The Ethiopian birr has gone up in value today as Prime Minister Abiy Ahmed’s reform agenda takes root and Ethiopians in the Diaspora are increasing their remittances through banks. As recently as 6 weeks ago, $1 USD was buying 37 birr in the black market — aka the parallel market or open market. Today in Addis Ababa, $1 USD was being exchanged for 28 birr, almost matching the official rate, which is 27 birr.
The black market currency exchange will continue to play an important role since the government does not have enough hard currency reserve to meet the demand of importers. Instead of criminalizing the foreign currency black market, PM Abiy appears to be urging the traders to reduce the exchange rate so that the central bank, National Bank of Ethiopia, can increase its reserve. Many of them are complying because they support the Prime Minister’s reform effort.
But devaluing the birr to match the open market rate (which reflects the real value) would be a faster and more effective way of attracting hard currency for the government, according to economists. It also attracts more tourism.