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Ethiopia's forex crunch will aggravate reform pressure

Friday, October 21, 2022

Significance

The government hopes this plan will above all inject fresh foreign currency into the cash-starved economy. Recently, it has had to manage its dwindling foreign exchange (forex) reserves with ever more restrictive measures.

Impacts

  • Subject to the success of negotiations to end the war in Tigray, the economy could recover somewhat in the coming year.
  • The government will keep depreciation of the birr slow in an effort to curb inflationary pressure.
  • Donors will continue their tentative engagement but avoid providing direct budget support.

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