The streets of Addis Ababa are witnessing a dramatic shift as the Ethiopian birr plummets in value. This sudden change is a direct result of the government’s recent implementation of a flexible exchange rate policy, a move intended to modernize the economy and address long-standing foreign currency shortages. However, the consequences have been stark. The birr has lost a staggering 60% of its value against the dollar since the policy’s introduction, sending shockwaves through the Ethiopian economy.
The impact is readily apparent in everyday life. Menus at restaurants like the Samra Hotel in Bole are constantly fluctuating, with prices changing almost hourly. Many supermarkets are resorting to hoarding essential goods, selling only small quantities to avoid government penalties and pushing consumers to pay inflated prices for bulk purchases. Even the bustling Merkato, Addis Ababa’s largest open-air market, has seen an influx of guards attempting to control businesses from raising prices.
The government has responded with a crackdown on price speculators, confiscating hoarded goods and shutting down thousands of stores accused of price gouging. The Addis Ababa City Trade Bureau has issued warnings of further action against those exploiting the situation. But despite these efforts, the situation remains volatile.
While the International Monetary Fund (IMF) has approved a $3.4 billion credit facility to help Ethiopia through this transition, and has disbursed $1 billion immediately, experts like Getachew T. Alemu, a public policy specialist, warn that the impact on fixed-income earners will be severe. He highlights that the government’s actions to stabilize the situation have yet to address the fundamental issue of the birr’s value, making the future uncertain for many Ethiopians.
The government’s own actions have added to the public’s anxieties. Last week, the cost of ordinary passports was abruptly raised from 2,000 to 5,000 birr, further straining those already struggling with the rising cost of living. This unexpected increase has sparked anger and frustration, with many questioning the government’s ability to manage the economic transition effectively. The situation in Ethiopia remains fragile, and the success of the new exchange rate policy hinges on the government’s ability to address the growing anxieties and ensure a stable economic environment for its citizens.
