Ethiopian Review

Addis Ababa, Ethiopia — The foreign currency shortage has been widening the gap between the official exchange rate and the black market. However, action last week by the Federal Police halted the rocketing illegal rate.

The Federal Police swoop last week resulted in the arrest of six individuals allegedly involved in unofficial foreign exchange trading.

The official exchange rate of dollar against birr has been ranging between 11.10 birr and 11.30 birr, however the black market had risen to 13.70 birr for a dollar.

Indeed, the recent devaluation of birr has brought a positive impact on the country’s foreign reserve position; the reserve has increased by 12.1 per cent within the last nine months, according to the central bank report presented to parliament two weeks ago.

However, the demand and the reserve have been out of step, giving space to the black market which also has an impact on the country’s reserve position by diverting the legal inflow of foreign currencies to the black market, a macro economic researcher explained to Capital.

Police acted last week to reduce the impact of the black market on the country’s reserve position and with the aim of prohibiting illegal inflows of foreign currencies. The measure brought an immediate impact on the black market exchange rate, which shifted to a range of 13.40 to 13.30 birr; a decline of 0.30 birr within two days. This week it dropped further to 13.20 birr.

- By Yohannes Anberbir | Capital Ethiopia