Ethiopia’s central bank injected US$780 million into the foreign exchange market in 2025, but the heavy intervention failed to stop a steady weakening of the birr, underlining persistent structural strains in the economy.
The sum reflects the combined value of 10 foreign-exchange auctions conducted by the National Bank of Ethiopia (NBE) between February and mid-December, according to public notices. The auctions were aimed at easing dollar shortages and stabilising the currency after the authorities floated the birr in mid-2024.
Despite the injections, the local unit continued to depreciate through the year.
The NBE began selling foreign currency to banks in August 2024, citing higher-than-expected reserves and the need to contain monetary growth. Central bank data show that banks’ average daily FX sales to businesses rose sharply to US$25 million in July 2025, from just US$1 million a year earlier.
As reserves improved, the central bank stepped up support. In August, it auctioned US$150 million to commercial banks the largest single allocation since the programme began with 28 lenders participating at a weighted average exchange rate of 138.2 birr per dollar. October saw a similar-sized sale, while an additional US$50 million auction was held on December 16.
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In an August 4 statement, the NBE said FX supply conditions remained “robust” and that business and individual demand was “being widely addressed” by the banking system.
Reserves boosted by gold boom
Ethiopia’s ability to intervene more aggressively has been supported by a sharp rise in international reserves, which tripled in the fiscal year ending July, driven by surging gold exports and stronger capital inflows.
The rebound followed sweeping reforms backed by the International Monetary Fund, including the adoption of market-based FX policies, tighter inflation control and an export-led growth strategy.
Capital inflows reached a record US$32 billion by mid-2025, a 33 percent year-on-year increase, according to central bank data. Exports accounted for US$16.8 billion, diaspora remittances US$7.1 billion, and foreign direct investment and loans US$6.1 billion.
Prime Minister Abiy Ahmed said in October that gold exports had surged sevenfold in a year, rising from US$409 million to US$3.5 billion, overtaking coffee exports for the first time in decades.
Birr keeps falling
Still, the currency has struggled to stabilise. After the float, the birr lost nearly two-thirds of its value, according to data compiled by Bloomberg.
Pressure intensified in the third quarter of 2025, with the birr sliding 8.1 percent between July and September, from 135.5 to 146.4 per dollar, official figures show. As of December 16, the weighted average auction rate had weakened further to 154.7 birr per dollar.
The Ethiopian Economics Association said the renewed depreciation pointed to unresolved imbalances in the FX market, more than a year after the shift to a floating regime.
“The re-intensification of depreciation pressure underscores ongoing structural challenges in achieving exchange rate stability,” the association said in its December quarterly update.
Analysts also flagged wide disparities in FX rates across banks, which they say have added to volatility and costs. They argue that deeper reforms are needed to develop a transparent interbank FX market capable of delivering lasting stability.
