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.