The Ethiopian government has transitioned to a market-based foreign exchange rate system, allowing the birr’s value to be determined by the market. This shift marks the most significant economic change in the country in 50 years, moving away from the long-standing fixed exchange rate policy. The National Bank of Ethiopia aims for the market-determined exchange rate system to attract foreign investment, stabilize the economy, secure IMF funding, and advance a long-delayed debt overhaul. The reforms also include ending mandatory foreign exchange surrender for exporters, liberalizing import and capital flow rules, allowing non-bank currency exchanges, and deregulating how commercial banks allocate forex to importers. “A market-based currency exchange system would weaken the birr’s purchasing power and raise the value of the dollar, negatively impacting businesses.

Source: Ethiopian News July 30, 2024 08:33 UTC