Ethiopian birr again fell against US dollar on Friday. The birr has recorded 63% decline since the start of this week.
The Ethiopian Commercial Bank (CBE) and private banks announced new foreign exchange rates this morning. The rates show further decline in the value of birr against US dollar and other foreign currencies. US dollar was being sold for 58 birr by the CBE last week. After the introduction of floating exchange rate by the government, the birr fell thrice.
Today CBE is selling one dollar for 85.6201 birr and buying for 83.9413. Private banks today further decreased price of birr against dollar. Awash bank is today selling dollar for 94.5011 and buying for 90.0009 birr.
Since the announcement of macroeconomic reforms on Sunday, the birr has recorded around 63% decline in its value against US dollar. The fall in birr value is being linked to liberalization of foreign exchange market. It would be interesting to see where birr’s fall will stop.
Ethiopian business community is closely watching the rapidly changing foreign exchange rates. They are waiting for the FX market to stabilize before making key business decisions.
Ethiopian PM, in his talk with MPs yesterday, said that the new macro economic reforms should be analyzed holistically, not in isolation. He hoped that things would improve after the current difficult period.
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I personally do not agree with the idea of 63% decline.
We have been buying more than 70% of foreign currency with a black market rate for import of goods. The black market was leading the market, not the bank rate.
Now the market rate (black market rate) is being legalized. The change at banks will directly affect those who are related with legal transactions such as medical, fuel and other expenses but not all.