Ethiopian Birr Loses Ground: Hits 132 in Black Market After Currency Liberalization











The Ethiopian birr recorded another fall against the U.S. dollar in the black market today, continuing a troubling trend that began last month following the Ethiopian government’s announcement of macroeconomic reforms and the liberalization of the foreign exchange market. The birr has dropped to 132 birr per dollar in the parallel market. The government had anticipated that these reforms would narrow the gap between the birr’s values in the official and black markets. However, the reality has been quite different. Before the reforms, the official exchange rate was around 57 birr to the dollar, while the black market rate was approximately 120 birr.

Since the introduction of these reforms, the birr has lost more than 100% of its value against the dollar. As of today, the Commercial Bank of Ethiopia (CBE) has set the selling price of the U.S. dollar at 124 birr, while the Development Bank of Ethiopia leads with slightly higher rates.

The reaction from the public has been swift, with social media amplifying the frustrations. One Twitter user, Lidya Bekelle, expressed her dismay:“We were at this bank today to request $ with my mom and guess what, the selling rate is 134.50 birr ?. & the IBD manager told us that we will get from ⚫️ within the range of 120-124 birr. Is it legal to sell more than the updated selling rate? @NBEthiopia @globalbanketh Genuine question.”

This has raised concerns about discrepancies between different banks’ rates and the legal implications of charging above the official exchange rate. Similarly, Sara Yirga tweeted about an additional hurdle:“I was told that I need to block ETB 200-500k for three months in a separate/new travel account before the bank entertains my $ request. Is that acceptable @NBEthiopia?”

These tweets reflect the confusion and frustration many Ethiopians are facing as they navigate the new market-based foreign exchange system. The disparity between official and black market rates and the restrictive measures imposed by banks highlight the challenges in accessing foreign currency through official channels.

Background: A New Currency Regime

On August 9, 2024, Addis Insight reported on the National Bank of Ethiopia’s (NBE) move from a fixed to a market-based exchange rate system. This policy change was intended to better align the birr with its market value, correcting historical distortions, fostering economic stability, and encouraging private sector growth. Despite these goals, the reform has unveiled significant challenges, especially in bridging the gap between official and black market rates.

Market Discrepancies

The gap between official and black market rates has persisted, with many Ethiopians continuing to rely on the parallel market for access to foreign currency. According to Deutsche Welle, in Addis Ababa, one dollar exchanges for 120 to 140 birr on the black market, while official rates hover around 124 birr. This gap has created confusion and raised questions about the effectiveness of the NBE’s reforms in stabilizing the currency market.

Previously, Ethiopian businesses faced significant hurdles due to currency restrictions. As noted by Tadese Melaku from Horra Trading, companies retained only 40% of their foreign currency earnings, which led to shortages and high service fees. This situation drove many businesses to the parallel market, where they could access foreign currency more easily, albeit at higher rates.

The Black Market’s Response

The black market’s persistence highlights the challenges in addressing the foreign exchange supply gap. Finance consultant Tilahun Girma has emphasized that the overvaluation of the birr under the previous fixed exchange rate system led to reduced formal export channels and increased contraband activities. These issues have only been exacerbated by the current shortage of foreign currency available through official channels.

Experts like Andualem Goshu argue that while floating the exchange rate could eventually reduce reliance on the black market, success will require more than policy changes. Ensuring a steady supply of foreign currency is critical to reducing the black market’s influence. Measures such as banning non-essential imports and securing temporary support through loans from the IMF and World Bank may help alleviate immediate pressures but will not fully solve the underlying supply issues.

Public Reaction and Concerns

The frustrations voiced on social media reflect a broader dissatisfaction with the way the currency reforms are being implemented. Lidya Bekelle’s experience at a bank selling dollars at 134.50 birr, higher than the official rate, raises concerns about regulatory oversight and consistency across financial institutions. Similarly, Sara Yirga’s report of needing to block large amounts of Ethiopian birr for months just to access foreign currency is seen as an unreasonable barrier to those needing dollars for travel or other essential purposes.

These reactions underscore the confusion and difficulties many individuals are facing as they attempt to navigate the new currency landscape.

Future Outlook

The National Bank of Ethiopia has introduced several reforms aimed at enhancing market flexibility and liquidity, including the removal of surrender requirements and the introduction of non-bank foreign exchange bureaus. These measures are designed to improve accessibility and increase the flow of foreign currency through official channels.

However, experts like Tilahun Girma believe that more targeted interventions, such as foreign exchange auctions, may be necessary to stabilize the exchange rate and prevent speculative behavior. Over time, these interventions could help narrow the gap between official and black market rates and reduce the public’s reliance on informal channels for foreign currency transactions.



The Ethiopian birr’s dramatic fall against the U.S. dollar highlights the challenges in transitioning to a market-based exchange rate system. While the reform was intended to close the gap between official and black market rates, the birr has instead lost over 100% of its value, exacerbating the public’s frustration and confusion. Social media reactions, such as those from Lidya Bekelle and Sara Yirga, illustrate the real-world impact of these currency fluctuations and the difficulties many Ethiopians face in accessing foreign currency through official channels.

As Ethiopia continues to navigate this complex economic transition, the success of the currency reforms will depend on the government’s ability to address supply shortages, enforce consistent policies across financial institutions, and provide greater clarity to the public. Only then can the country hope to achieve the stability and growth envisioned by these reforms.