Ethiopia Eases Forex Curbs As It Awaits Crucial Bailout

Ethiopia eased foreign exchange curbs on Monday as part of a broad economic reform package, as the Horn of Africa nation awaits a multi-billion dollar bailout from international lenders

Addis Ababa, (APP - UrduPoint / Pakistan Point News - 29th Jul, 2024) Ethiopia eased foreign exchange curbs on Monday as part of a broad economic reform package, as the Horn of Africa nation awaits a multi-billion dollar bailout from international lenders.

The value of the local currency, the birr, slid by around 30 percent after the central bank announcement.

"The reform introduces a competitive market-based determination of the exchange rate and addresses a long-standing distortion within the Ethiopian economy," the National Bank of Ethiopia (NBE) said in a statement.

Africa's second most populous country is pinning its hopes on a rescue package of at least $10.5 billion from external lenders including the International Monetary Fund (IMF), but negotiations have been long and fraught.

Analysts say the IMF has called for numerous reforms of Ethiopia's tightly state-controlled economy, including floating the currency, in order to unlock the funding.

Battered in recent years by several armed conflicts, the Covid pandemic, and climate shocks, the country has about $28 billion of external debt and is grappling with sky-high inflation at around 20 percent and a shortage of foreign currency reserves.

Under the shift to a market-based exchange rate regime, the NBE said "banks are henceforth allowed to buy and sell foreign currencies from/to their clients and among themselves at freely negotiated rates".

The central bank would, it said, make "only limited interventions to support the market in its early days and if justified by disorderly market conditions".