On July 28, 2024, Ethiopia secured a $10 billion loan arrangement with the International Monetary Fund, contingent on sweeping economic reforms. The following day, the National Bank of Ethiopia announced it would abandon the fixed exchange rate system that had governed the birr for more than a decade in favor of a market-based, floating exchange rate.
The float began on July 29, 2024. On the same day, the IMF's Board approved an Extended Credit Facility (ECF) of $3.4 billion, with $1 billion distributed immediately. The World Bank added its support, pledging $16.6 billion in funding over three years, including a $1 billion IDA grant and a $500 million concessional loan.
For years, Ethiopia's fixed exchange rate system, paired with strict controls on current account transactions, had created mounting economic pressures. The birr was artificially overvalued at the official rate, while the country faced severe shortages of foreign exchange. Weak export growth, high inflation, and restricted access to dollars at the official rate had driven a thriving parallel market where the birr traded at more than double its official value.
The reform required by the IMF was intended to address these imbalances directly — allowing the birr to find its true value, narrowing the gap between official and parallel markets, and improving export competitiveness. The move was politically and socially sensitive: a weaker currency raises import prices, particularly for fuel and food, straining household budgets immediately.
The devaluation was steep. When the float was introduced on July 29, 2024, the birr lost roughly 30 percent of its value overnight. The decline continued: within about ten days, by August 7, 2024, the birr had devalued approximately 100 percent from its pre-float level, trading at around 112 to 114 birr per US dollar.
Two years later, in August 2026, the reform was still unfolding. Ethiopia had received $2.65 billion in cumulative IMF funding under the program and had conducted 24 foreign-exchange auctions administered by the central bank, with the birr continuing to slide in value, though the pace of devaluation had slowed from the initial shock.
