The Price of Becoming “Modern”

By Kebour Ghenna

Ethiopia is being modernized, on paper, at least.

The latest step comes in the form of the National Bank of Ethiopia’s foreign exchange reforms, notably Directive No. FXD/04/2026 and related measures, which aim to liberalize the foreign exchange regime. The message is clear: fewer controls, more flexibility, easier movement of capital, and a system that looks, finally, like those of advanced economies.

The reaction has been overwhelmingly positive.

Investors applaud. Analysts approve. Institutions endorse. There has been remarkably little criticism. And that, perhaps, is the first thing worth noticing.

Why so little dissent?

Because the reforms speak the language the global system understands: liberalization, efficiency, openness. These are not just policies, they are signals. Signals that Ethiopia is “ready,” “reforming,” and “open for business.” In a world where capital rewards familiarity, adopting the standard script brings immediate praise.

But praise is not proof.

The idea behind the reforms is elegant. Let the market determine the price of foreign exchange. Allow capital to move more freely. Trust that efficiency will follow.

But economies are not built on elegance. They are built on structure.

Ethiopia’s challenge is not primarily regulatory, it is productive. The country does not lack foreign exchange because the rules are wrong. It lacks foreign exchange because it does not yet produce enough that the world wants to buy.

Liberalizing access to foreign exchange does not create exports. It redistributes scarcity.

And when scarcity is redistributed through markets, it tends to flow toward those already positioned to access it, importers, intermediaries, and those with capital. Meanwhile, domestic producers, still building capacity, face rising costs and sharper competition.

The result can be a strange kind of progress: a system that looks modern, behaves efficiently, and yet struggles to produce.

So when will we know if this is not working?

Not immediately. Reforms like these rarely fail overnight. They drift.

But the signs will be there:

** Persistent or worsening foreign exchange shortages despite liberalization

** A widening gap between imports and exports

** Increased pressure on the currency without corresponding growth in productive capacity

** Capital moving out faster than it comes in

** Domestic industries losing ground rather than gaining strength

At that point, the question will no longer be whether the policy is modern.

It will be whether it is appropriate.

And if it is not?

Then the response should not be denial, nor a doubling down on theory. It should be adjustment. Reintroducing targeted controls where necessary. Supporting domestic production more deliberately. Slowing the pace of liberalization to match the pace of structural transformation.

In development, timing matters more than ideology.

There is nothing inherently wrong with becoming modern. But there is a quiet danger in arriving too soon, before the foundations are ready to bear the weight. Modernity, imposed ahead of capacity, risks becoming a veneer rather than a transformation. In the end, development is not judged by how closely one resembles others, but by how firmly one stands on its own. And in that journey, timing is not a detail, it is everything.

Editor’s Note : The article appeared first on the personal SM page of the author.

__

Join our Telegram Channel : t.me/borkena

To Support Borkena  : https://borkena.com/subscribe-borkena/ – one time support or small monthly options available. Inquire information about it : info@borkena.com

Like borkena on Facebook

To submit Press Release, send submission to info@borkena.com

Add your business to Ethiopian Business Listing / Ethiopian Business Directory  

Join the conversation. Follow us on X (Formerly Twitter)  @zborkenato get the latest Ethiopian News updates regularly.