Ethiopian birr dips 30% as central bank floats currency for IMF loan

BREAKING NEWSJuly 29, 2024 at 12:43 PM UTC

TLDR

Ethiopia's central bank floated the birr currency to secure IMF support and progress debt restructuring, resulting in a 30% devaluation to 74.73 birr per dollar.
Banks can now freely trade foreign currencies at negotiated rates, with the central bank limiting interventions in the exchange markets.
This move aims to boost economic stability and attract foreign investment by increasing transparency and flexibility in currency trading.

Ethiopia's central bank floated the country's birr currency on Monday, a move aimed at securing support from the International Monetary Fund (IMF) and advancing a long-delayed debt restructuring.

Following the float, the birr's value against the U.S. dollar plummeted by 30% to 74.73 per dollar, per the Commercial Bank of Ethiopia, the country's largest lender. The currency had been trading at 57.48 birr to the dollar on Friday.

The central bank announced that banks are now permitted to buy and sell foreign currencies to their clients and among themselves at freely negotiated rates. The regulator also stated it would only make "limited interventions" in the foreign exchange markets going forward.

Key Takeaways

The Horn of Africa nation has been grappling with soaring inflation and chronic foreign currency shortages. Late last year, it became the third economy on the continent in as many years to default on its government debt. The country has been in discussions with the International Monetary Fund (IMF) to establish a new lending program, following the abandonment of the previous fund-supported program agreed upon in 2019 due to conflict in the northern region of Tigray. Negotiations resumed after a peace deal was reached in November 2022.

Ethiopia

Economy

Birr

Currency

Commercial Bank of Ethiopia

Foreign Currency

IMF

Devaluation

Horn of Africa