Ethiopia Announces Major Economic Reforms Including Currency Float, Birr Devaluation Ahead of IMF Meeting

Jul 29, 2024, 04:03 AM

Ethiopia has announced a series of significant economic reforms, including floating its currency, the birr, and shifting to a market-based exchange rate system. The National Bank of Ethiopia has removed restrictions on the foreign currency market and introduced a market-based exchange regime, allowing banks to buy and sell foreign exchange freely. These measures are part of broader fiscal and interest-rate based monetary policy reforms aimed at correcting foreign exchange distortions, strengthening financial stability, and managing government debt. The reforms also include the simplification of rules governing foreign currency accounts, especially those held by foreign institutions, and granting special foreign exchange privileges to companies within special economic zones. The sharp devaluation of the Ethiopian birr by approximately 30% was observed, with the selling transaction rate of USD/Birr at the Commercial Bank of Ethiopia rising from 58.6393 last Friday to 76.2311 today. These changes come ahead of an International Monetary Fund (IMF) meeting today to discuss Ethiopia's financing request.