Ethiopia’s recent decision to float its currency on July 28, 2024, has led to a significant devaluation of the Ethiopian Birr (ETB) against major global currencies such as the Euro (EUR), US Dollar (USD), and British Pound (GBP). This strategic move was intended to stabilize the economy by allowing market forces to determine the exchange rate. However, it has introduced considerable volatility in the currency’s value, posing both opportunities and challenges for the country’s economy.
Exchange Rates Across Selected Banks
US Dollar (USD)
- Development Bank of Ethiopia (DBE):
- Buying: ETB 113.02
- Selling: ETB 117.01
- Difference: ETB 3.99 (+3.53%)
- Ahadu Bank (AHD):
- Buying: ETB 108.00
- Selling: ETB 116.64
- Difference: ETB 8.64 (+8.00%)
- Debub Global Bank (DGB):
- Buying: ETB 107.51
- Selling: ETB 117.01
- Difference: ETB 9.50 (+8.83%)
British Pound (GBP)
- Development Bank of Ethiopia (DBE):
- Buying: ETB 147.98
- Selling: ETB 153.22
- Difference: ETB 5.24 (+3.54%)
- Ahadu Bank (AHD):
- Buying: ETB 142.93
- Selling: ETB 154.37
- Difference: ETB 11.44 (+8.00%)
- Amhara Bank (AMH):
- Buying: ETB 139.19
- Selling: ETB 154.49
- Difference: ETB 15.30 (+11.00%)
Euro (EUR)
- Development Bank of Ethiopia (DBE):
- Buying: ETB 125.57
- Selling: ETB 130.06
- Difference: ETB 4.49 (+3.45%)
- Ahadu Bank (AHD):
- Buying: ETB 120.53
- Selling: ETB 130.18
- Difference: ETB 9.64 (+8.00%)
- Tsedey Bank (TSED):
- Buying: ETB 118.81
- Selling: ETB 130.69
- Difference: ETB 11.88 (+10.00%)
Highlight: Development Bank of Ethiopia (DBE)
The Development Bank of Ethiopia (DBE) has emerged as a key player in the current currency exchange landscape, offering some of the highest rates for major currencies compared to other banks in Ethiopia. This reflects the bank’s strategic approach to capitalizing on the recent floatation of the Ethiopian Birr.
- For the US Dollar (USD), DBE offers a buying rate of ETB 113.02 and a selling rate of ETB 117.01. This makes it one of the most competitive banks in terms of USD exchange rates, with a difference of ETB 3.99, which is a modest spread indicating DBE’s strategic pricing to attract both buyers and sellers.
- In the case of the British Pound (GBP), DBE offers the highest buying rate at ETB 147.98 and a selling rate of ETB 153.22. The difference of ETB 5.24 is relatively low, making DBE an attractive option for those looking to exchange GBP.
- For the Euro (EUR), DBE’s buying rate is ETB 125.57 and selling rate is ETB 130.06, with a difference of ETB 4.49, offering the highest rate among the selected banks.
DBE’s competitive rates position it as a strong choice for individuals and businesses looking to exchange currency, particularly in light of the recent devaluation of the Birr. This is indicative of the bank’s strategy to enhance its market share in foreign exchange services.
Implications of the Birr Devaluation
Before the currency float, the Birr was relatively stable, with the exchange rate hovering around ETB 57 per USD. Following the float on July 28, 2024, the value of the Birr against the USD has more than doubled, now trading at rates around ETB 120 per USD. This represents a devaluation of over 110%, signaling a major shift in the currency’s value.
This sharp devaluation impacts the economy in multiple ways:
- Export Potential: The devaluation makes Ethiopian goods cheaper on the international market, potentially boosting exports. However, the benefits may be offset by the increased cost of imported goods and services, which are now significantly more expensive due to the weaker Birr.
- Inflation Pressure: As the cost of imports rises, so does the general price level within the country, fueling inflation. This increase in prices particularly affects essential goods like food and fuel, straining the purchasing power of the population.
- Financial Market Volatility: The large discrepancies in buying and selling rates across banks highlight the instability and uncertainty in the market. Businesses engaged in international trade are facing challenges in pricing, budgeting, and financial planning. They might need to adopt hedging strategies to protect against adverse currency movements.
Ethiopia’s decision to float its currency on July 28, 2024, has led to significant devaluation of the Birr, as evidenced by the current exchange rates across major banks. The Development Bank of Ethiopia (DBE) stands out by offering some of the highest exchange rates for USD, GBP, and EUR, making it a competitive choice for currency exchange. The implications for the economy are profound, affecting everything from export competitiveness to inflation and market stability. This period marks a critical juncture in Ethiopia’s economic landscape, with both opportunities and challenges ahead.
