Ethiopia Burns $2.2 Billion Defending Birr as Currency Sinks 3.2% to Record Low
Updated
Updated · Business Insider Africa · Aug 19
Ethiopia Burns $2.2 Billion Defending Birr as Currency Sinks 3.2% to Record Low
1 articles · Updated · Business Insider Africa · Aug 19
Summary
The birr slid 3.2% this year to nearly 162 per dollar despite Ethiopia spending about $2.2 billion to support it, leaving it the weakest performer among 23 African currencies tracked by Bloomberg.
Oil-driven import costs and broader demand for hard currency have overwhelmed central bank supply; in the latest intervention, bids were roughly four times the dollars on offer.
Addis Ababa's black market now prices the dollar at about 180 birr—around 15% above the official rate—signaling persistent shortages and pressure ahead of Ethiopia's New Year and import financing needs.
The strain comes after a 2024 IMF-backed devaluation and could intensify as interventions drain reserves estimated by the IMF at $5.9 billion, while the government also expects a wider budget deficit partly from fuel subsidies.
Despite a $2.2 billion defense, Ethiopia's currency is collapsing. Will IMF-backed reforms trigger an economic meltdown before saving the nation's reserves?
With black-market premiums soaring, how long can Ethiopia's central bank prevent a total currency collapse amid crushing global fuel shocks?