NBE Governor Mamo Mehretu Announces $2.5 Billion Transfer from IMF and World Bank

NBE Governor Mamo Mehretu Announces $2.5 Billion Transfer from IMF and World Bank The governor of the National Bank, Mamo Mehretu, said that so far, 2.5 billion dollars have been transferred to the National Bank from the International Monetary Fund (IMF) and the World Bank. On the other hand, he stated that only 18 percent of imported consumer goods are imported using foreign currency. He pointed out that the others were mostly entering the country through the informal or parallel market. Thus, he said, “The change of the currency to the market should not cause an increase in commodity prices.” He mentioned that the bank is prepared to respond legally if issues of illegality and negative pressure arise. Additionally, he declared that a strict fiscal and monetary policy will be activated to control illegal practices in financial institutions. “We have made adequate preparations based on technology,” he said.

Birr Falls 58 % to 90.78 as Dashen Bank Takes the Lead in Currency Float

Birr Falls 58 % to 90.78 as Dashen Bank Takes the Lead in Currency Float Ethiopia recently made a significant shift in its monetary policy by floating its currency, the birr. This move has led to a sharp devaluation, with the exchange rate plummeting from 57 birr per US dollar a week ago to the current rates as indicated by Dashen Bank. This represents an astonishing devaluation of approximately 58%. Current Exchange RatesAs of today, Dashen Bank has published the following exchange rates for the Ethiopian birr (ETB): US Dollar (USD): Buying – 90.7899, Selling – 98.0531 Pound Sterling (GBP): Buying – 111.6146, Selling – 120.5437 Euro (EUR): Buying – 98.4436, Selling – 106.3191 Canadian Dollar (CAD): Buying – 59.3764, Selling – 64.1265 United Arab Emirates Dirham (AED): Buying – 22.3694, Selling – 24.1589 Saudi Riyal (SAR): Buying – 21.9013, Selling – 23.6534 Chinese Yuan (CNY): Buying – 11.3810, Selling – 12.3015 The Float DecisionThe decision to float the birr was driven by the government’s intention to stabilize the economy and address imbalances in the foreign exchange market. By allowing market forces to determine the exchange rate, the National Bank of Ethiopia (NBE) aimed to improve foreign currency reserves, attract foreign investment, and enhance export competitiveness. Deal with IMF and World BankA crucial factor leading to this bold monetary policy shift was Ethiopia securing a deal with the International Monetary Fund (IMF) and the World Bank. The agreement provided Ethiopia with access to $16 billion USD for debt restructuring and economic support. This financial assistance was contingent upon Ethiopia implementing significant economic reforms, including floating its currency. The support from these international financial institutions is expected to help stabilize the economy, manage debt, and spur growth. Immediate ImpactThe immediate impact of the float has been a dramatic devaluation of the birr. The currency’s value against the US dollar has increased by 58%, signaling significant inflationary pressure. This sharp adjustment is expected to affect various sectors of the economy: Import Costs: With the birr losing value, the cost of imported goods is set to rise, leading to increased prices for essential items and raw materials. This could exacerbate inflation, affecting the purchasing power of Ethiopian consumers. Export Competitiveness: On the positive side, a weaker birr makes Ethiopian exports cheaper and more competitive on the international market. This could potentially boost the country’s export revenues and help reduce the trade deficit. Foreign Debt: Ethiopia’s foreign debt, primarily denominated in foreign currencies, will become more expensive to service. This could strain the country’s financial resources and necessitate careful debt management strategies. Prime Minister Abiy Ahmed’s AppealPrime Minister Abiy Ahmed has urged banks to narrow the gap between official exchange rates and the black market. By aligning the official rates closer to the black market rates, the government aims to curb illegal currency trading and stabilize the official exchange market. This move is crucial in restoring confidence in the formal banking system and ensuring a more transparent and regulated financial environment. Long-term ConsiderationsWhile the immediate effects of the currency float are challenging, the long-term benefits could be substantial if managed properly. A market-determined exchange rate can lead to a more efficient allocation of resources, improved investment climate, and a more balanced economy. Government MeasuresTo mitigate the adverse effects of the devaluation, the Ethiopian government is expected to implement several measures: Monetary Policy Adjustments: Tightening monetary policy to control inflation and stabilize the currency. Fiscal Policies: Implementing fiscal measures to support vulnerable sectors and individuals affected by rising costs. Foreign Exchange Management: Enhancing foreign exchange reserves and managing capital flows to ensure stability. The floating of the Ethiopian birr marks a pivotal moment in the country’s economic history. While the initial shock of devaluation poses significant challenges, the move could pave the way for a more resilient and competitive economy in the long run. The government’s ability to navigate this transition period will be crucial in determining the success of this bold monetary policy shift. Prime Minister Abiy Ahmed’s directive to banks to narrow the gap with the black market is a critical step toward stabilizing the currency and ensuring economic stability. The deal with the IMF and World Bank, providing much-needed financial support, underscores the international community’s confidence in Ethiopia’s potential for economic reform and growth. Dashen Bank rate is the highest.

