
in the Ethiopian economy as the main objective of the study. The objective of this study was to
identify the reasons for the gap in the use of foreign exchange in the Ethiopian economy. The
aim of the study was to provide insights into the factors that contribute to the end of foreign
currency transactions and to propose possible policies to address the issue The purpose of the
study is clearly stated and consistent with the research question.

Methodology:

This study is a qualitative study using a case study approach. The researcher conducted an
extensive search of academic literature on the Ethiopian economy and its foreign exchange rate
The literature review was conducted using databases such as Google Scholar, Scopus and Web
of Science. The researcher identified 15 relevant case studies and identified the reasons for the
gap in the use of foreign exchange in the Ethiopian economy.

The study used a combination of qualitative and quantitative methods to investigate the reasons
for foreign exchange disparities in Ethiopia. The data for the study were collected through
interviews with key players in the Ethiopian economy, and a review of relevant literature. Both
qualitative and quantitative methods can be used to explore the topic more thoroughly. Some
argue that reliance on secondary data sources does not provide depth and accuracy of findings.

Finding:

The findings of this study suggest that there are several reasons for the foreign exchange gap in
the Ethiopian economy. These factors include high trade deficits, weak exports of various
commodities, lack of FDI and inaccessibility to international financial markets One of the main
reasons identified in this study is the high importance of trade capital. Ethiopia’s imports have
consistently exceeded its exports, resulting in foreign exchange reserves. In addition, Ethiopia
has few export destinations, and most of its exports are coffee. These miscellaneous exports
further increase the country’s foreign exchange gap

Another reason identified in this study is the lack of FDI. Ethiopia has limited FDI due to various
factors such as political instability, limited infrastructure and difficult business environment This
limits the flow of foreign exchange into the country, contributing to the gap in foreign exchange
in the 19th century. Finally, the study shows that the inaccessibility of international financial
markets is a major cause of the foreign exchange gap. Ethiopia has limited access to international
financial markets due to low creditworthiness and lack of economic growth. This limits the
country’s ability to borrow foreign currency and effectively manage foreign currency reserves.
The study found that the major factors contributing to the foreign exchange gap in Ethiopia are
the country’s trade deficit, low export earnings and high demand for imported goods Goods other
factors contributing to the foreign investment gap were the lack of access to foreign investment
by the country, weak institutional structures and inadequate foreign investment. along with flow
The research findings are supported by other studies on the topic, which also show Ethiopia’s
trade deficit, low export earnings and high demand for imports as major contributors to the
foreign exchange gap (Ghebreyesus, 2018). It does not fully examine the impact of external
factors such as political instability or natural disasters.

Strength:

This study provides a comprehensive analysis of the reasons for the foreign exchange gap in the
Ethiopian economy. The study uses the situational analysis approach, which allows for a detailed
examination of the economic situation of the country. Furthermore, the study draws on a wide
range of academic literature, providing a rigorous analysis of the available data. One of the
strengths of this study is the in-depth analysis of the various factors that contributed to the end of
the use of foreign currency in Ethiopia The study also provided valuable insights into possible
policy measures to address this issue role to improve foreign exchange conditions in country A
detailed analysis of the various factors responsible for differences in foreign exchange rates
provides valuable insights for policy makers. Some argue that the study’s policy
recommendations are inadequate or effective in addressing the issue.
Weakness:

This study is limited in quality. Although the circumstantial analysis approach provides an in-
depth examination of the economic situation of the country, it does not allow for statistical
analysis or quantitative modeling Besides, the analysis relies only on textbooks to establish such
findings this is emphasized to prevent s Further research with qualitative and quantitative
methods is needed to identify alternatives A limitation of this study was the reliance on
secondary sources of data, which lowered the depth and accuracy of the findings Besides, the
study did not examine the potential impact if factors from external sources such as global
economic conditions will have on the foreign currency deficit gap in Ethiopia The study’s
reliance on secondary data sources may limit the depth and accuracy of the findings. However,
some argue that the study’s limitations in understanding the causes of the foreign exchange gap
in Ethiopia outweigh its valuable contributions.

Bibliography:

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