Ethiopia’s central bank allotted US$500 million in a special foreign exchange auction on Tuesday, as authorities intensified efforts to improve access to hard currency and stabilise the country’s financial system amid ongoing economic reforms.
The National Bank of Ethiopia (NBE) said it received bids worth US$1.06 billion from 30 commercial banks, reflecting strong demand for foreign exchange in an economy that has long struggled with dollar shortages.
According to the central bank, the weighted average exchange rate for successful bids stood at 159.9865 Ethiopian birr per U.S. dollar.
The auction is one of the latest measures by Ethiopian authorities to ease pressure on businesses and financial institutions facing chronic shortages of foreign currency needed to finance imports, repay external obligations and support industrial activity.
Foreign exchange scarcity has remained one of the biggest challenges for Ethiopia’s economy in recent years, contributing to supply bottlenecks, rising import costs and delays in payments for goods and services.
More Read
Businesses across sectors including manufacturing, energy, pharmaceuticals and transport have frequently complained about limited access to dollars through the official banking system, forcing some firms to scale back operations or rely on more expensive parallel market channels.
Analysts say the strong oversubscription at Tuesday’s auction underscores the extent of pent-up demand for foreign currency among Ethiopian banks and importers.
The special auction also comes against the backdrop of broader macroeconomic reforms being implemented by the government and the central bank to liberalise the economy, improve investor confidence and unlock international financial support.
More Read
Ethiopia has been gradually reforming its foreign exchange system as part of a wider economic adjustment programme aimed at stabilising public finances and restoring external balance after years of pressure from debt burdens, inflation and conflict-related disruptions.
The country has faced mounting economic challenges since the COVID-19 pandemic, compounded by the conflict in the northern Tigray region, climate-related shocks and rising global commodity prices.
In recent years, authorities have taken steps to narrow the gap between official and parallel market exchange rates, improve transparency in foreign exchange allocation and encourage greater participation by commercial banks in currency markets.
Economists say expanding access to foreign currency is critical for Ethiopia’s ambitions to attract foreign investment and accelerate industrial growth, particularly in export-oriented sectors such as textiles, manufacturing and agriculture.
The government has also pursued negotiations with international lenders and creditors to restructure debt and secure fresh financing to support economic recovery.
Earlier reform measures included adjustments to the exchange rate regime, easing restrictions in parts of the financial sector and efforts to strengthen monetary policy coordination.
More Read
The latest auction is expected to provide temporary relief to businesses dependent on imports, particularly companies requiring fuel, machinery, industrial inputs and medical supplies.
However, analysts caution that sustaining adequate foreign exchange supply will depend on Ethiopia’s ability to boost exports, attract remittances, increase foreign direct investment and secure additional international financing.
Coffee exports, gold shipments and remittances remain among Ethiopia’s key foreign exchange sources, although the country continues to face a wide trade imbalance driven by strong import demand.
The International Monetary Fund and other development partners have repeatedly emphasised the importance of exchange rate flexibility and financial sector reforms in supporting long-term economic stability.
Economists also note that improving foreign exchange availability could help moderate inflationary pressures by easing import costs and reducing uncertainty in supply chains.
The National Bank of Ethiopia announced the auction results in a statement posted on its official X account, without providing details on whether additional special auctions would follow in the coming months.
Market participants say further interventions may be needed if demand for foreign currency continues to outpace supply, particularly as Ethiopia’s economy expands and import needs rise alongside infrastructure and industrial development plans.
