The recent dynamics surrounding the National Bank of Ethiopia’s (NBE) forex auctions offer a compelling, if concerning, case study in this delicate balance. From a purely theoretical standpoint, the move towards a market-responsive exchange rate is a cornerstone of modern financial economics. However, financial economics is not a doctrine applied in a vacuum; it is a discipline acutely aware of frictions, imperfections, and transitional pathologies. The exchange rate doesn’t glide to a new equilibrium; it can lurch, driven by pent-up demand and speculative anxieties. What we are observing is a poignant example of a short-term profit motive trumping long-term market stability and collective welfare.

Source: Ethiopian News December 27, 2025 08:17 UTC