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Economy

National Bank: Auction-Based Foreign Exchange Will Not Continue Indefinitely

The Reporter (Amharic) · 6 hours ago · Read the Full Story on The Reporter (Amharic)
National Bank: Auction-Based Foreign Exchange Will Not Continue Indefinitely
AI SUMMARY

The National Bank of Ethiopia announced that its auction-based foreign exchange supply to banks is a temporary measure and will not continue indefinitely as the banking sector gains independence.

  • The National Bank of Ethiopia announced that the foreign exchange currently provided to banks through auctions will not continue permanently.
  • Vice Governor and Chief Economist Fikadu Digafe stated that the banking system is beginning to stand on its own feet.
  • During the last fiscal year, over 17 billion USD was spent on imports and other purchases through the banking system alone, excluding Franco Valuta.
  • The NBE's auction-based foreign exchange supply accounted for only 17 percent of the total 17 billion USD spent on imports.
  • The NBE's future role in foreign exchange supply will be limited to providing temporary support for essential goods.
  • The central bank currently intervenes in the foreign exchange market to support bank liquidity, bolster market development, and stabilize prices for essential goods.
  • The NBE does not have a dual mandate to provide permanent foreign exchange support to banks, with its primary goals being to increase foreign exchange reserves and ensure currency stability.
  • The exchange rate is now market-determined, and future NBE interventions will be limited to curbing excessive volatility and strengthening supply.
  • The gap between official bank exchange rates and the parallel market has narrowed substantially following the reforms.
  • Minister of Planning and Development Dr. Fitsum Assefa stated that the floating of the Birr and macroeconomic reforms have resulted in a significant reduction in inflation, contrary to earlier fears.
Read the Full Story on The Reporter (Amharic)
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