Addis Ababa: Ethiopia’s macroeconomic reform would stabilize the nation’s economy and lay foundation for resilient economic structure, Ethiopian Economics Association President Professor Tasew Woldehanna noted. Addressing the international conference on the floatation of the Ethiopian Birr and its economic implications today, the president said the reform aims to stabilize the economy, address imminent challenges and lay foundation for resilient economic structure.
According to Ethiopian News Agency, the decision to float the Ethiopian Birr is a bold strategic move, marking a departure from the fixed exchange rate regime to a floating exchange rate. The Ethiopian government aims to reflect the true market value of Birr, promoting efficiency, transparency, and resilience in the financial system.
The move is expected to enhance export competitiveness by making Ethiopia’s goods and services more affordable in the global market, thereby stimulating economic growth and attracting foreign investment, he elaborated. However, the president warned that this transition is not without its challenges as a floating exchange can lead to short-term volatility and inflationary pressure.
Therefore, it is imperative that risks are managed with robust monitoring and fiscal policies, he added. To mitigate potential adversity, it is essential to focus on strengthening economic fundamentals, including improving infrastructures, enhancing the ease of doing business, and fostering an environment conducive to innovation and entrepreneurship.
By building a strong and diversified economic base, the nation can better withstand fluctuations arising from the floating exchange rate, he further elaborated. President of Commercial Bank of Ethiopia, Abie Sano, stated that the foreign exchange policy reform and market-determined exchange rate regime is an extraordinary shift in the Ethiopian economy.
According to him, the reform aims to unify the official and parallel markets, alleviate foreign exchange shortages, and address other external trade imbalances. It is thus anticipated to boost FDI, enhance investor confidence, and significantly enhance Ethiopia’s export competitiveness, the President noted, adding that there would be a huge boost in domestic productivity too.
For the President, increasing FDI would generate more foreign exchange and increase export earnings, which would help the trade balance deficit. On his part, Policy Studies Institute Director-General, Fekadu Tsega, said the decision to float the Ethiopian Birr represents a pivotal moment in the nation’s economic journey.
As Ethiopia embarks on the comprehensive macroeconomic reform, there is a need to learn valuable lessons from the experience of other countries, he noted. The two-day conference was jointly organized by the Ethiopian Economics Association, Policy Studies Institute, and Center for Governance, and Intra-Africa Trade Studies (CGIATS).