Gold Boom Buoys Exports But Erodes Central Bank's Stability

Feb 7 , 2026.

Ethiopia’s new love affair with gold looks, at first glance, like an economic fairy tale.

For a country starved of hard currency, mired in arrears and stuck in debt talks under the G20’s Common Framework, the relief could hardly be timelier. Export income is the cleanest source of dollars. Undoubtedly, it beefs up reserves and grants policymakers breathing space. Little wonder headlines hail a “golden rescue”.

In the second quarter of last year, export earnings leapt by 128.5pc from a year earlier. Gold alone supplied 45.4pc of total receipts, up from 11.1pc. Volumes declared at customs were 10 times higher, even as global prices slipped by roughly 10pc. Exports reached 1.76 billion dollars, the trade deficit narrowed to 3.3 billion dollars from 4.3 billion dollars, and the current-account gap shrank to 864 million dollars from 2.16 billion dollars.

Nonetheless, below the balance-of-payments (BoP) tables, the shine dulls. The National Bank of Ethiopia (NBE) has been buying bullion at a premium and selling it at a discount. In the year to June 30, 2025, its audited accounts show 275.2 billion Br in revenue from gold sales, up from five billion Birr, but 315.6 billion Br in purchase and refinery costs, up from 6.9 billion Br. Before valuation effects, this meant a loss of about 40 billion Br. Auditors uncovered a 57.2 billion Birr hit from “loss on sales of gold and write-downs to net realisable value”.

Earlier advice from the International Monetary Fund (IMF) had urged Ethiopia to “avoid heavy engagement in gold trading”, warning that such exposure would “lead to continued losses for a Central Bank already navigating a fragile macro-economic environment”. The auditors echoed that refrain, flagging negative equity and “going-concern risks” for the NBE if losses persisted. Those warnings now read prescient.

The figures that galvanised interest are striking partly because they arrived so quickly. Two years ago, gold provided barely a tenth of export earnings. Last year, it was almost half. Coffee, once the undisputed king in the export arena, now plays second fiddle. Oilseeds, pulses and khat, cash crops that sustain millions of smallholders, have been shoved aside. A single quarterly shift has thus overturned a decades-old export hierarchy.

However, volume, not price, drove the change. International bullion quotes fell, yet Ethiopia’s shipments soared. That gap revealed the power of local policy levers. Officials tout tough border patrols and traceability schemes that discourage smuggling into Sudan, Kenya and Djibouti. Traders whisper that an overvalued official exchange rate and delays in surrendering proceeds still make the informal path tempting. Each side may be partly right. The truth remains buried in unshared spreadsheets.

How can one metal deliver macro relief and institutional pain at once?

The answer is how Ethiopia captures and prices gold. A 10-fold jump in volume in a country that has not discovered a new seam points to policy, not geology. Economists cite three shifts. Tighter border policing may have steered miners into legal channels. Exchange-rate tweaks narrowed the penalty for formal sales. Most importantly, the NBE’s domestic purchase scheme has offered prices attractive enough to pull gold out of hiding.

If formalisation alone were at work, the story would been benign. Gold was always leaving Ethiopia, now it is recorded, and its proceeds flow through banks. The balance of payments would improve without new costs. The accounts show a less happy tale. Gains in the external sector are being financed by quasi-fiscal losses borne by the Central Bank. The balance sheet can be stretched until monetary credibility cracks.

However, Ethiopia, wrestling with double-digit inflation and rising bad loans, can ill afford that path.

Statistics behind the boom contain blind spots. Export proceeds appear in current-account data when bars cross the border, yet dollars may reach the NBE weeks later. Surrender ratios and settlement lags are unpublished. Purity varies widely, with artisanal output ranging from 60pc to 90pc. If the Central Bank pays miners on rosy assays and later ships lower-grade metal, write-downs follow. Customs, the NBE and the Ministry of Mines each keep partial ledgers. None reconciles smoothly.

Opacity matters because concentration risk is soaring. An export basket, once built on coffee, oilseeds, pulses, khat, and a sliver of manufacturing, now rests on one volatile commodity. A fall in bullion prices, a supply hiccup or a crackdown on dirty gold in destination markets could wipe out half of Ethiopia’s hard-currency earnings overnight. Compliance worries grow as buyers screen their supply chains for links to conflict finance, environmental harm, and money laundering.

A sturdier response begins with clean data. Ethiopia could publish a gold annexe to its quarterly BoP, including volumes, average purity, purchase price, export price, proceeds received, surrender ratio, and who bears each risk. Without numbers, policy becomes guesswork and rumours thrive.

Next, pricing rules should be formula-driven and public. Paying miners a fixed discount to the London benchmark adjusted for purity and freight would cap the subsidy. If the state wants to pay a premium to fight smuggling, let the cost be passed through the budget, not hidden at the Central Bank. Leaving price risk with a monetary authority that lacks fiscal backing is folly. Better to house the purchase scheme in a standalone agency with its own capital and audits, rolling positions off to the reserve bank quickly.

Windfall dollars, however fragile, should be banked, not spent. Reserve cover remains thin. Some of the extra cash could clear arrears and rebuild buffers. The rest could include export diversification, irrigation for coffee farmers, power for industrial parks, and border trade facilitation. The federal government plans macroeconomic reforms and seeks IMF help; earmarking part of the gold gains for social programme cushions would strengthen its case.

Nothing will work if trust keeps ebbing. Remitters, long the largest source of dollars, increasingly use informal networks. Investors left in debt-service limbo scout rival destinations. To lure them back, policymakers should clarify their exchange-rate path, relax cumbersome surrender rules, tame inflation and calm its war-scarred regions.

The lure of gold is understandable. It delivers instant dollars without tax rises or spending cuts. But Ethiopia’s crunch is structural. It has an import-heavy economy with scant exports, a fiscal situation dependent on money printing, and a debt stock the IMF and World Bank deem unsustainable. Wagering the Central Bank’s capital on a single commodity will not mend these flaws. It risks swapping an external crisis for a monetary one. Losses keep piling up.

Gold is neither hero nor villain. It is a test. The test is whether Ethiopia can turn a commodity bonanza into lasting stability or repeat the familiar African tale of windfalls squandered and institutions weakened. The balance of payments now glitters. But, the balance sheet does not. Unless policymakers reconcile the two, Ethiopia’s gold rush may fade as swiftly as it arrived, leaving only shine on paper and a Central Bank deep in the red.

PUBLISHED ON Feb 07,2026 [ VOL 26 , NO 1345]