Ethiopia Floats Birr Currency, Seeks IMF Support and Debt Restructuring
Market-Determined Exchange Rate Aimed at Addressing Economic Issues
Ethiopia’s national currency dropped 30 per cent against the dollar after its central Bank floated its birr currency on Monday.
This move is aimed at securing International Monetary Fund (IMF) support and advanced debt restructuring support.
Ethiopia has been grappling with high inflation and foreign currency shortages, and it defaulted on its government debt last year.
Ethiopia requested debt restructuring in 2021, but progress was delayed by the Tigray conflict.
Negotiations with the IMF resumed after a peace deal in Tigray in 2022. The central bank will now allow banks to trade foreign currencies freely with limited interventions.
Prime Minister Abiy Ahmed announced the reforms, and the country expects $10.7 billion in external financing from the IMF, World Bank, and other creditors.
The U.S. supported the shift to a market-determined exchange rate, calling it necessary for addressing economic issues.
Importers welcomed the move, which eliminates reliance on the black market for dollars.
In conclusion, the floating of Ethiopia’s birr currency is a significant step towards addressing the country’s economic challenges, including high inflation and foreign currency shortages. The move aims to secure IMF support and debt restructuring support, and the country expects $10.7 billion in external financing from various creditors.
Q: Why did Ethiopia decide to float its birr currency?
A: The country aimed to secure IMF support and advanced debt restructuring support.
Q: What are the benefits of a market-determined exchange rate?
A: It eliminates reliance on the black market for dollars and allows banks to trade foreign currencies freely with limited interventions.
Q: Who supports the shift to a market-determined exchange rate?
A: The U.S. has expressed support for the move, calling it necessary for addressing economic issues.
Q: How much external financing does Ethiopia expect to receive from creditors?
A: The country expects $10.7 billion in external financing from the IMF, World Bank, and other creditors.
