Ethiopia's currency dives by 30% as IMF-backed reforms to stabilize the economy take effect
Ethiopia’s currency has lost 30% of its value the day after the central bank began implementing a flexible exchange rate policy backed by the International Monetary Fund as part of new measures to stabilize the eastern African nation’s economy
ADDIS ABABA, Ethiopia — Ethiopia's currency lost 30% of its value Tuesday, the day after the central bank began implementing a flexible exchange rate policy backed by the International Monetary Fund as part of new measures to stabilize the eastern African nation's economy.
Mamo Mihretu, governor of the National Bank of Ethiopia, said in a televised address Monday that the reforms “will introduce a competitive, market-based determination of the exchange rate and address a long-standing distortion within the Ethiopian economy.”
Commercial banks can set the price of foreign exchange and non-bank entities are permitted to operate forex bureaux for the first time, a historic change in a country where the government for decades fixed those prices, allowing a black market to flourish.
The International Monetary Fund approved a four-year credit facility worth $3.4 billion to coincide with Ethiopia's reforms. It pledged to disburse $1 billion immediately to address pressing needs, with Managing Director Kristalina Georgieva describing the reforms as a «landmark moment for Ethiopia.»
Ethiopia expects a total of around $13.5 billion in new funding, including from the World Bank and currency swap agreements with foreign governments.
Prime Minister Abiy Ahmed said in a statement that the new exchange rate regime is «critical to relieving (forex) shortages, removing constraints to private sector investment and growth, and aligning the prices of imported and exported goods and services with
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