Ethiopia’s Exchange Rate Reforms: From Dirty Peg to Managed Float
Ethiopia’s Exchange Rate Reforms: From Dirty Peg to Managed Float Addis Ababa The Pre-Float Regime and Rationale for Reform For decades Ethiopia maintained a dirty peg exchange-rate system. Under this regime the Ethiopian birr was effectively fixed or only slowly adjusted against the U.S. dollar, while strict controls governed all foreign exchange (FX) transactions. Commercial banks were subject to directives: 30% of all foreign-currency inflows had to be surrendered to the National Bank of Ethiopia (NBE), and allocation committees in banks met regularly to ration the remaining . Importers faced a complicated tiered system: requests were split into current account (basic necessities), essential , and non-essential categories. Each category was served via a long waiting list. Even “essential” imports might wait months; non-essentials were often deferred for 4–12 months or more. In effect, officially authorized ...