Ethiopia has spent an estimated $1.35 billion supporting its currency in 2026, underscoring mounting pressure on the birr amid ongoing economic reforms and external imbalances.
According to data reported by Bloomberg, the National Bank of Ethiopia (NBE) has stepped up its presence in the foreign exchange market through a series of auctions aimed at stabilizing the currency.
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The scale of intervention is significant, amounting to roughly a quarter of the country’s known foreign exchange reserves.
The central bank carried out its largest interventions on January 27 and February 21, each involving $500 million in biweekly auctions. In its latest move on March 17, the NBE purchased $70 million worth of birr from local commercial banks, even though total offers reached $241 million.
The imbalance between supply and uptake reflects cautious liquidity management as authorities attempt to manage volatility.
Despite these efforts, the birr continues to weaken. Following the latest auction, the currency slipped by 0.28 percent to 157.46 per US dollar, indicating persistent demand for foreign currency in the market.
These developments come at a time when Ethiopia is implementing sweeping macroeconomic reforms supported by the International Monetary Fund.
A key component of the reform agenda has been the transition toward a more market-determined exchange rate system since mid-2024. While this shift is expected to improve external competitiveness and transparency over time, it has also exposed the currency to short-term depreciation pressures.
The situation mirrors broader trends across Africa, where several currencies have come under strain due to global financial tightening, a stronger US dollar, and structural external deficits.
Ethiopia’s case highlights the tension between maintaining currency stability and preserving limited foreign exchange reserves while advancing reform.
The National Bank of Ethiopia now faces a complex policy trade-off as it continues to intervene in the market while gradually stepping back to allow price discovery.
The sustainability of such interventions will likely depend on the country’s ability to boost foreign exchange inflows through exports, remittances, and investment in the months ahead.
Source: Bloomberg
