July 19, 2024

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Ethiopian Finance Minister Birr

Finance Minister Addresses Rumors about Birr Devaluation

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Ethiopian Finance Minister responded to queries about birr devaluation yesterday. He presented country’s budget for the next fiscal year to the House of People’s Representatives on Tuesday.

Since the start of this year, speculations have been going around that the Ethiopian government will have to devalue birr. International Monetary Fund and World Bank have been urging the Ethiopian government, reportedly, to devalue currency. Ethiopia has been in talks with these lending institutions for a bailout package of around $3 billion.

There is a huge difference between birr’s official value ( 57 birr to 1 dollar ) and its rate in black market ( 120 birr to 1 dollar).

An MP, on Tuesday, warned against the devaluation as a policy response to the country’s foreign exchange woes, citing economists’ concerns about its immediate impact on low-income households. The Finance Minister acknowledged ongoing difficulties in managing the foreign currency regime and noted that high-level discussions are underway to determine appropriate measures.

“These are concerns we’re quite aware of,” he responded. “A sustainable foreign exchange regime has been part of our objectives.”

Interestingly, it was reported this week that World Food Program is concerned about likely birr devaluation. The WFP reportedly warned against currency devaluation. Millions of people in Ethiopia are dependent on food aid provided by WFP, USAID and other aid organizations. According to WFP, currency devaluation will lead to rise in inflation.

It seems that either Ethiopian government hopes it would be able to convince IMF and World Bank about the current exchange rate or it has found alternative sources of financing.

Ethiopian Minister of Finance, Ahmed Shide, this week visited Qatar and delivered a special message from the Ethiopian PM to the Emir of Qatar. Ethiopian government is in talks with UAE, Saudi Arabia, Qatar and other countries for financial support.

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