|« Ethiopian birr devalued, IMF welcomes move||Ethiopia to generate over $6bn from agricultural exports »|
Ethiopia Devalues Its Currency by 17 Percent
By Peter Heinlein | Addis Ababa
Ethiopia has sharply devalued its currency - the birr - in a bid to boost economic growth. The move was welcomed by economists, though it may have the side effect of fueling inflation.
Ethiopia's Central Bank announced Wednesday that the birr has been devalued from roughly 13 ½ birr to the dollar to nearly 16 ½ birr, a one-day drop of about 17 percent. The rate was posted on the bank's website. Officials were not immediately available to comment.
Action Gets 'Thumbs Up' - With Some Reservations
The International Monetary Fund representative in Addis Ababa, Sukhwinder Singh Toor, welcomed the move, saying it would help to bolster the competitiveness of Ethiopia's struggling economy.
Analysts said the devaluation should improve the Horn of Africa nation's trade deficit. Figures for fiscal year 2010 show a $7 billion deficit, based on $8.7 billion in imports and $1.7 billion dollars in exports. The trade deficit comprises about 30 percent of Ethiopia's Gross Domestic Product of about $23 billion a year.
But Tewodros Mekonnen, a researcher in the Macroeconomic division of the Ethiopian Economics Association, said the devaluation may not have the desired effect immediately because imports are mostly essential goods, such a food and fuel, while exports are agricultural items.
"In order to reduce your trade deficit, your import and export needs to respond to the exchange rate devaluation, but at the moment imports are too essential to reduce it, so imports may not respond as much," said Mekonnen. "Also, exports may not respond as much because you cannot increase your agricultural exports just because you have the advantage of the exchange rate devaluation."
Tewodros said the hope is that the devaluation could spur domestic production of some of the essential items that currently must be imported.
He is among several analysts who say the downside of the devaluation is a possible uptick in inflation, which in July stood at 5.7 percent. It also could force the government to revise its estimated budget deficit, as more local currency will be needed to purchase necessary imports.
Exports and Growth
Ethiopia is Africa's biggest coffee exporter, and the world's fourth largest exporter of sesame.
Prime Minister Meles Zenawi says Ethiopia's economy has grown at a rate of 10 percent or more in each of the past seven years, though international agencies question the method of calculating the figure. Mr. Meles says, though, that even with double digit growth, the country must run just to stand still, because population growth in the country of 80 million people has been faster than economic growth.
A poverty index recently released by Oxford University and the United Nations ranked Ethiopia as the world's second poorest country, after Niger.
i have said it long ago a $1 is worth about 22 birr. in my calculation…i thing it has a little bit to go still.
bad for the dwellers good for expatriates and creepy tourist diasporas.
This is a 44 % devaluation in a year (it was 11.3 to 1$ usd in July/2009). What is going on? Are we turning to a Zimbabwe?
Look it may look great for my holidays in Ethiopia but for those who live there I do truly do not see the benefit.
God help them
“Y’all remember what IMF told the Greeks, and most recently the Romanians. Either listen to our recommendations or else you will be robbed of everything.
I assume the Woyannes are not going to be happy being dictated. However, it has no choice but to pay the loans for all the roads construction boom seemingly real economic growth thanks to the achievements of the regime, the fact is coming out. The regime waited for the election to go through, and asked for EU to hold on to their report, drew a five year plan while hoodwinking the IMF to hold on to the red slip. Now the truth has come out, Woyanne’s economic growth is all lie, its all borrowed money. Pay back is going to be a real biatch. Greeks and Romanians are going through them at the moment, in developed nations its called austerity measures, and in the Woyanne ruled space its called trouble brewing. As it is the people are poor, most are barely making ends-meet, add this inflation they will start to see red like bulls.Some Woyannes were trying hard to convince us the country’s economy was growing 12% annually, while it was the interest adding on borrowed money.”
I don’t see the need for the devaluation, particularly when we know there is an inflation risk - already one of the highest in the world.
If the economy has been on record with double digit growth consecutively for the past 7 years (as Meles and his cronies claim), why bother about tinkering with the exchange rate?
And what will all these mean to the Ethiopian poor? (more than 90% of the 80 million or so of the population).
Awokish awokis siluat metsehfun atebech, an old Ethiopian proverb went!
It will have a desasterous consequence on the ruined ecomony of the nation. late alone the actual economic loss, the pschological repercussion in iteslf is not a point to underestimate.
Ethiopia under Tigria are in dead hell and what we wait for now?This small gruop so callad Woyane are nothing but ,we,the Ethiopians are so bad to know who is our enemay really.stand and fight to this popput gang.
we will be like Ertrea 1$ =400 nakiffa near future .and also as i see the news different agencies they dont accept our growth by 14% so if it is true growth why Ethiopia gov. show statstics to different economist?i think western leaders will know everything about EPRDF
I potive tha many TPLF thugs became rich or millioners overnight.they knew before hand to hoard their dollar. FOX, WE NEED TO RISE UP AND ELIMINATE THESE PARASITES.
