Borkena
Toronto – The Ethiopian government is said to have exhausted policy measures intended to stabilize the forex exchange rate. However, that did not yield a positive outcome. Birr continues to lose against major currencies including the U.S. Dollar.
According to DW Amharic report published on Friday, the forex exchange rate gab is growing between commercial banks, forex offices and the parallel market.
Commercial Banks (including the private ones) are exchanging the U.S dollar in a range of 153 to 156 Ethiopian birr. Authorized Forex offices operating in the capital on the other hand are paying between 178 and 180 Ethiopian birr. Euro is selling for 204 or 205 Ethiopian Birr.
The rate in the parallel market is reportedly much higher than forex offices although the source unspecified it. When the Ethiopian government introduced marcro-economic reform in July 2024, one of the stated goals was to narrow the exchange rate gap between the parallel market and what the banks offer. US$1 was exchanging at a rate of 57 t0 58 Ethiopian birr at the time. In less than two years, the Ethiopian Birr lost over 100 percent of the value it had.
The source cited Abdulmenan Mohammed, a finance professional, as saying competition between commercial banks to acquire hard currency has slowed down. His explanation is that forex offices and parallel market rates has been growing while commercial banks are stuck in a range of paying 150’s.
On Saturday, the National Bank of Ethiopia disclosed that of the $500 million forex auction made available over 44 millions was not sold.
Introduction of market based forex exchange regime in July 2024 was painted at the time as a policy measure to improve foreign currency reserve and narrow exchange rate gaps. Although the government claims to have overcome foreign currency reserve shortage, birr continues to lose value and the gap in exchange rate is also not reversed.
Restrictions on Money transfer services from overseas was another policy response to narrow exchange rate gap. The government outlawed dozens of transfer services while authorizing others to operate. It does not help tackle the growing difference between parallel market and authorized Forex offices.
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