June 5, 2025 – Addis Ababa

The Ethiopian Birr fell to a new low of 134.9519 per U.S. dollar in Thursday’s foreign exchange auction, marking a continued slide in the local currency as the central bank faces growing pressure to manage dwindling reserves and rising demand.

The National Bank of Ethiopia (NBE) announced that 12 banks received foreign currency at the auction, down from 14 in the previous round and 16 in early May, signaling tightening access to foreign exchange in the formal market.

The result underscores Ethiopia’s shift toward a managed depreciation strategy, as the central bank attempts to bridge the gap between official and parallel market rates while navigating economic reforms and external imbalances.

“The weighted average exchange rate of all successful bids was 134.9519 Birr per USD,” the NBE said in a statement. “The next foreign exchange auction will be held in two weeks.”

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A Steady Climb Toward Market Correction

The latest figure represents a 1.34% drop in the Birr’s value since the previous auction on May 22, when the weighted average rate was 133.1715. In early May, the rate stood at 132.9643, indicating a consistent uptick over the past month.

Auction Date	Auction No.	Avg. Rate (Birr/USD)	Banks Awarded
June 5, 2025	7	134.9519	12
May 22, 2025	6	133.1715	14
May 7, 2025	5	132.9643	16

Ethiopia, which has been undergoing structural economic reforms and negotiations with international lenders, has signaled plans to gradually ease its decades-old currency controls as part of a broader liberalization agenda.

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Policy Strategy Amid Fragile Fundamentals

Analysts say the NBE’s biweekly auctions are acting as a pressure valve, allowing the central bank to release limited reserves to priority sectors while slowly realigning the official exchange rate with real market demand.

The declining number of successful bidders could indicate either shrinking foreign exchange availability or intensified competition among commercial banks as importers scramble for hard currency.

The foreign exchange shortfall has been one of Ethiopia’s most persistent macroeconomic challenges, with the IMF and World Bank repeatedly advising more flexibility in currency management.

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Implications for Business and the Economy

• Importers are facing higher input costs, pushing inflationary pressure on goods ranging from industrial equipment to consumer staples.
• Manufacturers and pharmaceuticals dependent on imports are increasingly vulnerable to pricing volatility and delivery delays.
• Ride-hailing platforms, retailers, and logistics firms are already reporting cost adjustments as the currency weakens.

Meanwhile, informal currency markets are trading the dollar at a significantly higher rate—often 15–20% above the official auction rate—despite ongoing government crackdowns.

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Outlook: More Auctions, More Volatility

With the next auction scheduled in mid-June, traders and businesses will be watching closely to assess whether the NBE accelerates the pace of devaluation or introduces parallel reforms to improve liquidity.

The Birr’s trajectory is likely to remain under pressure as Ethiopia seeks to rebuild reserves, restore investor confidence, and close financing gaps through concessional loans and diaspora bond issuance.

Still, without a meaningful boost in forex inflows from exports, remittances, or foreign direct investment, analysts warn that the NBE may be forced to make deeper adjustments in the second half of 2025.