Ethiopia’s central bank is conducting a $60 million foreign exchange auction, open to all banks, to manage money supply growth. Following the removal of currency market restrictions in July 2024, this auction is intended to facilitate IMF funding and address ongoing economic issues such as high inflation and foreign currency shortages. Ethiopia recently defaulted on its debt for the third time in three years.
Ethiopia’s central bank announced on Monday that it would be conducting a foreign exchange auction amounting to $60 million, allowing participation from all banks. This move follows the lifting of foreign currency market restrictions in July 2024, which is a strategic effort to secure funding from the International Monetary Fund (IMF) and advance a much-needed debt restructuring process.
The National Bank of Ethiopia indicated that the purpose of the auction is to manage potential excessive growth in the money supply, a significant concern given the country’s economic situation. In December 2023, Ethiopia faced severe economic challenges, including high inflation rates and ongoing foreign currency shortages, leading to its classification as the third African economy in recent years to default on sovereign debt.
In summary, the Ethiopian central bank’s recent $60 million foreign exchange auction aims to stabilize the money supply and attract IMF funding amidst ongoing economic challenges, including high inflation and foreign currency shortages. This auction is part of broader efforts to reform the country’s financial system and manage external liabilities. Overall, these measures reflect Ethiopia’s commitment to addressing economic instability and ensuring sustainable financial practices moving forward.
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