New currency devaluation is criticized by analysts as disadvantageous to Ethiopia
October 10,2017
borkena, Ethiopian News
National Bank of Ethiopia announced a new round of currency devaluation today. There seem to be a sense of urgency on the part of the government as the devaluation is going to be effective as of October 11, 2017.
The value of Ethiopian currency (Birr) will drop by Fifteen percent against currencies like the US dollar. Currently, the rate of exchange for US dollar is 23.4177 Ethiopian Birr. After the change, starting tomorrow, the exchange rate will be 26.9303 Ethiopian Birr.
Ethiopian currency was devalued by seventeen percent some seven years ago.
According to government sources, with the newly introduced devaluation, the regime seeks to achieve the 2010 Ethiopian Budget year (2017-18) through enhancing export trade in agricultural, service, mining and manufacturing sectors.
The objective of the introduced change is “to enhance export sector and be competitive in international market.”
The National Bank also introduced new interest rates for savings accounts. The interest was five percent but after tomorrow it is going to be seven percent interest rate.
Analysist criticized the devaluation on grounds that Ethiopia will lose competitive advantages to import much-needed goods including gas, among other things. And that the devaluation will have an effect of import substitution with locally produced goods. Besides some sectors, for example, manufacturing and service, are in their infancy.
The Ethiopian Parliament was reopened yesterday after three months recess. Political instability is getting worse in Ethiopia and there is a dire shortage of foreign currency in the country.
The government borrowed a huge amount of money to finance infrastructure and other projects including grand dam over the Nile, which caused tension with Egypt, but most of the projects are halted due to funding issues.
On the other hand, there have been allegations that a huge amount of fund is squandered through corrupt practices.
The alleged “fight against corruption”, it was meant to be a response following countrywide protest against the ruling TPLF party, hit a dead end when triggered instability within in the ruling party as many of TPLF officials are suspected of grand scandals the cost the country billions of dollars.
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