Economy
Tight Birr Liquidity Squeezes Bids at NBE Foreign Exchange Auction
Capital Ethiopia · 2 weeks ago · Read the Full Story on Capital Ethiopia
AI SUMMARY
Commercial banks failed to fully absorb the National Bank of Ethiopia's foreign exchange supply for the first time, driven by a temporary birr liquidity crunch rather than a structural decline in hard currency demand.
- During the September 9, 2026 foreign currency auction, the National Bank of Ethiopia offered 125 million US dollars, but 20 participating banks submitted total bids of only 120 million US dollars, leaving 5 million dollars unallocated.
- All participating institutions received their requested allocations in full at a weighted average exchange rate of 160.5357 birr per US dollar, with the marginal rate settling at 158.3500 birr, reflecting a 1.16 percent appreciation of the birr.
- Financial analysts explain that the undersubscription stems from a tight birr liquidity position among commercial banks rather than a structural decline in dollar demand.
- Gross foreign exchange reserves improved to 5.5 billion US dollars by the first quarter of fiscal year 2026, covering roughly 3.5 months of imports.
- A special auction on August 19, 2025, injected 500 million US dollars and cleared significant pent-up demand, helping moderate subsequent requirements.
- The NBE has replaced administrative currency allocations with regular bi-weekly auctions under a market-based framework introduced in July 2024.
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