Ethiopia deputy finmin: rumour of FX devaluation "completely…

By Rachel Savage

JOHANNESBURG, Jan 19 (Reuters) – Ethiopia’s deputy finance minister said on Thursday that rumours the birr currency would be devalued were “completely unfounded”, as the east African country seeks an International Monetary Fund (IMF) loan after an African Union-backed ceasefire.

The birr currently trades at 53.42 to the U.S.dollar, according to Refinitiv Eikon data, but it is worth 96-97 on the black market according to a Reuters reporter and the country has long experienced foreign exchange shortages.

“There is widespread rumour that devaluation is in the making. This is just a rumour. Completely unfounded,” state finance minister Eyob Tekalign said on Twitter.

“A sensible macro reform is always our agenda but there should not be any concern about mere devaluation.”

Ethiopia currently operates a managed exchange rate for the birr, allowing it to depreciate gradually against the dollar.In 2020, the IMF recommended moving to a market-clearing exchange rate regime, to deal with an overvalued currency and FX shortages.

Africa’s second-most populous country requested a debt restructuring under the Group of 20’s Common Framework process in early 2021, but progress was held up by a two-year civil war in the Tigray region.

Ethiopia’s government and the Tigray People’s Liberation Front (TPLF), a guerilla force-turned-political party, agreed on Nov.2 to stop fighting following talks.

The IMF requires debt relief commitments from a country’s bilateral creditors before it agrees to a loan programme.

Adopting a more flexible exchange rate is also often a stipulation of the IMF, with Egypt’s pound weakening after it moved to a more market-determined forex regime under the terms of a fund programme.

“We’ve made it very clear, we want to reform our trading forex regime,” Eyob told Reuters in an October interview.”So the exchange rate unification remains one important policy goal, but we are just doing it gradually.” (Reporting by Rachel Savage in Johannesburg, Additional reporting by Duncan Miriri in Nairobi and Dawit Endeshaw in Addis Ababa; editing by Marc Jones and FRank Jack Daniel)