Likewise, there are indications that the price level in the economy largely reflects the parallel market rate. However, the emergence and existence of active parallel foreign exchange market has created several complications to policy makers in their attempt to regulate the external balance.Īccording to IMF, Ethiopia has broadly pursued a policy of depreciating the nominal rate by 6 percent a year. In response to excess demand for foreign exchange in the official market, parallel markets for foreign exchange have gained traction. The foreign exchange provided by the banks is decreasing significantly.
In some parts of the city where black market trading takes place, during the week, one US Dollar was selling between 102 to 110 birr which is more than double in comparison to the normal exchange rate which is less than 54 birr. It is widely thought that the surging inflation coupled with shortage of hard currency in Ethiopia are driving up the price of the US dollar on the black market. Due to the increased demand for foreign currencies, the dollar exchange rate at the parallel market has in recent episodes skyrocketed making the official and black markets to drift exponentially apart.
To properly manage the unification and avoid a shock to the system, conducting a series of studies including sifting through the lessons learnt from other countries, is said to be integral.Īs the government has alarmed over the years, Ethiopia’s economy has witnessed a shortage in foreign currency. The committee is expected to assess ways on how the government could equalize both the normal and parallel exchange rates to increase government’s foreign exchange gain, which is currently being munched by the black market. Government organizes a committee to assess feasible ways to unify the normal exchange rate market with the ever so rising parallel market exchanges.Īs sources inform Capital, a committee comprising of different stakeholders from various ministries, financial advisors and officials from the National Bank of Ethiopia, has been established in recent weeks to tackle the matter.
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