Ethiopian currency birr has dropped to a new record low against US dollar in parallel market. The US dollar is being sold for around 174 in the black market.
Ethiopian currency birr started its downward journey in July last year when the government introduced macro economic reforms and liberalized foreign exchange market. Back then, official birr to dollar exchange rate was 58, but in black market dollar was being sold for around 120 birr. The government last year, on introducing the reforms, said that it wanted to kill the black market through new reforms. Immediately after the reforms were announced, birr plunged to over 100 against dollar in official market but the difference between black and official markets could not be considerably narrowed down.
Today, Commercial Bank of Ethiopia’s birr to dollar exchange rate is 137, but in black market dollar is being sold for over 170.
Implementation of macro economic reforms was one of the pre requisites by the International Monetary Fund and World Bank for a bailout package for Ethiopia. Ethiopia has received over $3 billion from the lending institutions in the last 12 months.
However, IMF, over a week ago, questioned sustainable economic growth in Ethiopia. It urged Ethiopia to ensure stability and attract more direct foreign investment.
Around 38% difference in the price of birr between open and black markets indicates that Ethiopian economic troubles, despite having received a bailout package, are far from being over.
