Ethiopia’s central bank injected $780 million into the country’s foreign exchange (FX) market in 2025 as authorities accelerated measures aimed at curbing dollar shortages and stabilising the local currency.
Despite the aggressive intervention, the birr continued to weaken through the year, reflecting persistent structural weaknesses in the FX market.
The figure reflects the combined value of 10 FX auctions held by the National Bank of Ethiopia (NBE) between February and the second week of December, according to public notices reviewed by Finance in Africa. The NBE began selling FX to banks in August 2024 as a way to channel higher-than-expected reserves and control monetary growth. So far, 12 auctions have been completed.
According to the apex bank, the interventions helped to boost market liquidity and meet rising demand, with banks’ average daily FX sales to businesses climbing sharply to $25 million in July 2025, up from $1 million a year earlier.
As foreign reserves reached new highs, the NBE stepped up allocations in August, auctioning $150 million to banks — the highest level recorded since the initiative began.
In a press statement issued on August 4, the central bank said: “The NBE would like to indicate, on this occasion, that FX supply conditions continue to be robust and that business and individual demand for foreign exchange is being widely addressed by the banking system.”
“Reflecting the record FX inflows received last year, commercial banks are at present continuing to make stepped-up FX allocations, which NBE will further support through periodic FX auctions as needed,” the statement added.
A total of 28 banks participated in the August sale after a successful online bidding process conducted at a weighted average exchange rate of Birr 138.2 per dollar. October’s sale was the only other $150 million auction during the year.
On December 15, the NBE announced an additional $50 million auction scheduled for the following day, marking its latest market intervention.
Gold-backed reserves support interventions
Ethiopia’s international reserves tripled in the fiscal year ending July, bolstered by a sharp rise in gold exports and stronger capital inflows, enabling the NBE to intervene more aggressively in the FX market.
The upturn comes as the Horn of Africa nation pressed ahead with sweeping reforms introduced in mid-2024, aimed at stabilising the economy after decades of disruptions.
Backed by the International Monetary Fund (IMF), the measures focus on curbing inflation, adopting market-based FX policies and stimulating export-led growth.
Tangible results have begun to emerge.
Central bank data show capital inflows reached a record $32 billion as of mid-2025, marking a 33% year-on-year increase. The improvement was driven by $16.8 billion in export earnings, $7.1 billion in diaspora remittances, and $6.1 billion in foreign direct investment and new loans.
In October, Prime Minister Abiy Ahmed revealed that gold exports rose sevenfold within a year, climbing from $409 million to $3.5 billion as of July 7 and outstripping coffee for the first time in decades.
The surge in gold output was attributed to higher payments to artisanal miners, fewer smuggling incidents and the resumption of operations at Midroc Gold Mine, Ethiopia’s leading industrial gold producer.
Meanwhile, coffee generated $2.65 billion over the same period, nearly doubling from $1.4 billion the previous year, underscoring a wider export boom.
Birr weakens despite FX injections
After the NBE floated the birr last year as part of a broader overhaul of FX rules, the currency lost nearly two-thirds of its value, according to Bloomberg data.
Despite repeated interventions, the downward trend has persisted.
Market pressures intensified in the third quarter of 2025 following months of moderation, with the birr depreciating by 8.1% after sliding from 135.5 ETB per dollar on July 1 to 146.4 ETB per dollar on September 30, official data shows.
“This persistent decline indicates that adjustment pressures in the FX market have continued more than a year after the transition to a floating regime commenced,” the Ethiopian Economics Association said in its Quarterly Macroeconomic Update released earlier in December.
The association noted that after the sharp depreciation that followed the initial transition, the pace of decline slowed. The birr fell by 11.5% between mid-September and December 2024 and by 2.72% in the first quarter of 2025, before accelerating slightly to 4% in the second quarter.
“The 8.1% depreciation in Q1 FY2025/26 therefore represents a re-intensification of depreciation pressure, underscoring the ongoing structural challenges in achieving exchange rate stability,” the report said.
The authors noted that while the $150 million injection in August provided temporary relief, renewed currency weakness points to deeper structural imbalances driven by higher demand relative to supply.
As of December 16, when the latest auction was completed, the average weighted exchange rate had weakened further to ETB 154.7 per dollar, reflecting underlying pressures.
The birr’s volatility has been exacerbated by consistent disparities in FX rates across banks. For instance, on September 30, buying rates ranged from 129.04 ETB per dollar at NIB to 143.51 ETB at ZamZam Bank, representing a spread of more than 14 birr.
Analysts warn that the fragmented structure has contributed to higher foreign currency costs, highlighting the need for policy measures that not only support the development of a genuine interbank FX market but also enhance transparency.
They argue that clearer reporting of transaction prices, liquidity conditions and auction outcomes would help deepen liquidity and stabilise prices.