This website has become my eye , and my mouth now. I wished to comment issue, but I was looking how I can do it. Now Nazret.com did it again.
Must I think investing in Nazret.com to make Nazret.com an Ethiopian Al-Jizira.
You do have the tenacity, gut, patience,… to be an Ethiopian Al-Jizira. This the only website which does not focus on hate only. It is accommodates any Ethiopian unlike the others like the other Ethiopian website.
Check all the Ethiopians websites and compare this website. I am puzzled if the person who running this website is an Ethiopia? reason, most Ethiopians are filled with hate, biase, prejudice, hate, ethnic, tribe, anything you can name,… this is a different website. The otherwebsites are not there to allow people to communicate, but to force their hatred, biases, ethnic outlook ,… on others.
Bravo, ewnetm Nazret.
I think said something about the devalueing of the money. I have never come cross any news or books that tell me a govenment devalues its money for good. This is the first time in my entire life who a government devalues its money on purpose.
Zimbabwe money became useless because European sanction a punishment after white farmers were chased from Zimbabwe.
In Nigeria in 1986 the money was devalued because the government took loan and the loan was packed with the Stracture Adjustment Programme under the premise of Washington Consensus. Why WB, IMF,… impose thier devaluation?
Good questions, their stock stakeholder multinational corporations will take over the poor nations and that is how WORLD BANK, IMF,… keeps Europeans Economy in steady state.
We all know that WB, IMF,… were established to safegaurd the economy of the western alliance so that they Europe and others parners do not face any detrimental economic criss like they faced during first and second world.
What happened in Nigeria in 1984 to 1990, it is only Nigerians who knows what happened to them after their money was devalued by the force by WB and IMF.
life became hell to Nigerians and the country was invaded by foreign investors and multionational stockholder corporations. The country was immersed into a national economic crisis, then the corporations and WB,IMF,… were watching as spectators when the people were languishing in unforeseen horrible life conditions. The government ofNigeria lost control of the country and the nations was run by corrupt Nigerians who benefitted from the WB scum. Then the government had to intervene to reverse the situation to the previous states. But it was too late and Nigerians has to go suffer, and Nigeria still remains stuck because of all that.
Now we have a regime which does the same mistake many counties did before.
We told you the economic growth in Ethiopia is a lie. It is the WB,IMF,… scum again to manipulate the useless leaders pyschologically . Can you notice, external economic institutions publish articles that say there is no economic development in Ethiopia, but WB,IMF,… oppose that by saying there is development. Why? do u think WB, IMF,… more bona fide or credible than those other external isntitutions?
There is a saying in Tigrignea,” Kbelewaya Zibelu Aba gunbahs, Zagra Yibeluwa.” I do not know the name of Aba gumbah, but there is this huge black bird in Ethiopia which is not tamed, wild and which is not edible. What the Tigrignea sayings says is that if someone wants to eat that bird which is not edible, he or she will give it the name of the edible bird like fowl ( Kokah in Tigrignea which is also wild bird but edible). WB, IMF,… preaching about growth in Ethiopia is not genuine.
By the way, WB, IMF,… has nothing to do with development any country except to do financial marketing and to exploit other nations as much as possible and to safequard their economy.
We Ethiopians have to forget all these toothless political parties like TPLF,olf, ONFL,MEDRKE,… and unite and oppose all these before it is too late. Otherwise we are going to watch helplessly when our people are taken hostage by foreign companiers.
There is no benefit for any Ethiopian by devalueing the national currency. It is foreign investors who benefit from this. Ethiopians will watch helplessly when their country is invaded by foreign companies.
To believe that foreign investos will bring development to the country and to eradicate poverty is a good wish.
Unfortunately, This govenment we have a termimally ill govenment. Everything this government does is against the country’s national interest?
The government has done the following :
1. Deliberately destroyed Ethiopian Navy to develop Ethiopia.
2. Land-locked Ethiopia so that Ethiopia can develop.
3. Selling land to Arabs, Indians,… to develop Ethiopia
4. Selling Ethiopian Teleocom to France to develop Ethiopia
5. It is in the process of selling the national bank to City Bank , an American bank based in york.
Everything is on sell in Ethiopia. Now to make it worse the money is devalued. Where on earth does devaulation ones own currency benefit? Never heard of such story in my entire life. I do not think there is any book written that supports this cliam of devaluing ones own money to benefit citizen? May be in the new book of Meles Zenawi. The book of Meles Zenawi is bizzare, weird, … I gues Meles Zenawi lives in other planet in his mind and otherswise, he would not do all these crazy things to the 86 million people.
Meles Zenawi, everytime he get elected by 99.6%, he is damaging Ethiopia by 99.6%, nothing. He does will in destroying the country.
A national and co-ordinated disobedience is the only solution. We do not need to carry AK-47 and cross terrains as TPLF, … and others are doing. We need to unite and stop this in one day.
Wake up and save your nation
That’s why Meles was saying the economy will grow ti 1 trillion birr!!! Priny baby print!!!! In 5 years we will have 5 trillion birr in circulation!!!!
I meant Print baby print (birr)!!!!
