September 01, 2010 (Bloomberg) — Ethiopia devalued its currency, the birr, by 17 percent against the dollar, the third such move in the past 14 months, according to the National Bank of Ethiopia.
The exchange rate was quoted at 16.351 per dollar today compared with 13.628 yesterday, according to the website of the Addis Ababa-based central bank. It was trading at 11.381 on July 10 last year.
The devaluation will boost exports, crimp imports and make it easier to boost foreign currency reserves. Ethiopia needs to raise its reserves to 3 months of import cover from 2.3 months to cushion its economy from external shocks, the International Monetary Fund said in a June report. For that, it needs to devalue the exchange rate by 10 percent, the IMF said.
“This policy measure will help improve competitiveness and encourage the government to provide appropriately supportive monetary policy,” Sukhwinder Singh, the IMF’s resident representative in Ethiopia, said by phone today.
Ethiopia’s trade deficit was expected to grow to $7 billion in the fiscal year to July 7 from $6.3 billion the year before, according to IMF figures.
–Editors: Philip Sanders, Ben Holland