Ethiopia Birr Hits Record Low as Central Bank Sells US$500 Million in One Day

ETHIOPIA · MARKETS

The Ethiopia birr has fallen to a record low near 162 per dollar, and the central bank has answered with an unscheduled US$500 million sale on 20 August. That single auction matches the entire amount the bank had allocated for the whole quarter.

What the Ethiopia birr auction reveals

The auctions work in a simple way. The central bank offers a fixed pot of dollars, commercial banks bid a birr price for them, and the highest bidders are served until the pot runs out. That is how the Ethiopia birr’s official exchange rate is now set.

The National Bank of Ethiopia had set out a measured plan for the first quarter of the 2026/27 financial year. Four auctions of US$125 million each, on 12 August, 26 August, 9 September and 23 September, adding to US$500 million.

On 20 August it intends to sell US$500 million in one sitting, and it has called the sale unscheduled and special. The quarterly plan and the single-day sale are now the same number.

It is not the first sale of this size. The bank sold US$500 million at special auctions on 27 January and again on 21 February this year, both outside its regular timetable. What is new is that one day now matches everything it had scheduled for three months.

A central bank that compresses a quarter into a day is not managing a currency. It is defending a level.

Bloomberg reports the bank has already spent roughly US$2.2 billion this year holding the line. The birr has still weakened about 3.2% to near 162 per dollar.

The bidding tells the story more plainly than the rate

At the 25th auction on 12 August, banks submitted US$470.17 million in bids against an allocation of US$125 million. That is a bid-to-allocation ratio of roughly 3.8 times. Only nine of the 28 banks that took part came away with dollars.

In June the same ratio was about 1.6 times. Participation over the same stretch rose from 14 banks to 28.

The clearing levels moved with the demand. The marginal rate went from 157.00 to 161.0050 birr per dollar, and the weighted average of successful bids from 157.00 to 161.7994.

Those numbers describe a market where the official price is set by rationing rather than by clearing. Every auction that ends oversubscribed leaves unmet demand looking for another venue.

What is pushing on the currency

The immediate pressure is the import bill. Higher global oil prices linked to the conflict involving Iran have raised the cost of fuel and fertiliser, both of which Ethiopia buys in dollars.

The same conflict has weighed on remittances from Ethiopian workers in the Gulf, according to Bloomberg’s reporting. That removes one of the country’s steadier sources of hard currency at the moment it is needed most.

Ethiopia floated the birr on 29 July 2024 as the centrepiece of a reform programme backed by the International Monetary Fund. The currency moved sharply in the days that followed and has not found a stable level since.

A float that needs US$2.2 billion of support inside eight months is a managed rate wearing a float’s clothing. That is the tension the reform programme has not resolved.

What outside investors are actually watching

Ethiopia is the most populous country in East Africa and, alongside Kenya, one of the region’s two biggest economies. It is also two years into a four-year International Monetary Fund arrangement worth about US$3.4 billion. The IMF board approved the fifth review on 1 July 2026, releasing about US$464 million and taking total payouts under the programme to roughly US$2.65 billion.

For anyone holding Ethiopian assets, the exchange rate is the transmission channel for everything else. It determines what local earnings are worth in dollars and whether they can be repatriated at all.

David Cowan, chief Africa economist at Citigroup, expects the birr to reach between 185 and 195 per dollar by the end of the year, while also expecting the authorities to stop it crossing 200. That is one bank’s forecast rather than an official projection.

The gap between the auction rate and what importers actually pay outside it is the number that will decide whether the reform is judged a success. Bloomberg puts the street price in Addis Ababa at about 180 birr per dollar, roughly 15% weaker than the official rate. A gap that wide is the clearest sign that a market has not cleared.

The wider East African read

Ethiopia’s difficulty is specific but not unique. Several African economies that liberalised exchange rates in 2024 and 2025 have discovered that the hard part comes after the float, not during it.

Nigeria unified its rates in June 2023 and has spent the years since managing the aftermath. Ghana’s cedi slumped, then rebounded sharply, and its central bank is now managing the swing.

What separates Ethiopia is the thinness of the buffer. Ethiopia went into the float with reserves covering barely two weeks of imports. They have since been rebuilt to about US$5.9 billion, or roughly 2.1 months of import cover, on IMF figures. That is real progress, but it is still a thin cushion for a country this size, and every large auction spends part of it.

That is why a single auction matters more here than it would elsewhere. There is less room behind it.

What would count as evidence either way

The first test is simply whether Thursday’s auction clears, and at what rate. A sale that goes off near the last marginal level would suggest the bank has found a floor.

The second test is the 26 August auction. If the scheduled US$125 million goes ahead as planned, the special sale was a one-off intervention rather than the start of a new run rate.

The third test is slower and more revealing. It is whether importers stop queueing, which is the only durable sign that the official market has become the real one.

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