Addis Abeba — The Ethiopian Citizens for Social Justice party (EZEMA) has voiced strong criticism against the government's recent shift to a market-based exchange regime, warning of potential economic hardships for citizens.
This comes as Ethiopia implements major macroeconomic reforms backed by the International Monetary Fund (IMF) and World Bank.
On Monday, the National Bank of Ethiopia (NBE) announced floating the birr as part of a major revision of the country's foreign exchange (FX) system, followed by nearly 40% depreciation of the birr.
In a statement released On Wednesday, EZEMA stated, "the current solution of letting the market determine the exchange rate is particularly risky for a country like Ethiopia, which has a limited production sector and is heavily dependent on imports."
The party acknowledged the government's efforts to address economic challenges but warned of potential inflation and increased living costs. "This approach is likely to cause significant inflation by increasing prices substantially," EZEMA noted in their statement.
The reforms, announced by the National Bank of Ethiopia (NBE), allow banks to buy and sell foreign currencies at freely negotiated rates. The NBE stated it would make only limited interventions to support the market in its early stages.
The opposition party, led by education minister professor Berhanu Nega, also criticized the timing of the policy change, suggesting it was premature given current economic conditions. "We believe that the adjustment made is untimely by any measure," the statement read.
EZEMA called for more active government involvement in monetary policy, arguing that this is necessary for inclusive development and social justice. The party warned, "Without direct and proactive government involvement in addressing overall national economic development issues, including monetary policy, it will be impossible to escape deep poverty or ensure social justice."
The statement also took issue with government communications, urging more balanced reporting on economic matters. EZEMA said, "We reiterate our call for them to adhere to truth and professional integrity."
The party concluded by stating that the government "will bear full responsibility for any economic, social, and political consequences" arising from the new monetary policy.
The macroeconomic reforms have received support from international financial institutions.
On July 31, 2024, Ethiopia's parliament approved a $1 billion grant and $500 million concessional credit from the World Bank's International Development Association (IDA). Earlier, the International Monetary Fund (IMF) agreed to lend Ethiopia $3.4 billion over four years following the new economic reform program.
