US Dollar Soars against Birr Following Central Bank’s Bold Policy Shift

In an extraordinary turn of events, the US Dollar surged against the Birr, reaching 74.7 Br in cash buying rates as of today, July 29, 2024. Selling rate is at 76.2 Br for a dollar. The state-owned Commercial Bank of Ethiopia (CBE) trades the Birr 30pc higher that the 58.6 Br traded late last week. The change marks a shift in the foreign exchange market, driven by the National Bank of Ethiopia's (NBE) unprecedented policy move towards liberalisation.

The NBE's recent bold strategy seeks to draw in foreign investments and bring stability to the financial ecosystem through a liberalisation policy. The new approach involves reducing restrictions and allowing market forces to exert more influence on exchange rates.

However, the immediate aftermath of this policy implementation is a steep drop in the Birr value, which has affected major currencies, with the US Dollar experiencing the most pronounced surge. The shift raises concerns among businesses and importers reliant on overseas goods, as costs associated with these imports are forecasted to substantially increase.

Market experts postulate that while the liberalisation measures may be daring and crucial for long-term economic alterations, it could bring about short-term instability and inflationary pressures. With the economy facing potential volatility, the NBE is anticipated to keep a close eye on the development and proactively instigate additional counteractive measures to offset any detrimental consequences on the economy.

Central Bank Governor Mamo Mehiretu vowed this morning to safeguard the Birr, disclosing that billions of dollars in resources to replenish the country’s foreign exchange reserves.

In Ethiopia's economic chronicle, the policy changes unveiled in unprecedented speed is etched as a transformative moment, holding the promise of restructuring the country’s economic future.

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