If I was the leader, if want to discourage import, I would have increased the import duty by 50% or more or increase the value of the money instead of devalueing the money just sell everything in the country for everyone who can show me any amount of dollar.
Meles Zenawi, you are filled with insanity and you are sworn to destory the country. The more you stay , the more damage you are incuring on the poor people. You are wasting one generation time and you destroy the ocunty every year. Shame on you
Peter Smoking some Stuff??
Peter is cementing his reputation as one of the MOST unprofessional reporters in the entire world by describing an economy growing by 10% as a struggling economy. People have always wondered what Peter is smoking when he writes his scribbles?? Sometimes U have to wonder what Peter does in Addis?? He looks like a kind of guy who enjoys few shots of whiskey and a joint or two. I believe we all can remember Peter also told us during the May election that Tigrai is a battleground state!! That’s Peter for U!
ኢትዮጵያ ለዘላለም ትኑር
TO prove my claims on the evilness of WB, IMF,… IMF has actually responded with happiness for the devaluation. Why? This is done by them and it will benefit them.
This all what I said on my previous comments. I did not even IMF was thrilled by the devaluations of our money. I speculated it must have been done by their order. Now their response confirms my claim. It is them who will benefit from this devaluation and eventually, the useless regime will have no control in the country like Nigeria in 20 years ago.
This is exactly that will happen when the economy is falsly said to grow by a funny figures. Neger si gemer endezih new.
I think the Woyane government is having dire problems with its foreign exchange reserves, which currently can cover only a two month import bill. They are also desperate to ‘achieve’ their 15% economic growth each year till 2015 and ‘eliminate’ hunger at the same time. They need more dollars to achieve their over ambitious goals.
Their logic appears that if you cannot attract enough capital through foreign direct investment and diaspora remittance, then devalue Birr. On the face of it, devaluation may help a country tackle its balance of payments problems by exporting more, producing import substitutes locally, and reducing its deficit through time. In reality however there is no significant relationship between devaluing one’s currency and reducing trade deficit. Most developing countries, especially those in Africa, have undervalued currencies but they have persistently experienced enormous trade deficit over the past three decades. Ethiopia, for example has been devaluing its currency continuously from 2.06 Birr/dollar in 1991 to around 16.5 birr/ dollar in 2010, which means Birr has been devalued by more than 800% over the past 19 years! By contrast Ethiopia’s trade balance has become all the worse through time surging from a paltry 1 billion dollar to a whopping 7 billion dollar in the same period.
In theory, a country can manipulate its currency to improve its international competitiveness and trade performance and increase its trade surplus and international reserves. Tiny, poor and primary product exporting economies like Ethiopia may be tolerated to keep their currency undervalued but it is a different story when it comes to powerful export-led economies like China. You know what the US congressmen have been saying to China over the past five years: let your renminbi appreciate or face protectionist measures. After so many threats and rants, at times mediated through DS Khan of the IMF, China finally agreed to revalue its currency.
An inquisitive mind would ask: why do the IMF and the US push poor and fragile economies like Ethiopia to devalue their currencies while require China and other emerging economies to revalue? After all, aren’t China and Ethiopia both developing countries? If it is good for Ethiopia to devalue its currency, how come it is not good for China?
Economists pls answer this question
If you are Gurage why do you hate Dr Berhanu so much?
Anyways am not going to Ethiopia anytime soon. I wish you to meet another lovely woman like me in Soddo. If you are so much occupied about me, we will arrange to meet after your holiday
When Edi Amin called Uganda’s Bank manager to print more Uganda money, the manager said that Uganda money has become shit (useless). President Amin drove to the bank and told the manager that you call Uganda money Toilet paper? And, there he shot him on the spot. Very soon, Melese with his lost, crazy mind will do the same. The good thing is before he gets there; Addis’ angry mob will catch him and cut him into hundred pieces, before BIRR becomes toilet paper.
Someday one might need a duffel bag to carry the Birr to go to the markets.Wallets and pockets are not gonna be big enough for the PAPER, Birr!!
Continued from the first comment
devaluation also impacts the country’s debt problem negatively. when birr is devalued from 2 to 16 birr per dollar, the country’s debt demominated in the local currency (birr) increases eight fold, that is, for evry dollar we now ofer 16 rather than 2 birr notes
currency devaluation is not a choice when the economy is highly dependent on imported capital goods. as Teodros Mekonnen noted in the report, these essential plant and equipment imports cannot be produced loccally or cannot be cut dramatically anytime soon, thus devaluation has little effect here. in fact it will lead to imported inflation as imports become more expensive after devaluation
it may even kill remittance. assuming that devaluation does not lead to immediate inflation, a DC dishwasher or parking lot attendant may reduce the amount of dollars he sends home to family and friends.
adoption agriculture airline airlines athletics aviation business caf china crime diaspora drought dv economy ecx energy eritrea «ethiopian airlines» famine fashion football health hydroelectric ict immigration investment islam manufacturing media «meles zenawi» migration mobile muslim nile olympic olympics phone politics power press rail railway religion soccer sport style telecom train visa wikileaks