The Ethiopian currency, birr, experienced a decline today in the morning, with a devaluation of approximately 3%. In the afternoon, again, the Ethiopian currency, birr, devalued by 4%. So, in a day, the Ethiopian currency, birr is devalued by 7%.
On Monday, the birr had already lost 30% of its value following the Ethiopian government’s announcement of macroeconomic reforms, which included the liberalization of the foreign exchange market. The introduction of a floating exchange rate system led to this significant depreciation.
The Commercial Bank of Ethiopia (CBE) updated its foreign exchange rates on Monday, setting the price of the US dollar at 74.73 birr, reflecting a 30% drop from the previous rate of 58 birr. Today, in the morning, the birr further decreased in value, with the CBE selling the dollar for 77.12 birr. Now again, after a decrease in value, CBE is now selling the dollar for 80.02 birr. For updated exchange rates for CBE, you can visit here.
This week, Ethiopia secured commitments for substantial financial support from the International Monetary Fund (IMF) and the World Bank, amounting to around $20 billion in grants and concessional loans over the next few years. These institutions have urged the Ethiopian government to align the official exchange rate of the birr with market conditions.
Prior to the announcement of these reforms, the birr was trading at 120 per dollar on the black market. The government aims to eliminate this black market by allowing the currency’s value to be determined by market forces. However, experts suggest that the birr may continue to depreciate in the coming weeks, potentially stabilizing around 90 birr per dollar, which is now 80 birr per dollar.
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