ETB - Ethiopian Birr

Overview of the Ethiopian Birr (ETB)

The Ethiopian birr (ETB), the national currency of the Federal Democratic Republic of Ethiopia, is issued by the National Bank of Ethiopia, which manages its value through a dirty float. In the foreign exchange market, the birr is considered to be an exotic currency or thinly traded currency.

• National flag:

• Currency name: Birr Ethiopia

• Currency symbol: Br

History of the formation and development of the Ethiopian Birr (ETB)

• From 1855 to 1936: The first birr. In the 18th and 19th centuries, the country of Ethiopia used the Maria Theresa thaler and blocks of amole tchew salt as currency. The thaler was called birr or talari. In 1855, the Maria Theresa thaler was officially accepted as the standard currency of Ethiopia.

• From 1936 to 1941: Italian Lira. After Italy occupied Ethiopia, the Italian Lira was announced on July 15, 1936, at a rate of 3 lira for each talari. The exchange rate with the thaler was raised to encourage the use of the Lira.

• From 1941 to 1945: East African Shilling. In the East Africa Campaign of 1941, the British Army used various currencies, including Indian and Egyptian money. The Italian Lira was still in circulation for small transactions. The East African shilling became the official currency on July 1, 1942, until 1945.

• From 1945 till now: The second Birr. In 1945, the Birr was reintroduced at a rate of 1 birr for 2 shillings. The birr is divided into 100 santims, and since 1976, birr has become the official name in all languages.

• Year 2024: The floating Birr. In 2024, Ethiopia implemented a reform policy that included the liberalization of the foreign exchange market, leading to the floating of the birr. The Central Bank received 13.5 billion USD from international partners. However, the value of the Birr.

The Ethiopian Birr (ETB) Denominations

Below are the types of Ethiopian Birr currency that have been issued:

• ETB Banknotes: Ethiopian Birr banknotes are issued in various denominations: 1, 5, 10, 50, 100, 200 Birr. The design of the banknotes often includes images of Ethiopia's cultural heritage, history, and natural landscapes.

• ETB coins: Ethiopian Birr coins are issued in smaller denominations and are mainly used in daily transactions with denominations of 1, 5, 10, 25, 50 Santim, and 1 Birr. In recent years, the 1 Birr coin has gradually been replaced by paper money or electronic payment methods. However, coins are still widely used in small transactions and rural areas.

The current exchange rate of the Ethiopian Birr (ETB)

The latest exchange rate of the Ethiopian Birr (ETB) against the USD is 106 Birr for 1 USD. Due to the floating exchange rate, the value of the Birr against other currencies can fluctuate significantly in a short period.

The exchange rate of the ETB fluctuates depending on the economic situation and foreign exchange policies.

Factors affecting the value of the Ethiopian Birr

Below are the factors affecting the value of the Ethiopian Birr:

• Current account deficit: Ethiopia is a country that imports more goods than it exports, leading to a prolonged current account deficit. The shortage of foreign currency devalues the Birr due to the demand for USD exceeding the supply.

• High inflation: Ethiopia is a country that has experienced high inflation for many years. The domestic inflation situation reduces the purchasing power of the Birr and devalues the currency compared to strong foreign currencies.

• Monetary policy: The National Bank of Ethiopia (NBE) frequently intervenes in the foreign exchange market to maintain a stable exchange rate. However, these interventions are not sustainable, so when the foreign exchange reserves decrease. In addition, the floating of the Birr in 2024 is a step towards addressing this issue, but it has led to a sudden depreciation.

• High public debt: Ethiopia has a high level of public debt, especially foreign debt. This creates pressure for repaying foreign currency debts and reduces the value of the Birr.

• Political situation and internal conflict: The Tigray war negatively affects the economy and foreign investment. The unstable political situation has caused investors to withdraw their capital, reducing demand for the Birr and increasing depreciation pressure.

• Foreign investment and remittances: Foreign direct investment (FDI) and remittances play an important role in providing foreign currency for Ethiopia.

The value of the Ethiopian birr is affected by various factors leading to fluctuations and depreciation. These factors also cause the Ethiopian economy to be highly volatile. To improve the value of the Birr, Ethiopia needs to implement macroeconomic stabilization measures, enhance exports, and maintain a stable political environment.