Ethiopia’s Central Bank Reserves Increase 200% After Exchange Rate Reform: Governor Mamo

By: Getahun Tsegaye
Staff Writer

Addis Ababa, Ethiopia – Over the past nine months, Ethiopia’s foreign currency reserves increased by 200%, as said by Mamo Mihretu, Governor, National Bank of Ethiopia (NBE), attributing this unexpected surge to exchange rate reform initiated by the government.

The measures were aimed at easing the liquidity of foreign currency and addressing earlier shortfalls. Mamo emphasized that these very measures contributed to restoring stability in the forex market alongside increased inflows and reduced scarcity. 

Adjustment of the exchange rate, a major change in policy after many years of a tightly controlled forex regime, was implemented by the NBE in July 2023. The governor stated: “This has helped to create a more stable and predictable foreign exchange system, freely navigating past constraints.” 

Besides, they have been tightening forex transaction monitoring and working with commercial banks to implement compliance. Part of these reforms sees the NBE hold discussions with commercial banks every so often to address forex management policy fine-tuning and operational remaining gaps to address.

The NBE has also indicated that it will conduct foreign currency auctions every two weeks, which is meant to contribute toward the establishment of a transparent and competitive forex market. This is expected to further stabilize foreign currency rates and enhance private sector access to hard.

Governor Mamo added that illegal forex trading will be clamped down and stressed that unauthorized forex dealers and unlicensed operations will be dealt with harshly. “We are working closely with security agencies to crack down on illicit currency trade and ensure that all transactions are conducted through legitimate banking channels,” he stated.

Ethiopia has been plagued with the foreign currency problem for a long time now, and the situation has gotten worse with high import demand and low export earnings. The recent boost in reserves, coupled with policy changes, marks the beginning of a more sustainable forex management approach.

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