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Currencies

Ethiopia devalues currency to spur lagging exports

A $5 note next to 6 one Birr coins: The Birr will now exchange at 26.91 to the dollar, down from the previous 23.40. PHOTO | LYNETTE MUKAMI | NMG
A $5 note next to 6 one Birr coins: The Birr will now exchange at 26.91 to the dollar, down from the previous 23.40. PHOTO | LYNETTE MUKAMI | NMG   AFP

The Ethiopian central bank has devalued the national currency by 15 per cent, making it the first such move since 2010.

The National Bank of Ethiopia (NBE) said devaluation of the Birr would take effect today (Wednesday).

Accordingly, the Birr will now exchange at 26.91 to the dollar, down from the previous 23.40.

The directive was announced by NBE's vice governor and chief economist, Mr Yohannes Ayalew, at a press conference in Addis Ababa.

Jumpstart lagging exports

Mr Yohannes said the measure was to control inflationary pressure and boost export earnings which had hitherto stagnated.

“Since investment return is high in Ethiopia, the devaluation won’t cause an inflationary pressure and adversely affect import,” Mr Yohannes said.

Analysts say the devaluation will help to boost the Ethiopian export sector which has experienced a sluggish outlook. It is also expected to reduce forex shortages and to ease the country's debt burden.

While Coffee is one of Ethiopia's major exports, revenues from the crop have fallen short of the government's targets over the years as global commodity prices took a dip.

“The rate was pushed to mitigate the inflationary pressure that could arise from the devaluation,” said Mr Yohannes.

Mr Sisay is based in Addis Ababa

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