Ethiopia’s Birr Plummets by 82% to 103.94: CBE Leads the Charge in Currency Float

Ethiopia’s Birr Plummets by 82% to 103.94: CBE Leads the Charge in Currency Float Ethiopia recently made a significant shift in its monetary policy by floating its currency, the birr. This move has led to a sharp devaluation, with the exchange rate plummeting from 57 birr per US dollar a week ago to the current rates as indicated by the Commercial Bank of Ethiopia (CBE). This represents an astonishing devaluation of approximately 82%. Current Exchange RatesAs of today, the CBE has published the following exchange rates for the Ethiopian birr (ETB): US Dollar (USD): Buying – 103.9413, Selling – 105.6201 Pound Sterling (GBP): Buying – 121.9101, Selling – 123.9483 Euro (EUR): Buying – 110.5307, Selling – 112.3413 Swiss Franc (CHF): Buying – 111.5904, Selling – 113.4222 Kuwaiti Dinar (KWD): Buying – 281.7255, Selling – 286.9600 Chinese Yuan (CNY): Buying – 10.3712, Selling – 10.5786 UAE Dirham (AED): Buying – 20.4557, Selling – 20.8648 The Float DecisionThe decision to float the birr was driven by the government’s intention to stabilize the economy and address imbalances in the foreign exchange market. By allowing market forces to determine the exchange rate, the National Bank of Ethiopia (NBE) aimed to improve foreign currency reserves, attract foreign investment, and enhance export competitiveness. Deal with IMF and World BankA crucial factor leading to this bold monetary policy shift was Ethiopia securing a deal with the International Monetary Fund (IMF) and the World Bank. The agreement provided Ethiopia with access to $16 billion USD for debt restructuring and economic support. This financial assistance was contingent upon Ethiopia implementing significant economic reforms, including floating its currency. The support from these international financial institutions is expected to help stabilize the economy, manage debt, and spur growth. Immediate ImpactThe immediate impact of the float has been a dramatic devaluation of the birr. The currency’s value against the US dollar has almost doubled, signaling significant inflationary pressure. This sharp adjustment is expected to affect various sectors of the economy: Import Costs: With the birr losing value, the cost of imported goods is set to rise, leading to increased prices for essential items and raw materials. This could exacerbate inflation, affecting the purchasing power of Ethiopian consumers. Export Competitiveness: On the positive side, a weaker birr makes Ethiopian exports cheaper and more competitive on the international market. This could potentially boost the country’s export revenues and help reduce the trade deficit. Foreign Debt: Ethiopia’s foreign debt, primarily denominated in foreign currencies, will become more expensive to service. This could strain the country’s financial resources and necessitate careful debt management strategies. Prime Minister Abiy Ahmed’s AppealPrime Minister Abiy Ahmed has urged banks to narrow the gap between official exchange rates and the black market. By aligning the official rates closer to the black market rates, the government aims to curb illegal currency trading and stabilize the official exchange market. This move is crucial in restoring confidence in the formal banking system and ensuring a more transparent and regulated financial environment. Long-term ConsiderationsWhile the immediate effects of the currency float are challenging, the long-term benefits could be substantial if managed properly. A market-determined exchange rate can lead to a more efficient allocation of resources, improved investment climate, and a more balanced economy. Government MeasuresTo mitigate the adverse effects of the devaluation, the Ethiopian government is expected to implement several measures: Monetary Policy Adjustments: Tightening monetary policy to control inflation and stabilize the currency. Fiscal Policies: Implementing fiscal measures to support vulnerable sectors and individuals affected by rising costs. Foreign Exchange Management: Enhancing foreign exchange reserves and managing capital flows to ensure stability.

