Ethiopia has taken a significant step towards liberalizing its economy by starting to license independent foreign exchange bureaus. The announcement came on Thursday from the country’s central bank. This move is part of a broader plan to overhaul the financial sector following the recent free floatation of the local birr currency.
The decision to introduce independent forex bureaus aligns with the National Bank of Ethiopia’s ambitious goal to transform the country’s financial landscape. According to central bank governor Mamo Mihretu, this development marks a crucial milestone in opening up Ethiopia’s financial sector and bringing it in line with international standards.
Ethiopia has been grappling with severe economic challenges, including high inflation and a chronic shortage of foreign currency. These issues culminated in a debt default late last year, placing the country in a precarious financial position. To address these problems, the government has been working closely with the International Monetary Fund (IMF). Just weeks ago, Ethiopia secured a $3.4 billion loan from the IMF, a crucial step towards debt restructuring.
The recent floatation of the birr has led to a significant depreciation of the currency, with its value dropping by approximately 40% against the US dollar. Despite the currency’s decline, Prime Minister Abiy Ahmed has defended the decision, arguing that it will help to eliminate the gap between the official and black market exchange rates.
As Ethiopia navigates this period of economic reform, the establishment of independent foreign exchange bureaus is expected to play a vital role in stabilizing the currency market and boosting investor confidence.