The National Bank of Ethiopia's efforts to manage market disparities pushed the bank dollar rate to 155.05 birr on Tir 26, 2018 E.C. This rise follows a black market peak of 190 birr, driven by heightened demand from Chinese New Year disruptions. Remittances surged as Ethiopian expatriates rushed to procure goods before factory closures in China.
The National Bank of Ethiopia (NBE) has intensified interventions to stabilize the official foreign exchange market, resulting in bank dollar rates climbing to 155.05 birr on Monday, Tir 26, 2018 E.C. This adjustment comes as the black market rate soared to 190 birr, exacerbated by a demand spike tied to Chinese New Year. With factories halting operations in China during the January-February period, Ethiopian remitters flooded the market with dollar requests to stock up on imports ahead of Lunar New Year and spring festivals. This pressure widened the price differential significantly. To ease the strain, the NBE last week (Tir 19) auctioned a special allocation of 500 million USD, encouraging banks to meet expatriate needs. Separately, the Customs Commission directed importers opening letters of credit (LCs) to reference official rates, curbing under-invoicing that drains forex reserves. In today's 17th round auction, the NBE offered 70 million USD, but demand reached 127.25 million USD, leading to high competition. Only 8 of 19 participating banks secured dollars, with the lowest bid rate at 154.8141 birr. Over the past two months, the NBE has supplied 890 million USD to narrow the official-black market gap. An International Monetary Fund (IMF) report from last month highlights that the premium between bank and parallel market rates has jumped 13 percent in recent weeks, up from under 10 percent previously. The primary culprit, per the IMF, is the NBE's practice of channeling substantial forex to the Ethiopian Investment Bank outside auctions, distorting supply-demand balance. The fund also cautions that auction quotas may prompt banks to withhold demand and obscure true pricing. The NBE maintains these auctions aim to halt forex shortages and alleviate commercial banks' hard currency constraints, promising continued market normalization in line with directives.
