Ethiopia introduces new approach to keep Birr’s value


ADDIS ABABA- Ministry of Finance (MoF) said that new multiple policy approaches are introduced to address the existing sharp decline of Birr’s value in par with the USD and other hard currencies, adding that the devaluation method is also diversified.

Commenting on the current pressing economic challenges to local media, Finance State Minister Eyob Tekalign (PhD) stated that meticulous approach, which is derived from Ethiopia’s context is introduced to adjust the distorted foreign exchange system.

Noting that the value of Ethiopia’s Birr is closely associated with foreign exchange earnings and administration, the State Minister indicated that the shortcomings in Ethiopia’s poor market system has caused a huge disparity between Birr’s real value and the amount it is being sold at the market.

As to him, Ethiopia’s foreign exchange system is distorted and the market does not showcase the real value of the Birr. “The mismanagement of the forex crunch pushes the hard currencies to parallel market thereby forcing producers and importers to purchase it in exaggerated amount and soaring the price increment and inflation.”

World Bank and International Monetary Fund’s (IMF) continued recommendation to Ethiopia to solely execute devaluation to encourage export and generation of  foreign exchange does not suit with the country’s status of being a net importer.

Eyob indicated that experiences of countries with the same level of forex reserves with Ethiopia, but do not so much affected by the forex crunch is attesting the fact that the devaluation of Birr will no longer a silver bullet. Accordingly, a fundamental adjustment in the forex system and the boost in local production supply is considered to address the forex crunch.

Sharing the above, Economist at Addis Ababa University College of Development Studies Nigussie Seme (PhD) said that the previous devaluation measures had not brought about the desirable outcomes due to Ethiopia’s

 negative trade balance. The devaluation actions that were taken place during the past decade affected the economy in soaring the price of the bulk imports and aggravating inflation and cost of living.

The expert pointed out that government’s initiative to take integrated policy interventions instead of a mere devaluation of Birr is laudable, expressing his optimism that the measure would play a pivotal role in ensuring the Birr’s real value in the exchange market.

As to Eyob, due attention has been given to adjust the trade balance and Ethiopia’s export capacity in a view to enhancing the availability of foreign currencies thereby narrowing down the Birr’s value in the exchange market.

The Ethiopian Herald February 4/2021

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