Ethiopia’s Parallel Forex Rate Surges to 150 ETB, Testing Government Reforms











Ethiopia’s forex parallel market continues to experience significant volatility, with the rate soaring to 150 ETB per USD, a sharp increase from the 130 ETB per USD recorded just two weeks ago. This fluctuation underscores the challenges of aligning the official and parallel exchange rates, despite ongoing efforts by the government and commercial banks to stabilize the market.

As part of a broader economic policy reform agreed with the International Monetary Fund (IMF), the liberalization of the forex market was intended to close the gap between the official and parallel markets. The shift to a floating exchange rate was also intended to enhance market transparency, increase liquidity, and reduce reliance on informal trading. However, although the forex reserve has improved, the rise in parallel market prices underscores the ongoing challenge of balancing the supply and demand for foreign exchange.

Commercial banks have intensified efforts to attract remittances, a crucial source of foreign exchange for the country. One prominent initiative is the “CashGo” mobile application, developed by EagleLion, which allows Ethiopians living abroad to send money back home quickly and securely. The app is supported by major Ethiopian banks, including the Bank of Abyssinia, Commercial Bank of Ethiopia (CBE), and Dashen Bank. While CashGo is a key part of the push to channel remittances through formal banking channels, the growth in remittance inflows, rising by 24 percent over the past three months, can be attributed to a broader set of efforts by both the government and commercial banks to promote formal remittance systems.

The National Bank of Ethiopia (NBE) has also played an active role in this process. NBE launched the Debo initiative, an awareness campaign aligned with the new Foreign Exchange Directive 01/2024, aiming to educate the Ethiopian diaspora about the benefits of using Foreign Currency Accounts (FCY) and the legal remittance systems in place. Through this, NBE hopes to promote understanding of these policies and increase the flow of remittances through formal channels. Additionally, the central bank has announced a deposit of 100 billion birr across 31 banks nationwide, which the Diaspora community can access for various purposes via the unite.et app.

Despite the positive strides in attracting remittances, the gap between official and parallel market rates remains a persistent issue. As of today, the official exchange rates are ETB 139.74 per USD at Rooha Forex Bureau and ETB 126.48 per USD at CBE, still considerably lower than the parallel market rate of ETB 150. This disparity signals continued pressure on the official forex market, as many individuals and businesses continue to turn to the parallel market due to the higher exchange rates offered.

Prime Minister Abiy Ahmed (PhD), addressing members of parliament recently, emphasized the positive impact of the ongoing reforms, including a 161 percent growth in Ethiopia’s foreign exchange reserves over the past three months. The National Bank of Ethiopia and private banks have also benefited, with their reserves growing by 161 percent and 29 percent, respectively. In addition, remittance inflows have risen by 24 percent, a development the Prime Minister described as a significant achievement driven by reforms. As for the export sector, the plan for the past three months was to secure 1.1 billion USD. However, the country surpassed expectations, achieving 1.5 billion USD in export earnings during this period.

While these efforts show promise, the widening gap between the official and parallel forex markets continues to present challenges. Ultimately, the success of these measures will depend on maintaining investor confidence, ensuring continued access to foreign exchange, and addressing the persistent demand for forex that continues to fuel the parallel market.











5 COMMENTS

Mustefa Hiko Gemeda







January 14, 2025 At 9:20 pm













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Let us use this service knowing that it is a deserted service That is inspiring

Ethiopia’s Parallel Forex Rate Surges to 150 ETB, Testing Government Reforms - Ethio Diaspora Hub Service







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[…] Ethiopia’s Parallel Forex Rate Surges to 150 ETB, Testing Government Reforms […]

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Mariamawit







January 22, 2025 At 11:07 pm













Good

Good

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[…] ETB per USD in some instances, reflecting ongoing economic reforms and market dynamics 6. Such changes impact both local businesses and consumers who rely on foreign currency for […]

[…] ETB per USD in some instances, reflecting ongoing economic reforms and market dynamics 6. Such changes impact both local businesses and consumers who rely on foreign currency for […]

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