Fed To Reinstate Duties On Khat Exporters As State Revenues Continue To Slump

This year’s total export earnings hover at USD 2.16bln

Worries over declining state revenues from the export of khat have led authorities at the Ministry of Trade and Regional Integration to reinstate duties on shipments of one of the country’s most valuable export commodities.

The decision was announced during a recent parliamentary review of the Ministry’s eight-month performance. Officials and members of the standing committee for Trade and Tourism have agreed to begin levying duties on khat exports next week.

The move comes in light of declining state income from export activities, particularly in light of tax breaks granted to khat exporters to incentivize performance. These exporters had been grappling with several challenges beginning late 2015, including competition from Kenyan khat growers in destination markets and overlapping taxation across states.

Officials say these factors have hindered export growth and led to widespread smuggling.

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Kassahun Gofe, a state minister of Trade, disclosed the implementation of the new tax system will enable exporters to claim refunds from regions where the taxes were deposited, but the tax breaks enjoyed by exporters will no longer apply.

The removal of domestic quotas and the revision of pre-licensing procedures aim to streamline regulations and support traders who have faced barriers in the past, according to Kassahun.

With only a fraction of trade licenses being utilized for exports, measures to curb smuggling, including stricter enforcement of licensing, are being considered, he disclosed. Kassahun and his peers want to see the reinstatement of taxes address revenue deficits while fostering a more sustainable and regulated khat export industry.

Data from the Ministry reveals a significant decline in Ethiopia’s overall export earnings over the first eight months of the financial year. Total revenues have dropped by more than USD 164 million to USD 2.16 billion compared to the same period last year.

The decline is attributed to several factors, including a significant drop in the export of agricultural commodities, which account for the majority of Ethiopia’s trade offerings. Oilseed exports have dropped by a staggering 149 percent, followed by a 110 percent fall in pulses and grains exports, and an 84 percent dip in livestock shipments.

The federal government is poised to implement a national export development strategy to streamline export processes, consolidate pricing information, and enhance export competitiveness, with officials hoping it will suffice to reinvigorate the export trade.

The strategy is pending approval.

Officials say they are turning their attention to high income export commodities such as khat, incense, and gum following “successes” in the trade of oilseeds, pulses, and livestock. However, security breaches in areas of incense and resin production have hindered production levels.