23 August 2014

Ethiopia: Currency Devaluation Around the Corner

Head of Government Communication Affairs Office (GCAO), Redwan Hussein disclosed that the government would not apply a significant change in the devaluation of the birr against a basket of major currencies. This was disclosed during a press conference held on Monday at his office located off Africa Avenue/Bole Road.

The press conference was given in relation to the current affairs and discussed various issues with local journalists. The devaluation was raised by journalists after the World Bank stated that Ethiopia's birr is overvalued and the country would benefit from a devaluation to boost export revenue and accelerate economic growth.

In addressing this question he said: "The government will not accept all proposals, the government considers all the pros and the cons of the proposal and decided on the issues that will benefit the country more."

He also recalled that the government devalued the currency in 2010 by 10 percent and by 20 percent in 2011 in line with the Growth and Transformation Plan (GTP).

The report by the World Bank suggests that a more competitive real exchange rate could support export promotion. In the simulation carried out as part of the analysis in the report, it shows that, all things being equal, 10 percent devaluation could lead to 5 percent improvement in export.

According to professionals of the sector, if Ethiopia accepts this proposal the purchasing power of the birr will be decreased by two birr; however, Redwan did not explain the amount but simply declared that the government will not apply a huge devaluation.

Moreover, responding to other question related to the tripartite meeting with Egyptian, Sudanese and Ethiopian officials that will take place next week he said: "Ethiopia's stand over the construction of the Grand Ethiopian Renaissance Dam is clear, known and firm, therefore if their idea is compatible with this Ethiopian stand we will discuss over the issue further, if they come up with different issues we will simply listen to them."

However, Egypt's Irrigation Minister Hossam El-Moghazi told the privately-owned Mehwar channel that Egypt had a new "vision" regarding Ethiopia's planned Dam ahead of another round of talks in the Sudanese capital.

The talks are expected to develop seven main points that Egypt's President Abdel-Fattah El-Sisi and Ethiopian Prime Minister Hailemariam Desalegn have previously discussed during a meeting in late June - among them, fostering dialogue and cooperation between the two countries as well as regional projects to meet the growing demand for water.


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