Behind Gentle Slide, the Brewed Buck Faces Mounting Strain in a Restrained Market

Jul 6 , 2025.

The Birr (Brewed Buck) edged lower against the Dollar (teh Green Buck) last week, a gentle slide that belies a deeper tightening of liquidity. Last week, the average buying rate posted by commercial banks moved from roughly 133.50 Br to about 134 Br for a dollar. Selling rates steadied near 136.50 Br. A shift of only half a Birr may seem trivial, but in a market closely policed by regulators, it signalled growing tension between stubborn dollar demand and a limited pool of foreign exchange, despite official pronouncements of a positive balance of payment and growing forex reserves.

Two banks kept staking out opposite ends of the pricing spectrum. The state-owned Commercial Bank of Ethiopia (CBE) has maintained the lowest rates for several months. It bought dollars at 131.5 Br and sold at 134.13 Br; and, it did not budge last week. That immovable position has created what traders call a floor, offering corporate and retail customers a predictable anchor and tamping down daily volatility. Market watchers view it as a deliberate plan to choke off speculative orders in the forex market.

Oromia Bank has been pursuing a "top-of-book” pricing strategy. Three weeks ago, it paid 135 Br for a dollar; by July 5, the Bank had lifted its buying rate to 136.75 Br and was selling near 139.50 Br, almost five Birr higher than CBE’s quotes. The sustained premium signalled a calculated bid to lure hard currency from companies fighting for dollars.

The Central Bank also nudged its reference rates higher, raising its buying quote from 134.68 Br to 135.14 Br over the past three weeks. The move, though mild, narrowed the gap with big private lenders and hinted that officials acknowledge the growing pressure in the market even as they attempt to avoid spooking exporters or importers.

Across the rest of the banking industry, two camps have emerged.

Zemen and Wegagen banks stayed cautious, offering buying rates shy of 134 Br. Their restraint showed a desire to avoid swelling forex exposures. Awash, Dashen and Abyssinia banks inched toward 135 Br, a recalibration bankers link to stronger demand. Awash, for instance, raised its buying rate from 133.15 Br to 134.18 Br during the week.

Smaller and midtier banks also shuffled their decks. Hijra, Tsehay, and ZamZam, which were previously priced aggressively, retreated below 133 Br, a shift that could indicate tighter Birr funding. Coop Bank and Goh Betoch Bank moved in opposite directions, lifting quotes above 133 Br, perhaps betting that customers would swallow steeper prices.

Amhara Bank offered the week’s most eye-catching print. On Saturday, it paid 134.65 Br for a dollar, well above CBE’s floor and near the top end of private-bank postings. According to market observers, the adjustment may reflect a sudden need for forex or an attempt to court flows from regions flush with diaspora remittances and import-oriented businesses.

The wide dispersion of quotes — CBE at the bottom, Oromia Bank at the top — lays bare the strains in the managed forex regime. While the Brewed Buck's nominal slide last week was modest, the range of bank prices revealed a market's sense of direction in the absence of large official interventions.

Importers remain the loudest suitors. The economy relies heavily on imported fuel, fertiliser, machinery and consumer goods. Although export earnings in coffee and gold (over eight billion dollars) have improved, they lag behind import bills of 19 billion dollars. Remittance inflows, a vital buffer, have grown, but not at a fast enough pace to offset demand. Add in scheduled debt payments and the Central Bank’s own requirements, and the squeeze becomes obvious.

The Central Bank introduced a weekly forex auction last year to redirect hard currency toward priority sectors. While the mechanism has improved transparency, bankers say it has also created a two-tier market: winning bids are cleared at official rates, while everyone else hunts for dollars in the interbank and parallel markets. That leaves liquidity “patchy,” with prices jumping. The Central Bank’s own moves invite careful reading. By inching its buying rate higher, the regulator appears to acknowledge market tension while refusing to chase Oromia Bank’s premium.

The approach may help dampen expectations of a sudden devaluation; however, some analysts caution that gradual adjustments, if too small, risk building pressure beneath the surface.

For now, CBE’s unchanged quote offers customers a shelter from daily swings. However, the steadiness could also mask the accumulation of strain. Should demand tighten further, the Bank may need to lift its floor, an action that would reverberate across the system. Equally, if Oromia Bank’s premium proves too tempting, other banks might follow, widening the high-low band and forcing the authorities’ hand.

Policymakers thus face a delicate balance. Tight supervision has so far prevented a disorderly fall, yet aggressive bids by lenders, such as Oromia Bank, have revealed competitive forces that the rules cannot fully tame. If the gap between the top and bottom of the market widens or if smaller banks struggle to source Green Buck, the Central Bank may need to intervene more directly, whether by selling reserves, revising auction rules or tightening oversight of bank positions.

With no big policy shift on the horizon, most traders expect the Birr’s measured slide to continue. The real question is whether the current mix of soft guidance and selective intervention can hold the line until larger inflows or reforms arrive. For now, the market is stable, but only just.

PUBLISHED ON Jul 06,2025 [ VOL 26 , NO 1314]