Ethiopia adopts market-based FX system, birr currency slides

By Dawit Endeshaw

ADDIS ABABA (Reuters) -Ethiopia’s central bank on Monday removed restrictions on the foreign currency market, it said, a crucial step towards securing funding from the International Monetary Fund and making progress on a long-delayed debt overhaul.

The birr currency sank 30% against the dollar to 74.73 per dollar, the biggest commercial lender said, after the removal of restrictions. The currency was trading at 57.48 against the dollar on Friday.

Last December, the Horn-of-Africa nation which is struggling with high inflation and chronic foreign currency shortages, became the third economy on the continent in as many years to default on its debt.

It has been in talks with the IMF since last year to establish a new lending program, after the last fund-supported program agreed in 2019 was abandoned due to conflict in the northern region of Tigray that ended with a November 2022 peace deal.

“Banks are henceforth allowed to buy and sell foreign currencies from/to their clients and among themselves at freely

negotiated rates, and with the NBE (National Bank of Ethiopia) making only limited interventions,” the central bank said in a statement.

The reforms were initially announced by Prime Minister Abiy Ahmed late on Sunday.

As part of the reforms, Ethiopia will get $10.7 billion in external financing from its development partners, said Mamo Mihretu, the central bank governor, in a video released online.

“This support includes exceptional financing from the IMF, the World Bank, and Creditors,” he said.

“The IMF and World Bank are both providing exceptional and front-loaded funding support that will be among their highest such allocations in the African continent.”

There was no immediate comment from the IMF.

Africa’s second-most populous country requested a debt restructuring under the Group of 20’s Common Framework process in early 2021, but progress was slowed by the civil war in the northern Tigray region that lasted two years.

The government in Addis Ababa had already unveiled some economic reforms, which analysts say are linked to the negotiations for a new IMF reform program, including the adoption of an interest rate-based monetary policy earlier this month.

This post is originally published on INVESTING.

  • Related Posts

    3 EM currency trades to consider

    Investing.com — With the U.S. presidential election concluding, Alpine Macro (BCBA:BMAm) has suggested three emerging market (EM) currency trades, especially if the Trump administration ushers in heightened protectionism.  The key pairs…

    California approves tighter rules for low carbon fuels policy

    (Reuters) -California regulators voted on Friday to toughen a policy aimed at boosting low-carbon fuels to slash greenhouse gas emissions from the transportation sector and meet state climate change goals,…

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    You Missed

    🎯 Stop System Hopping & Start Winning: Unleash Your Inner Trading Edge!

    • November 9, 2024
    🎯 Stop System Hopping & Start Winning: Unleash Your Inner Trading Edge!

    3 EM currency trades to consider

    • November 9, 2024
    3 EM currency trades to consider

    California approves tighter rules for low carbon fuels policy

    • November 9, 2024
    California approves tighter rules for low carbon fuels policy

    Explainer-Who are the key voices at the COP29 climate summit in Baku?

    • November 9, 2024
    Explainer-Who are the key voices at the COP29 climate summit in Baku?

    The Week’s Snapshot: Donald Trump’s Victory and Crypto, ASIC to Close 95 Firms, and More

    • November 9, 2024
    The Week’s Snapshot: Donald Trump’s Victory and Crypto, ASIC to Close 95 Firms, and More

    Trump prepares to withdraw from Paris climate agreement, NYT reports

    • November 8, 2024
    Trump prepares to withdraw from Paris climate agreement, NYT reports