https://www.polity.org.za
Deepening Democracy through Access to Information
Home / News / African News RSS ← Back
Financial|Lifting
Financial|Lifting
financial|lifting
Close

Email this article

separate emails by commas, maximum limit of 4 addresses

Sponsored by

Close

Article Enquiry

Ethiopia's PM defends currency float amid inflation concerns

Close

Embed Video

Ethiopia's PM defends currency float amid inflation concerns

Ethiopian Prime Minister Abiy Ahmed
Photo by Reuters
Ethiopian Prime Minister Abiy Ahmed

2nd August 2024

By: Reuters

SAVE THIS ARTICLE      EMAIL THIS ARTICLE

Font size: -+

Ethiopian Prime Minister Abiy Ahmed has defended this week's switch to a market-determined foreign exchange rate, saying it aimed to close the gap between the official and black market rates and did not amount to a devaluation of the birr currency.

The central bank allowed the birr to float freely on Monday, fulfilling a key condition to secure financial support from the International Monetary Fund and other creditors, and to put the nation's long-delayed debt restructuring back on track.

Advertisement

The birr has since then lost 31.5% against the dollar, to trade at 83.94 per greenback, the country's biggest lender, Commercial Bank of Ethiopia, said on Friday, and some economic analysts and commentators have voiced concern that inflation could surge.

"Saying Ethiopia has devalued its currency is wrong," Abiy said late on Thursday in a televised briefing to explain the new policy.

Advertisement

"There were two markets. One is 100 and the other is 50. So when the gap between the two became wide, it brought many dangers. So what we said (the two) should be unified," he said.

While lifting foreign exchange trading restrictions helped Ethiopia clinch the IMF deal and funding from other creditors including the World Bank, concern about the policy's inflationary impact on low-income households has led at least two local governments to crack down on shops raising prices.

The government and its creditors say the liberalisation will help the private sector make a bigger contribution to the economy and boost long-term growth.

Hours after floating the currency, Ethiopia got a new financing deal of $3.4-billion from the IMF, a move a senior finance ministry official said would make way for the completion of its debt restructuring in the next three to six months.

Soon after, the World Bank approved $1.5-billion in financing for its first ever budget support lending to Ethiopia. Abiy said the new financing would save $200-million from the restructuring of its $1-billion Eurobond.

EMAIL THIS ARTICLE      SAVE THIS ARTICLE

To subscribe email subscriptions@creamermedia.co.za or click here
To advertise email advertising@creamermedia.co.za or click here

Comment Guidelines

About

Polity.org.za is a product of Creamer Media.
www.creamermedia.co.za

Other Creamer Media Products include:
Engineering News
Mining Weekly
Research Channel Africa

Read more

Subscriptions

We offer a variety of subscriptions to our Magazine, Website, PDF Reports and our photo library.

Subscriptions are available via the Creamer Media Store.

View store

Advertise

Advertising on Polity.org.za is an effective way to build and consolidate a company's profile among clients and prospective clients. Email advertising@creamermedia.co.za

View options

Email Registration Success

Thank you, you have successfully subscribed to one or more of Creamer Media’s email newsletters. You should start receiving the email newsletters in due course.

Our email newsletters may land in your junk or spam folder. To prevent this, kindly add newsletters@creamermedia.co.za to your address book or safe sender list. If you experience any issues with the receipt of our email newsletters, please email subscriptions@creamermedia.co.za