Eritrea - Balance of payments

Hard currency transactions represented about 90% of imports in 1996. In 1997, the Eritrean currency, the Nafka, was introduced, changing the financial situation. In 1998, exports were only $30 million, and imports were $494 million. In 2000, exports were only $19.7 million while imports were $360.2 million. The decline in exports reflects the severing of trade with Ethiopia, formerly Eritrea's largest export market. Eritrea's highest record for exports was $95 million in 1996. The trade gap is covered by external remittances from Eritrean expatriates, bank loans, and grants-in-aid; but mounting debt threatens the country.

Eritrea's large trade gap results from a weak export base and the need to import large amounts of capital goods needed to rebuild the country's infrastructure and industrial base. Economic growth slowed substantially due to the war with Ethiopia, largely due to the disruption of trade between the two nations, Ethiopia's boycott of the port of Assab, an increase in military spending, and the drafting of a large percentage of the work force into military service.

The US Central Intelligence Agency (CIA) reports that in 2000 the purchasing power parity of Eritrea's exports was $34.8 million while imports totaled $470.5 million resulting in a trade deficit of $435.7 million.

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