By Addis Insight — February 21, 2026
Addis Ababa — Ethiopia’s central bank supplied $500 million to commercial banks through a special foreign-exchange auction on Friday, signaling continued efforts to stabilize the country’s dollar market as the birr trades near historic lows.
The National Bank of Ethiopia (NBE) said banks bid for $455.29 million, leaving the sale undersubscribed by about $44.7 million — a rare outcome in an economy long plagued by hard-currency shortages.
The auction cleared at a marginal rate of 152.01 birr per dollar, with a weighted average of 153.25 birr, according to the central bank. Bids ranged from 152.01 to 154.00 birr per dollar, indicating relatively tight pricing expectations across the banking sector.
All 30 participating banks received allocations, suggesting broad distribution rather than concentration among larger lenders.
Why It Matters
The operation comes as Ethiopia continues a sweeping overhaul of its foreign-exchange regime aimed at reducing distortions between official and parallel markets and attracting external financing. Dollar shortages have constrained imports, investment, and industrial activity for years.
An undersubscribed auction of this scale suggests easing pressure in official channels — or weakening demand due to slower import activity and tighter domestic liquidity.
Market Signals
The narrow bid range implies banks share similar expectations about the birr’s near-term value, with most demand clustered near the upper end of the range. The weighted average rate above the cut-off indicates buyers were willing to pay slightly more to secure dollars, reflecting persistent depreciation pressures.
Still, the failure to absorb the full supply may point to caution among lenders as businesses scale back orders amid high inflation and economic uncertainty.
Reform Backdrop
Ethiopia has been shifting from administrative FX allocation toward market-based mechanisms, including auctions and greater retention of export proceeds. The reforms are closely tied to negotiations with international financial institutions and efforts to unlock external funding.
By supplying large volumes through auctions, the central bank aims to improve transparency, reduce backlog in import payments, and gradually align the official exchange rate with market conditions.
Outlook
The NBE said future auctions will proceed according to schedule, suggesting the mechanism is becoming a permanent feature of monetary operations rather than an emergency measure.
Economists say sustained stability will depend on stronger export earnings, remittance inflows, and external financing — as well as containment of inflation, which continues to erode the birr’s purchasing power.
Bottom Line:
Ethiopia’s latest dollar sale shows the central bank’s determination to ease FX shortages while allowing the currency to adjust to market forces — but subdued demand highlights an economy still navigating tight financial conditions.
