Ethiopia: Central Bank announces floating exchange rate regime

Yinager Dessie, the governor of the BNE.

The National Bank of Ethiopia (NBE), may apply a fully flexible exchange rate regime over the next three years, announced Friday, September 6, the governor of BNE, Yinager Dessie.

The governor is formal, Ethiopia which has experienced a growth momentum since the last decade (10% growth rate on average) will imperatively revise its exchange rate regime.

The country, he says, will opt for the foreign exchange market (confrontation of supply and demand for money) to stabilize the level of its currency, deemed overvalued by the IMF.

« There is no doubt that we should slowly move to the type of forex management of the market. But our problem is that we have to watch the timing, « said the manager.

Created in 1945, the Ethiopian currency (birr) is currently following a weak exchange rate regime. The latter is decided by the central bank, and not by the actual demand on the international markets.

In 2015, the IMF estimated that Birr was overvalued by 30%. This overvaluation has reduced the competitiveness of exports.

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