Ethiopia To Float Currency Regime

The federal government has announced its intentions to shift the country’s foreign exchange rate regime to a market based system, marking a significant departure from the long-held fixed exchange rate policy.

The Office of the Prime Minister revealed the change in a ‘Macroeconomic Reform Program Policy’ statement released today. Banking industry insiders have been anticipating the switch to a market based regime in the lead up to the final stages of government negotiations with the IMF, which look likely to wrap up with an agreement before the end of July.

“[A] Market-based exchange rate regime is critical to relieve FX shortages, removing constraints to private sector investment and growth, aligning the prices of imported and exported goods and services with market realities. This approach also addresses imbalances in the balance of payments and offers numerous additional benefits,” reads the PM’s statement. 

It also touched on other policy reforms, including the introduction of an interest-based monetary framework, major fiscal policy shifts, and government debt management reforms.

“Our economic reform program, supported by the International Monetary Fund, the World Bank, and other significant development partners, is projected to deliver substantial benefits and outcomes to our economy,” reads the statement.