In a move signaling increased momentum in foreign currency management, the National Bank of Ethiopia (NBE) has announced plans to hold its ninth foreign exchange (forex) auction, scheduled for Tuesday, August 5, 2025. The central bank has allocated $150 million USD for this round—tripling the amount offered in the previous auction.
This decision follows a notable rise in foreign currency inflows at the start of Ethiopia’s new fiscal year, which began on July 8. Officials say the auction aims to stabilize the forex market and address pent-up demand among importers and other dollar-dependent sectors.
Background and Trends
NBE had paused forex auctions for over a month after conducting its eighth round, which released $50 million USD. In that round, the official exchange rate stood at 136.62 Ethiopian Birr per US dollar—a figure significantly higher than the central bank’s reference rate, reflecting ongoing depreciation pressures and high demand for foreign currency.
Despite previous government pledges to move toward a more flexible and market-based exchange rate regime, Ethiopia still operates a managed float system, where NBE intermittently supplies hard currency through controlled auctions to selected sectors like fuel, medicine, and telecom equipment.
Why This Matters
- Largest Auction Yet: At $150 million, this will be the largest forex auction under the new administration and may help ease the backlog for essential imports.
- Signal of Improved Inflows: The move reflects growing foreign currency receipts—likely from exports, remittances, and multilateral funding.
- Step Toward Liberalization: While the forex regime remains tightly managed, the frequency and scale of auctions are seen as a baby step toward gradual liberalization in line with Ethiopia’s IMF-backed economic reform roadmap.
Policy Shift or Stopgap?
The National Bank clarified that forex auctions will continue as needed, rather than on a fixed schedule, allowing it to respond flexibly to macroeconomic conditions. However, critics argue that without deeper structural reforms, these auctions only provide temporary relief to a system under strain.
What’s Next?
Market watchers will be looking at:
- The clearing exchange rate from Tuesday’s auction;
- Which sectors get priority access to the $150 million;
- Whether this signals a resumption of regular auctions, potentially aligning with IMF reform benchmarks.
As Ethiopia continues its economic transition, foreign exchange policy remains a key flashpoint—where fiscal discipline, structural reforms, and political stability all intersect.