Prime Minister Calls Banks’ Efforts Inadequate in Closing the Exchange Rate Gap with the Black Market

Prime Minister Calls Banks’ Efforts Inadequate in Closing the Exchange Rate Gap with the Black Market In a recent address to various segments of the public, including regional leaders, ministers, and investors, Prime Minister Abiy Ahmed urged Ethiopian banks to take decisive action to reduce the significant gap between the official exchange rate and the black market rate. Highlighting the urgency of the issue, the Prime Minister emphasized that the current practice of minor daily adjustments of 2 or 3 birr to the official exchange rate is insufficient, given the black market’s much larger fluctuations of 40-50 birr. The Prime Minister expressed concern over the complacency observed in the banking sector regarding the exchange rate disparity. He underscored the necessity for banks to adopt more aggressive measures to stabilize the currency market and prevent further economic disparity. “We cannot allow the black market to dictate our exchange rates and create an unsustainable economic environment,” he stated. The Prime Minister’s speech also brought attention to Ethiopia’s recent financial agreements with the International Monetary Fund (IMF) and the World Bank. He revealed that these deals were instrumental in rescuing the Commercial Bank of Ethiopia (CBE) from a precarious financial position. A substantial injection of $700 million was secured, which played a crucial role in stabilizing the bank after it faced significant challenges due to an inability to recover funds from borrowers involved in several failed projects. This bailout underscores the critical state of the banking sector and the urgent need for comprehensive reforms. Furthermore, Prime Minister Abiy Ahmed called on Ethiopian banks to transcend ethnic and religious divisions and consider mergers as a strategy for strengthening the financial sector. He argued that merging banks would enhance their operational capacity, increase their resilience, and better serve the diverse population of Ethiopia. “Our financial institutions must rise above ethnic and religious differences to build a robust and unified banking system capable of supporting our nation’s development,” he asserted. The Prime Minister’s address signifies a pivotal moment for the Ethiopian banking sector, as it faces mounting pressure to implement reforms that will bridge the exchange rate gap and foster a more inclusive and resilient financial environment. The call to action is clear: Ethiopian banks must move beyond incremental changes and embrace bold, transformative measures to ensure economic stability and growth. Key Points: Exchange Rate Disparity: PM Abiy Ahmed urged banks to address the significant gap between the official exchange rate and the black market rate, criticizing the complacency of minor daily adjustments. IMF and World Bank Deal: Ethiopia’s recent financial agreements with the IMF and World Bank injected $700 million into the Commercial Bank of Ethiopia, highlighting the critical need for financial stability. Call for Bank Mergers: The Prime Minister encouraged banks to overcome ethnic and religious divisions and consider mergers to strengthen the banking sector’s capacity and resilience. Economic Stability: Emphasized the necessity for bold reforms to ensure a sustainable and inclusive economic environment in Ethiopia.

