ETHIOPA DEVALUES ITS CURRENCY, RAISES INTEREST RATES.
In accordance to the report had on Ethiopia a year ago over the high level of investment returns leading to an abrupt inflationary pressure on the country’s currency value, the government has currently suggested a devaluation of their currency to raise the country’s competitiveness in the global arena.
However, following the Forex currency crisis, The Central Bank and The National Bank of Ethiopia has justified the move and devaluated the currency (birr) by 15pc and raised the interest rate by two percentage points to seven percent. This strategic factor has been seen as an effort to control the level of inflation, to also increase the export earnings and the economic value of the country in the global world exchange.
Seven years ago, the government had made a 17pc devaluation on the currency, with the hope to control the level of inflation, but quite unfortunate, it lead to a massive inflationary strain that had reached as high as 40pc affecting the import rate. For more than half a year, the official exchange rate stood stagnant around 23Br to the dollar, while the black-market sold a dollar for nearly 29Br. This issue became a disease to Ethiopia as country thereby depreciating its extensive worth in the global-market.
Furthermore, the current devaluation of the currency has geared up the Ethiopian Birr interest rate at 26.91 to the dollar, up from 23.40Br on the official market. This took effectiveness on the 11th of October, 2017.
The National Bank of Ethiopia has instituted directives upon the Nation’s commercial banks to transfer 30pc of their foreign currency to the Central Bank, as the regulators took series of measures to complement the devaluation of the Birr against the basket of major currencies.
There have been some directives which has instructed the banks to transfer all the ‘’wind-fall profit’’ from the currency adjustment on the devaluation of the Birr, Effective on the 11th October 2017. This was backed by the Vice Governor Yohannes Ayalew and the chief economist at the Central Bank, announcing the adjustment of the currency and its confirmation.