Three weeks into the floated exchange market, policymakers and business owners convened to chart a course on the prospects and pitfalls of navigating the uncharted territory. Policymakers expressed optimism while businesses with disrupted operations voiced concerns over substantial risks, with soaring costs, inflating credits, structural vulnerabilities, and illicit activities threatening stability.

A comprehensive discussion at Inter Luxury Hotel, Tito St., underscored the delicate moment the country is passing through amid macroeconomic reforms.

According to Abebayew Duferaw, deputy director of Foreign Currency Monitoring & Reserve Management at the central bank, the reforms will address currency shortages, promote economic growth, and foster a more competitive and transparent foreign exchange market. He noted that adopting a market-based monetary policy is crucial to resolving long-standing macroeconomic constraints.

Exporters can now retain 50pc of their foreign exchange proceeds, up from the previous 40pc. The waiting list system for banks' forex allocation is also eliminated, allowing easier access for importers while banks can freely negotiate foreign currency exchange rates with customers.

"We were bold with most of the reforms," said Abebayhu, while acknowledging ongoing concerns.

However, he also expressed lingering concerns, revealing that the central bank had revoked permits for several importers who requested under-invoiced LCs from 10 commercial banks, warning of the risks associated with foreign currency diversion. He also mentioned upcoming revisions to directives, including changes to Franco Valuta regulations.

"It is risking foreign currency diversion," he warned.

He advised importers to take heed and disclosed that controlling mechanisms are being enhanced with commercial banks to bolster the monitoring and supervision spectrum.

Businesses, however, revealed a series of difficulties they have faced in the past weeks. Unsettled payments, rising costs, market volatility, unpredictability, and bureaucratic inefficiencies are stifling their operations.

The reform has immediate consequences for importers and manufacturers such as Yesimashewa Eshetu, who is now facing higher costs and is on the brink of bankruptcy. He disclosed that manufacturers who had already calculated their cost build-up before opening LCs are encountering major losses due to the reform and ensuing inflated costs.

He said liquidity limitations at banks are preventing them from borrowing working capital and is frustrated that unsettled suppliers' credit initiated before the reform hit his company hard. He is struggling to cover unexpected additional costs.

"How will these scathing problems find a solution?" he inquired.

On behalf of the Ethiopia Publishers & Printers Association, Haymanot Asfaw, described a market in turmoil, with suppliers withholding products amid soaring inflation and uncertainty.

Some see the long-term potential. Gizat Worku, general manager of the Ethiopian Coffee Association, sees potential long-term benefits for exporters after they recover from the losses they have encountered. He believes that a currency exchange float is a step forward to encourage exports and increase foreign currency inflows. However, Gizat noted that inflated domestic commodity costs and their mismatch with international prices are issues that need to be addressed.

"The floating will benefit exporters in the long run," he told Fortune.

Abebe Shimeles (PhD), an economic advisor to the Ministry of Finance, noted that the reforms were made without external influence, to achieve robust macroeconomic stability through quantitative goals by maintaining an exchange rate that unifies with the parallel market.

"Short-term shocks were expected," he said.

Abebe cited policy, market, and government failures that have repressed the economy into one of the lowest poverty lines. He said major challenges include inflation, the informal economy, the expansion of the parallel market, and the debt burden. According to Abebe, GDP growth has been hampered to 6.1pc, despite multiple domestic and external challenges over the past four years.

He revealed that a nominal increase of the parallel rate by one percent reduces the annual growth rate by 0.4pc while remittance inflows have been negatively impacted. Abebe's research shows that every one percent premium in the parallel market reduces remittance inflows by nine percent. He said the average annual growth rate of exports is 5.9pc, garnering the country around three billion dollars. Meanwhile, consumer prices respond to changes in parallel exchange rates.

"We have one of the most complex economies," he said.