The National Bank of Ethiopia (NBE) conducted a special foreign exchange auction on Thursday, August 20, 2026, allocating $500 million to commercial banks. This intervention aimed to increase dollar liquidity and support the Birr, following a period where the currency had weakened by 12% over the past year, making it the worst-performing among 23 African currencies tracked by Bloomberg. The NBE's action came two weeks after a previous auction on August 12 saw a weighted average rate rise to 161.7994 Birr per dollar.
In this latest auction, 22 banks submitted bids totaling $710.14 million, with 21 receiving allocations. The NBE was able to cover about 70.4% of the demand, a significant increase from the roughly 26.6% covered in the August 12 auction. The marginal rate settled at 160.2121 Birr per US dollar, and the weighted average rate was 160.2144 Birr per US dollar. This represents about a 1% decrease in the weighted average rate compared to the previous auction, reversing a trend of increases.
This $500 million allocation was four times larger than the $125 million offered at the previous auction and matched the NBE's total planned allocation for four bi-weekly auctions in the first quarter of FY 2026/27. While total demand rose by 51% from $470.17 million to $710.14 million, the increased supply caused the bid-to-cover ratio to drop significantly from 3.76 times to 1.42 times. Despite the substantial injection, $210.14 million in demand remained unmet.
The central bank's intervention efforts in 2026 have now reached $2.7 billion, making it one of the largest currency defense efforts in Africa this year. The consistent spending highlights the pressure on Ethiopia's foreign exchange reserves due to reliance on imported goods, high oil prices, and insufficient export revenues. Analysts suggest that while such large injections can temporarily influence the clearing rate, the long-term effectiveness depends on addressing the underlying structural imbalances in the economy.
