Ethiopia has allowed its currency to trade freely to secure International Monetary Fund (IMF) support and make progress on a long-delayed debt restructuring.
Ethiopia has allowed its currency to trade freely to secure International Monetary Fund (IMF) support and make progress on a long-delayed debt restructuring.
The National Bank of Ethiopia announced on its website that banks can now buy and sell foreign currency at freely negotiated rates.
"The central bank will make "only limited interventions to support the market in its early days and if justified by disorderly market conditions."
The birr's value against the U.S. dollar has plummeted by 30%, reaching 74.73 birr per dollar, according to the Commercial Bank of Ethiopia, the country's largest lender. The currency was trading at 57.48 birr to the dollar just on Friday, Reuters reported.
Ethiopia has operated under a managed floating exchange rate system, leading to a shortage of dollars essential for imports and profit repatriation by foreign investors.
The East African country has been contending with increased financial difficulties arising from the effects of the COVID-19 pandemic and a concluded two-year civil war in November 2022.
Last December, the country became the third economy on the continent to default on its government debt late last year.
The government is currently negotiating with the IMF and World Bank to secure $10 billion in financing.
According to a Bloomberg, an IMF team is scheduled to discuss Ethiopia's request for a new financing program on Monday.
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