Borkena
Toronto – Ethiopian government macro-economic policy measure and series of actions to narrow down the gap between official forex and parallel market does not seem to be bearing fruits.
This week, the US dollar has been selling about 142 Ethiopian birr through official channels in various banks. However, . The rate of exchange in the parallel market was reported to be 160 and above.
Atilaw Alemu, an economist, told DW Amharic that the growing gap is a testament that the economic reform that Ethiopia introduced about a year ago has failed to achieve its objective which was to narrow down rates between official forex market and the parallel market, among other things.
It has repeatedly failed since the introduction of macro-economic reform in July 2024. When the government introduced the reform the rate of exchange was only 57.
Atilaw Alem seems to link the recent growing gap to unavailability of forex for export trades. He pointed out that Ethiopia is importing many commodities from overseas. When the volume of Ethiopia’s export is lower than the volume of its import, shortage of foreign currently pushes businesses in the direction of the alternative forex market – the parallel market.
He also remarked that the government’s recent measure to take action on the money transfer parallel market, including the suspension of some agents based in the United States, does not constitute a lasting solution to narrow down the rate of exchange differences.
Notably, the government is at times attempting to pay higher rates for some currencies. For example, this week $1 Canadian dollar was fetching about 115 Ethiopian birr through the official forex market while the rate for the parallel market was down to 107 birr. However, there are speculations that the parallel market could overtake again – possible within a short period of time.
Another key objective of the reform was to make forex easily accessible to exporters and other businesses. However, the National Bank continues to undertake forex auctions every two weeks. The National Bank paints a different picture as to why it continues dollar rations to the banks. Mamo Mihretu, in his recent live video message about two weeks ago, said the bank is doing so because “it now has a growing foreign currency reserve.”
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