Ethiopia's central bank has reportedly deployed $2.2 billion since the beginning of 2026 in an effort to defend the birr, which has been steadily losing value. This significant intervention comes as the currency has depreciated 3.2% year-to-date, reaching a historic low of 162 birr to 1 US dollar. This makes the birr one of Africa's worst-performing currencies in the past year.
The central bank's efforts include a recent special foreign-exchange auction where it offered $500 million, an amount equivalent to the entire sum originally planned for the first quarter's regular auctions. In the prior regular auction on August 12, the central bank allocated $125 million against bids totaling $470.17 million from 28 commercial banks, with only nine receiving allocations. The weighted average rate in that auction was 161.7994 birr per US dollar.
External pressures are exacerbating the currency crisis, including rising oil prices and conflicts related to Iran, which are increasing the cost of fuel and fertilizer imports. Additionally, remittances from Gulf-based workers have declined. Sarah Baynton-Glen, an economist at Sharbat Bank, attributes the crisis to structural current account deficits. The persistent gap between demand and supply for foreign currency is evident, with bids frequently exceeding the amounts offered by the central bank in its auctions. For instance, demand surged to about $1.06 billion at the May auction, more than twice the $500 million offered.
