Ethiopia’s Prime Minister Abiy Ahmed has revealed plans to float the country’s currency, the birr, as part of sweeping macroeconomic reforms aimed at addressing longstanding challenges. The East African nation, known as the Horn of Africa, currently operates under a managed floating exchange rate system, which has contributed to a scarcity of dollars crucial for imports and foreign investors’ profit repatriation.
In a comprehensive policy statement shared via X (formerly Twitter), Abiy emphasized the program’s goals of rectifying foreign exchange imbalances and resolving structural deficits in the balance of payments. According to him, transitioning to a market-based foreign exchange regime is pivotal in alleviating currency shortages, dismantling barriers to private sector investments, fostering economic growth, and harmonizing the prices of imported and exported goods and services with prevailing market conditions.
This development comes on the eve of an anticipated meeting with the International Monetary Fund (IMF), where Ethiopia is slated to discuss a potential new financing arrangement. Bloomberg News reported on July 25 that discussions during the IMF meeting are expected to focus on Ethiopia’s financing needs.
Earlier this month, Prime Minister Abiy informed parliament about ongoing negotiations with the IMF and the World Bank, expressing optimism that these discussions could unlock over $10 billion in financial support over the coming years, although specifics were not disclosed.
Ethiopia’s decision to float its currency marks a significant step in its efforts to overhaul its economic landscape, aiming to address longstanding economic challenges and attract much-needed international financial support.
