Ethiopia: Ethiopia Devalues Its Birr Currency 17% Against Dollar, Central Bank Says – By Jason McLure
Ethiopia devalued its currency, the birr, by 17 percent against the dollar, the third such move in the past 14 months, according to the National Bank of Ethiopia.
The exchange rate was quoted at 16.351 per dollar today compared with 13.628 yesterday, according to the website of the Addis Ababa-based central bank. It was trading at 11.381 on July 10 last year.
The devaluation will crimp imports and make it easier to boost foreign currency reserves. Ethiopia needs to raise its reserves to 3 months of import cover from 2.3 months to cushion its economy from external shocks, a June report from the International Monetary Fund said.
There is a “need for a 10 percentage point real exchange rate depreciation” in order to achieve that goal, the IMF said in the report.
Ethiopia’s trade deficit was expected to grow to $7 billion in the fiscal year to July 7 from $6.3 billion the year before, according to IMF figures.
Ethiopian birr devalued: central bank data
ADDIS ABABA (Reuters) – The Ethiopian birr was devalued by 16.7 percent on Wednesday, according to exchange rates published on the central bank’s website.
The birr was quoted by the National Bank of Ethiopia at a weighted average of 16.3514 against the dollar compared with 13.6284 on Tuesday. A central bank official confirmed the new rate but was not authorised to make further comment.
Last month, the government unveiled an ambitious five-year economic plan which targets average annual economic growth of 14.9 percent over the period and aims to end the Horn of Africa nation’s dependence on food aid.
Ethiopia is Africa’s biggest coffee exporter and the world’s fourth largest exporter of sesame. It is also one of Africa’s biggest potentional markets — with a population of 80 million — and most of its people have no telephones or bank accounts.
Devaluations can spur economic growth and reduce current account deficits to the extent they boost exports and discourage imports, although they carry the risk of importing inflation.
Ethiopia’s inflation rate slowed to 5.7 percent in July.
The country — still one of the world’s poorest with nearly 10 percent of the population relying on emergency food aid last year — is keen to attract foreign investment in agriculture and mineral exploration.
Ethiopia has operated a managed floating exchange rate regime since 1992.