Ethiopia Announces 300% Salary Increase for Low-Income Government Employees

Ethiopia Announces 300% Salary Increase for Low-Income Government Employees Salary Increase for Government Employees: A Response to Economic Challenges In a recent address, Prime Minister Abiy Ahmed (Dr.) outlined significant salary revisions for government employees as part of the Ethiopian government’s broader macroeconomic reforms. This decision comes in response to the economic challenges posed by inflation, particularly affecting low-income workers. Prime Minister Abiy Ahmed (Dr.) announced that government employees earning as little as 1,500 birr per month would see their salaries increased by 300%, a move described as unprecedented in Ethiopian history. This substantial adjustment aims to alleviate the financial burden on these workers amidst ongoing economic changes. The announcement came just one week after the Ethiopian government floated its currency, resulting in a 60% depreciation of the birr. This currency adjustment has had a significant impact on the cost of living, particularly for those with lower incomes. To address these challenges, the government has allocated over 90 billion birr for the wage reform. While the focus has been on increasing wages for lower-income employees, those earning above 25,000 birr have not seen immediate changes. The Prime Minister emphasized the need to support the most affected workers, stating that the government is committed to helping those who face the greatest financial difficulties. This landmark decision highlights the government’s efforts to prioritize social equity and economic support during a period of significant economic adjustment. 7 COMMENTS Tena August 2, 2024 At 8:12 am Nice But For Health Proffesional Must Add 300% Nice But For Health Proffesional Must Add 300% Kidane Geresu August 4, 2024 At 2:52 am Not clear. What about salary ranges from 15000 to 24999?below 25000. They all equally added 300%? Not clear. What about salary ranges from 15000 to 24999?below 25000. They all equally added 300%? Tamasgen Mosisa August 4, 2024 At 10:03 am This measure is mandatory, seems too late. This measure is mandatory, seems too late. Lemma solomon August 5, 2024 At 12:42 am The Ethiopian prime minister Abiy Ahmed is known by deceiving behaviour. He lied to his own people every time again and again. His brutal dictatorship is based of deceiving his own population and divide them on Ethnic line. If Ethiopian birr lost its value over 80% just in three days since the announcement of the new policy what other word can you use than devaluation. No need to be a prime minister to figure it out. The Ethiopian prime minister Abiy Ahmed is known by deceiving behaviour. He lied to his own people every time again and again. His brutal dictatorship is based of deceiving his own population and divide them on Ethnic line. If Ethiopian birr lost its value over 80% just in three days since the announcement of the new policy what other word can you use than devaluation. No need to be a prime minister to figure it out. Girmaa August 5, 2024 At 8:16 pm Still unfair decision. Because in the current Ethiopian economic crisis everybody is affected. I didn’t understand what this government is s moking Still unfair decision. Because in the current Ethiopian economic crisis everybody is affected. I didn’t understand what this government is s moking Tofik August 10, 2024 At 11:08 am Ethiopia birr devaluation hurts government employ in harsh manner Ethiopia birr devaluation hurts government employ in harsh manner Abdu August 16, 2024 At 10:51 pm How can will live in ethiopia??? How can will live in ethiopia??? Comments are closed.

All Self-Proclaimed Pan-Africanists are Yielding to the Will of Western Financial Institutions

