Ethiopia has spent approximately $2.2 billion this year attempting to stabilize its currency, the birr, which has nonetheless fallen to record lows. The birr has depreciated by 3.2% against the dollar this year, reaching nearly 162 per dollar, making it the worst-performing currency among 23 African currencies tracked by Bloomberg over the past year. This weakening trend has persisted since the government implemented IMF-backed exchange-rate reforms in 2024.
The pressure on the birr is exacerbated by rising global oil prices, which increase Ethiopia's import costs for fuel and fertilizer. Demand for foreign currency significantly outstrips the supply from the central bank; a recent dollar auction saw bids four times the amount offered. This scarcity has created a substantial gap between official and black-market exchange rates, with the dollar trading around 180 birr informally in Addis Ababa, about 15% above the official rate.
While the central bank has not publicly disclosed its foreign exchange reserves in dollar terms, an IMF report in July estimated them at about $5.9 billion. Continued interventions to support the birr are expected to further strain these reserves, despite some benefits from record gold exports. Analysts have differing outlooks, with Standard Chartered's Sarah Baynton-Glen expecting a slower depreciation to 163 birr per dollar by year-end, while Citigroup's David Cowan anticipates a further weakening to between 185 and 195 birr per dollar by year-end, although he expects authorities to prevent it from crossing 200 birr per dollar.
