Economic Gains Threatened by Currency and Regulation

Oct 5 , 2025

Ethiopia is navigating a complex economic landscape. While the government has launched significant liberalisation efforts, structural restrictions, currency volatility, and challenging regulatory practices continue to weigh on progress, according to the 2025 U.S. Ethiopia Investment Climate Statement. In a major reform step, Ethiopia introduced a floating exchange rate in July 2024. The move caused the Birr to depreciate over 100 percent, temporarily narrowing the gap with the parallel market. Coupled with measures to strengthen the National Bank of Ethiopia’s independence, this secured a 10.5 billion dollars assistance package from the IMF and World Bank. The government has also taken steps to open sectors such as telecommunications, import-export, and wholesale and retail trade. Initiatives to attract investment include the relaunch of the Ethiopian Securities Exchange and the implementation of a public-private partnership proclamation. Despite these advances, investors continue to face hurdles. The gap between official bank exchange rates and the parallel market is re-emerging, fueling foreign currency shortages. Banking sector liberalisation remains incomplete, as the Banking Proclamation still blocks majority foreign ownership of Ethiopian banks. A narrow tax base has led authorities to target foreign businesses with heavy and often questionable tax bills. Non-transparent, retroactive changes by the customs commission add to corporate losses. Ethiopia’s Sovereign Wealth Fund, Ethiopian Investment Holdings (EIH), created in December 2021, also draws criticism for its lack of transparency, with reported asset figures likely overstated.