All Self-Proclaimed Pan-Africanists are Yielding to the Will of Western Financial Institutions All Self-Proclaimed Pan-Africanists are Yielding to the Will of Western Financial Institutions: My Take on Ethiopia Changing Course to Float Its Currency Against the Dollar By- Gatkek Kuajien Chuol From Ghana to Kenya to Ethiopia, no African country seems spared from the influence of Western financial institutions, which pressure them to align with their interests. Who could forget the pointed remark made by a Ghanaian Parliamentarian about the “economic Maguire” — a reference to those claiming to be economic and financial experts and leaders, yet endorsing policies that work against the best interests of locals? Abiy Ahmed, the Prime Minister of Ethiopia, recently floated the Ethiopian Birr against the dollar. In defending his decision, he likened borrowing from the World Bank and IMF to borrowing from one’s mother, implying a level of sympathy and leniency in repayment. However, the reality is far from comforting. Repaying an IMF loan involves significant challenges beyond mere repayment. Last year, when rising living costs prompted public concern, the Prime Minister suggested that people could substitute meat with bread and bananas — both of which are often unaffordable or unavailable. This suggestion was seen as out of touch with the daily struggles faced by Ethiopians. The decision to float the Birr led to an immediate devaluation of savings by nearly 40%. This loss is exacerbated in a country heavily reliant on imported goods, where prices have already begun to rise, further straining the cost of living. The government’s focus on modernizing Addis Ababa with parks and LED lights starkly contrasts with the harsh realities many Ethiopians face, including those languishing in IDP camps or suffering from famine. The priority seems misaligned, focusing on aesthetics rather than addressing fundamental needs. Before this financial policy shift, Ethiopian civil servants struggled to make ends meet, and with the devaluation of their salaries and no corresponding increase, their situation has only worsened. Similarly, Kenya’s recent attempt to legislate a $2.7 billion debt repayment led to public outrage and protests, underscoring the contentious nature of these financial decisions. If I were to respond to Abiy Ahmed’s analogy of the IMF to a mother, I would question what kind of mother threatens her children with starvation. The backlash in Kenya highlights the volatility and public discontent that can accompany such policies. Ethiopia’s economy, once one of the fastest-growing in the 21st century, has been compromised by recent decisions that prioritize external financial aid over sustainable economic strategies. The abrupt devaluation of the Birr and the subsequent financial instability have deterred both foreign investors and the Ethiopian diaspora from investing in the country. This instability, coupled with ongoing conflicts and insecurity, paints a grim picture of Ethiopia’s economic future. Abiy Ahmed’s previous decisions, such as winning a Nobel Peace Prize for a peace deal with a dictator, have been controversial yet somehow fortuitous for him. However, the consequences of this latest financial decision may test the limits of his luck and leadership. Ethiopia’s diverse population, often divided along ethnic lines, may find common ground in the face of shared economic hardship. Addis Ababa, already unaffordable for many, may become even less accessible, potentially driving out those who cannot keep up with rising costs. Gatkek Kuajien Chuol, a human rights lawyer and writer, frequently contributes to Addis Insight and YourTango.com, with articles also published on Medium and Substack. His upcoming book, “Ethiopia, Gambella and Ethnic Federalism: A Tragedy for the Minority Ethnics,” explores these themes further.

5 Things to Know About the National Bank of Ethiopia’s New Foreign Exchange Guidelines

5 Things to Know About the National Bank of Ethiopia’s New Foreign Exchange Guidelines The National Bank of Ethiopia (NBE) has released a comprehensive new guideline to regulate the country’s foreign exchange market, set to take effect on July 29, 2024. This directive aims to streamline and standardize forex transactions among authorized banks and foreign exchange bureaus, enhancing transparency and stability in the forex market. Key Highlights of the Directive: Market Participation and Operations: The guideline mandates that only authorized banks and licensed foreign exchange bureaus can engage in forex transactions, both in the wholesale and retail markets. It emphasizes adherence to the “Know Your Customer” (KYC) principle to prevent illegal financial activities and money laundering. Exchange Rate Determination: The directive introduces a requirement for all market participants to set daily buying and selling rates for foreign currencies against the Ethiopian Birr, quoted to four decimal places. Transactions must be conducted at freely determined rates, with a minimum trade amount set at USD 50,000 for inter-bank trades. Transaction Reporting: All forex transactions above a threshold of 1,000 in any foreign currency must be reported daily to the NBE. This includes detailed information on the transaction amount, exchange rate, and counterparty, ensuring comprehensive monitoring of forex activities. Operational Hours and Compliance: The inter-bank forex market will operate from 8:00 AM to 5:00 PM on business days, with forex bureaus allowed to extend operations beyond these hours. All transactions must comply with the Foreign Exchange Directive FXD/01/2024, and non-compliance may lead to penalties or corrective measures by the NBE. Technological Integration: The guideline mandates the use of an electronic forex trading platform approved by the NBE for all inter-bank forex transactions, aiming to improve efficiency and reduce the risk of manual errors. Dispute Resolution: The NBE retains the authority to arbitrate disputes between market participants, ensuring fair play and adherence to market regulations. This new guideline is a significant step towards a more regulated and transparent foreign exchange market in Ethiopia, providing a stable environment for both local and international investors. The NBE encourages all market participants to familiarize themselves with the guideline and ensure compliance to support the overall financial stability of the country.

