Ethiopia's market-based currency reforms, supported by strong foreign exchange reserves and record inflows, are positioning the Birr for sustained stability, according to Zemedeneh Negatu, Co-founder & CEO of CBE Capital and Chairperson of Fairfax Africa Fund (U.S.).

In his X post , Zemedeneh noted that since last year's devaluation and shift to a market-determined exchange rate, the National Bank of Ethiopia (NBE) has maintained the gap between official and parallel market rates within 10-15% except for a recent temporary distortion.

"The NBE has already acted to address this through a 150 million USD auction, cracking down on FX market distortions, and easing access to foreign currency up to 10,000 USD for individual travelers and 15,000 USD for businesses," he said.

Zemedeneh highlighted that commercial banks are now providing up to 500 million USD monthly -- about 6 billion USD annually to customers, the highest in Ethiopia's history. With 32 billion USD in total FX inflows and record exports in the last fiscal year, both expected to grow further, he said FX availability will continue to strengthen market confidence.

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He emphasized that efficient FX allocation, transparency, and a stable macroeconomic environment could keep the Birr's exchange rate within a narrow, stable range, supporting growth. "If current trends continue Ethiopia could see average annual GDP growth of over 7% as forecast by the IMF, or 8.5% as projected by the government roughly double Sub-Saharan Africa's average," he added.

Zemedeneh pointed to Nigeria's 2023 currency devaluation as a cautionary example, noting that Ethiopia's reforms under the "Homegrown Economic Reform" programs I and II before the devaluation helped ensure smoother implementation. "The lesson is clear -- do the necessary reforms and preparations before undertaking a major devaluation," he stressed.