Since Abiy Ahmed became Ethiopia’s Prime Minister in 2018, the Ethiopian official currency, birr, has experienced a significant and ongoing devaluation, reflecting the ruling party’s incompetence. When Abiy took office, the official exchange rate was approximately 27 birr to one U.S. dollar. By early 2025, the birr had plummeted, with rates exceeding 130 birr per dollar in official markets and 154 birr on the parallel black market, marking a decline of over 380% in just seven years.
This sharp drop stems from a combination of factors. Ethiopia’s economy has been strained by persistent foreign currency shortages, high inflation, and external pressures from institutions like the International Monetary Fund (IMF). In July 2024, the government adopted a market-based exchange rate as part of a $3.4 billion IMF loan agreement, leading to an immediate 30% devaluation overnight and further depreciation in the following months. The move aimed to address chronic economic distortions, boost exports, and attract foreign investment, but it has also fueled inflation, with prices for basic goods like food and fuel soaring.
The devaluation has hit ordinary Ethiopians hard. Public sector workers, including teachers and nurses, struggle to afford essentials as their salaries lose value. While the government has promised wage hikes for lower-income earners, many view these measures as insufficient against the backdrop of skyrocketing living costs. Critics argue internal conflicts and corruption exacerbated economic instability.
Supporters of Abiy’s regime, however, contend that the devaluation was a necessary step to align the birr’s value with market realities and reduce the gap between official and black-market rates. They point to potential long-term gains, such as increased competitiveness for Ethiopian exports like coffee and textiles. Yet, with inflation hovering around 35% in recent years and the escalating civil war in the Amhara region, the birr’s decline remains a contentious issue, leaving Abiy’s regime fragile and the country unstable.
Abiy, who campaigned on promises of democratic reforms and political openness, has faced criticism for presiding over an increasingly repressive government. Reports of jailed opposition leaders and journalists, alongside restrictions on political parties, have stifled dissent. This climate of political instability has deterred foreign investment and exacerbated Ethiopia’s economic woes, contributing to the birr’s steep decline.
