Ethiopia devalues currency to boost exports
Ethiopia’s central bank devalued the country’s currency on Tuesday, in a bid to boost stagnating exports.
National Bank of Ethiopia Vice Governor confirmed it was devaluing the Ethiopian birr (ETB) by 15 percent during a press conference – the first time it has devalued the currency in seven years. Vice Governor Yohannes Ayalew told reporters in Addis Ababa the move will help boost the country’s economy by reviving exports.
Ethiopia devalues currency
The National Bank of Ethiopia’s decision to devalue the Ethiopian birr comes after repeated advice from the International Monetary Fund (IMF) and the World Bank to take such action in order to boost exports.
“The devaluation was made to prop up exports, which have stagnated the last five years owing to the birr’s strong value against major currencies,” Yohannes Ayalew said at the news conference on Tuesday.
The majority of Ethiopia’s exports are unprocessed products, which need to remain competitive on price for international markets. Ethiopia has operated a managed floating exchange rate since 1992 but exports have been falling short of targets in recent years.
Interest rate also raised
The central bank also announced on Tuesday that it has raised the national interest rate from 5 percent to 7 percent. The move is designed to stimulate savings and counter inflation that is likely to result from devaluing the nation’s currency.
“The rate was pushed to mitigate the inflationary pressure that could arise from the devaluation,” Yohannes said.
Ethiopia is one of the fastest growing in Africa but development has been fuelled by heavy public spending. Security issues in recent years have had a negative impact on foreign investment and private sector spending while dwindling exports have also reduced the country’s external income.
Featured image: National Bank of Ethiopia