Ethiopia's National Bank Proclamation of 2025 enables the issuance of a central bank digital currency known as Digital Birr. This initiative aligns with the Digital Ethiopia 2025 strategy to foster a cash-light economy. While promising financial inclusion and transparency, it raises concerns over privacy and government control.
Ethiopia's financial landscape is evolving with the introduction of the Digital Birr, a central bank digital currency (CBDC) authorized by the new National Bank Proclamation in 2025. The National Bank of Ethiopia (NBE) will issue and regulate this digital version of the birr, designed to operate alongside physical currency and potentially integrate with national ID systems and mobile wallets.
This development forms part of the government's Digital Ethiopia 2025 strategy, which seeks to drive a technology-enabled, cash-light economy. Proponents highlight its potential to enhance payment efficiency through instant, low-cost transactions and promote financial inclusion for millions without access to traditional banks, particularly in rural areas where financial inclusion remains low.
The article by Cherenet Daba, published on October 20, 2025, in Capital Newspaper, outlines the broader context of CBDCs globally. According to the IMF, over 130 countries are researching or developing them. In Africa, Nigeria launched the eNaira in 2021, while Ghana, South Africa, and Kenya are conducting pilots. Over 60% of African transactions occur outside formal banking, and CBDCs aim to formalize informal economies.
However, challenges persist in Ethiopia, where the informal economy dominates, corruption thrives in cash transactions, technological capacity is limited, and digital literacy gaps exist. Political centralization fuels fears of surveillance, as government access to transaction data could enable monitoring or freezing of funds during disputes.
Benefits include reduced corruption through digitized oversight, better tax collection, and support for fintech innovation and job creation. Risks involve exclusion of those with poor connectivity, cybersecurity vulnerabilities, and erosion of personal freedoms. Daba emphasizes the need for strong data protection, independent oversight, public education, and collaboration with private banks to build trust.
Quotes underscore the dual nature: “Technology is a double-edged sword. It can either empower or enslave us,” said Elon Musk. Success hinges on governance and transparency to balance innovation with rights protection.