Ethiopia has spent about $2.2 billion this year trying to support its weakening currency, but the intervention has so far failed to stop the birr from sliding to record lows.
The birr has fallen 3.2% against the dollar this year to nearly 162 per dollar, making it the weakest-performing currency over the past year among 23 African currencies tracked by Bloomberg.
The pressure has intensified as higher oil prices increase Ethiopia’s import costs and reduce the availability of foreign currency.
The latest intervention by Ethiopia’s central bank attracted bids worth roughly four times the amount of dollars offered, highlighting the strength of demand for hard currency.
The birr has been under pressure since Ethiopia allowed a major devaluation in 2024 as part of economic reforms backed by the International Monetary Fund. More recently, higher fuel and fertiliser costs linked to the Iran conflict have added to the strain, while remittances from Ethiopians working in Gulf countries have weakened, per Bloomberg.
Ethiopia relies heavily on imported oil, so higher global energy prices typically put upward pressure on its currency.
The pressure is even more visible outside the official market. In Addis Ababa, the dollar is trading for around 180 birr, roughly 15% above the official exchange rate.
Reserves face fresh pressure
The central bank’s interventions could also reduce Ethiopia’s foreign-exchange reserves, even as the country has benefited from record gold exports.
The central bank has not disclosed its reserves in dollar terms, but an IMF report in July estimated them at about $5.9 billion.
Meanwhile, the government expects a wider budget deficit in the fiscal year that began in July, partly because of additional spending on fuel subsidies.