Currency devaluation can be seen as a tool to address imbalances in the economy, particularly if the local currency is overvalued relative to its fundamentals. IMF and World Bank Conditionality: In exchange for financial assistance or access to development loans, the IMF and World Bank often impose conditions on borrowing countries, known as conditionalities. Social Impact and Equity Concerns: Currency devaluation can have distributional consequences, affecting different segments of the population in varying ways. Foreign Debt: If Ethiopia has significant foreign debt denominated in foreign currency, devaluation can make it more expensive to service this debt, as the amount owed in local currency increases. Export Competitiveness: On the flip side, devaluation can make Ethiopian exports cheaper for foreign buyers, potentially boosting export competitiveness and increasing export revenues.

Source: Ethiopian News June 11, 2024 09:50 UTC