Ethiopia’s National Bank Aligns Gold Prices with Global Market Rates in New Payment Policy

Ethiopia’s National Bank Aligns Gold Prices with Global Market Rates in New Payment Policy The National Bank of Ethiopia has implemented a new policy for purchasing gold, which links the payment to the daily international gold price and the foreign exchange rate set by the bank. This means that the amount paid to gold suppliers will be calculated by multiplying the current international price of gold with the exchange rate issued by the National Bank every day. This policy shift aims to provide a more transparent and fair system for determining the value of gold transactions in the country. By tying the gold price to the international market, the National Bank ensures that local suppliers receive payments reflective of global market conditions. This approach is part of the bank’s broader strategy to maintain a market-driven policy framework, adjusting foreign exchange policies to better align with economic realities. The National Bank of Ethiopia is the exclusive buyer of gold from domestic producers and suppliers. The bank encourages these suppliers by regularly updating the purchase price, which is influenced by fluctuations in the international gold market and the foreign exchange rate. This dynamic pricing model is intended to provide fair compensation to suppliers and to incentivize the legal sale of gold within the country, reducing the risk of smuggling and illegal trading. Gold producers and suppliers can easily access the daily foreign exchange rate through the National Bank’s official website. This transparency allows them to accurately calculate the expected payment for their gold. Payments are processed through branches of the Commercial Bank of Ethiopia, where suppliers can receive their money on the same day of the sale. This policy also supports the country’s economic goals by stabilizing the gold market, attracting more suppliers to operate legally, and ultimately contributing to the national economy. By offering competitive prices and a reliable payment system, the National Bank of Ethiopia aims to strengthen its role as a central player in the gold market and support the financial stability of gold producers and suppliers.

World Bank Approves $1.5 Billion Initiative, Commits $6 Billion for Ethiopia’s Growth

World Bank Approves $1.5 Billion Initiative, Commits $6 Billion for Ethiopia’s Growth Washington, July 30, 2024 — The World Bank’s Board of Executive Directors has approved the Ethiopia First Sustainable and Inclusive Growth Development Policy Operation, a substantial financial initiative aimed at bolstering Ethiopia’s economic reform agenda. This operation, consisting of $1 billion in grants and $500 million in concessional credit from the International Development Association (IDA), is poised to support home-grown reforms that encourage a more inclusive and resilient economy. The operation is designed to enhance the private sector’s role in the economy, address macroeconomic imbalances, and expand trade opportunities. It also aims to improve fiscal transparency and public spending efficiency, ensuring a more robust and transparent economic framework. Notably, the operation will also focus on protecting poor and vulnerable households from the adverse effects of economic adjustments, providing a critical safety net during periods of transition. Maryam Salim, World Bank Country Director for Eritrea, Ethiopia, South Sudan, and Sudan, emphasized the significance of the reforms supported by this initiative: “Successful implementation of these reforms can help the country reach its full potential so more Ethiopians can thrive. Importantly, there is a strong emphasis on protecting poor and vulnerable people from the costs of economic adjustment and expanding opportunities for them to participate in the economy.” The policy operation is part of a broader engagement by the World Bank in Ethiopia, which includes investments in various sectors such as health, education, social protection, and infrastructure development. This includes support for sustainable land and forest management, renewable energy expansion, and resilience building against climate risks. The initiative is complemented by other World Bank engagements, including the International Finance Corporation’s $320 million investment portfolio and the Multilateral Investment Guarantee Agency’s $1.15 billion in guarantees. Looking ahead, the World Bank commits to supporting Ethiopia’s aspirations to become a middle-income country, with plans to provide around $6 billion in new commitments over the next three years. This support aims to drive economic reforms and fast-track budget support, underscoring the Bank’s long-term investment in Ethiopia’s economic stability and growth. The World Bank Group also expressed condolences to those affected by the recent landslide in the Gofa Zone, offering readiness to assist in recovery efforts. For more information, visit IDA.worldbank.org.