The Ethiopian birr has slipped to a record low of 174 to the dollar on the parallel market, widening the gap with the official exchange rate to nearly 40% and raising questions about the country’s attempts to liberalise its economy. The widening spread could further pressure financial institutions and import-reliant businesses struggling to access foreign currency through formal channels.
One year after the government agreed to float the currency as part of a $3.4 billion deal with the International Monetary Fund, the gap between the official and black-market rates is wider than ever. The Commercial Bank of Ethiopia is quoting the dollar at 137 birrs. In informal markets across Addis Ababa and beyond, traders say the rate no longer applies to everyday transactions.
For Ethiopia’s private sector—especially import-dependent businesses—the growing divide between official policy and market reality could become unmanageable. According to four businesspeople who spoke to , dollar shortages have forced many firms to rely on the black market to pay suppliers, import goods, or repatriate earnings, inflating costs and squeezing margins.
From raw materials and spare parts to software subscriptions and logistics fees, companies are forced to source dollars at inflated black-market rates to keep running.
The reforms, known locally as the Homegrown Economic Reform Agenda, were designed to end chronic forex shortages, bring stability to the market, and create opportunities for private investment. However, implementation has been slow and uneven, and confidence in the new system is wearing thin.
Government officials insist the reforms are on track and point to more than $3 billion in financing secured from the IMF and World Bank over the past 12 months. The IMF has warned that a resurgent parallel foreign exchange market and fragile security conditions could hinder the reforms and complicate debt restructuring efforts.
Banks continue to ration dollars, prioritising large state-linked companies and imposing long delays on approvals for smaller firms. According to the IMF, the black market continues to fill the vacuum, setting the real rate, and could undermine the reform effort.
IMF also said structural issues limit the country’s effort to liberalise its foreign exchange market. A 2.5% commission charged by the central bank on FX sales, a lack of liquidity between banks, and high transaction costs have kept the market inefficient. These pressures have pushed the black-market premium to over 20%.
Inflation has eased faster than expected, thanks to tighter monetary policy and credit controls. The IMF urged authorities to shift to a policy-rate-based framework and to improve communication to strengthen the central bank’s credibility.
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