The gap between the Ethiopian currency’s official and parallel-market exchange rates widened to a record as foreign reserves dwindled and fighting in the country’s north resumed.
On Wednesday, the birr traded as high as 92 a dollar on the black market, while the official rate remained at 52.5, according to people familiar with the matter, as reported by Bloomberg.
The exchange-rate gap is widening mainly due to heightened risk surrounding the ongoing conflict in the country, Fikadu Digafe, vice governor and chief economist at the central bank, said.
“The imbalance between foreign-currency supply and demand is the problem; the government monetary policies are less effective due to the high cost of the nearly two-year war with the dissident northern Tigray region” Fikadu Digafe.
In June, the IMF predicted economic growth in the East African country may slow to 3.8% in 2021-22 due to conflict, lower agricultural production, a fall in donor financing and intensifying foreign exchange shortages, drought, and spillovers from the war in Ukraine.
Read also; Ethiopia Bans Use of Foreign Currency in Local Deals as it Tightens Control.
