The National Bank of Ethiopia's July 2024 foreign-exchange reform

After years of a fixed, administratively managed exchange rate that fed a chronic parallel-market gap, the National Bank of Ethiopia announced on July 29, 2024 a sweeping reform letting the birr's value be determined by market-based negotiation between banks and their clients rather than set by the central bank. Under the new regime, the NBE said it would intervene in the foreign-exchange market only in a limited way during the early transition and only if conditions became disorderly, a marked shift from its previous role as the primary price-setter. The reform also changed incentives for exporters and banks directly: exporters of goods and services were required to convert just 50% of their foreign-exchange proceeds into birr immediately, with the remaining half retained in foreign-exchange retention accounts they could use or sell at negotiated rates, reversing rules that had previously forced fuller conversion at unfavorable official rates. The central bank reported that the supply response was immediate and large, with goods exports more than doubling and remittance and capital inflows improving markedly in the months that followed, evidence it framed as validating years of IMF and World Bank pressure to abandon the distorted fixed-rate system blamed for the preceding decade's currency shortages.