Currency Floating: Foreign exchange and disinformation in Ethiopia
Ethiopia’s Birr: An Analysis of Its Valuation Trends
The federal government of Ethiopia recently announced that it would let the market determine the value of its currency, the birr, and ease limits on the amount of foreign currency held by commercial banks and exporters as part of a series of measures to increase the supply of dollars and boost economic activity in the country.
This decision is part of a broader economic strategy Ethiopia has employed several times in recent years to address various financial challenges. One of the latest devaluations was officially announced On October 10, 2017, to take effect on October 17, 2017, resulting in a notable drop in the value of the Ethiopian currency. Specifically, the Ethiopian Birr depreciated by 15% against major currencies such as the US dollar.
Before this adjustment, the exchange rate stood at approximately 23.4177 Ethiopian Birr for one US dollar in October; following the devaluation, this rate increased to about 27.17 Ethiopian Birr in December 2017 Ethiopian Birr per US dollar.
Such measures are often taken by governments facing economic difficulties as they can help to support foreign export investment. These types of government actions usually show the decision made by governments to maintain their financial stability in the face of economic challenges.
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On July 28, 2024, Prime Minister Abiy Ahmed announced that Ethiopia has embarked on full implementation of a macroeconomic reform policy. The Prime Minister also elaborated that the government has been implementing numerous economic reforms to address longstanding structural problems, including debt burden, inflation, unemployment, and low productivity.
Ethiopia’s birr has also been devalued to other currencies as part of this economic reform. The government claims the devaluation was implemented to boost exports and address the lack of foreign currency. Many measures were carried out to control trade balances and improve export competitiveness. These types of measures usually show the government’s decision to maintain financial stability in the face of economic challenges.
Following the Ethiopian government’s decision of Ethiopia’s economic reform program, the National Bank of Ethiopia announced a major revision of the country’s foreign exchange system effective immediately in a press release on July 29, 2024, which brought major policy changes, including the market-based exchange regime.
After the government’s decision, Ethiopia’s Birr to US dollar rate has doubled in just a few days.
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Source: NBE Exchange rates from 2014 – 2024
Concerning money floating, different false claims were circulating in Ethiopia’s social media landscape from salary hikes to money printing claims.
Alleged new salary hikes in Ethiopia’s public sector
After the government decided to implement the new macroeconomic reform, considering low-income civil servants working for the government, While addressing about the new macro-economic reform, Prime Minister Abiy Ahmed announced a significant salary increase specifically for civil servants in low-income government workers, boosting their salary by an unprecedented 300% bands to help them offset the economic shocks.
Following the Prime Minister’s speech, different social media claims started to appear, claiming that the list shows the new salary increment for civil servants working for the government.
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Several reports show that civil servants are dissatisfied with their pay raises. According to Addis Maleda’s report, civil servants are not informed when changes will be implemented and do not receive salary increases yet.
However, the federal government hasn’t yet announced any changes. The government also denied the claim, stating that reforms to public sector salaries needed parliamentary approval.
Recent reports showing an alleged letter from the Ministry of Finance written to the prime minister’s office show that the salary increment will be implemented starting from Sep 11, 2024.
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Is Ethiopia on Set to print Money locally?
A video circulating on online platforms like Youtube with more than eight thousand views, and on TikTok with more than three thousand views claimed that Ethiopia has signed an agreement with a Japanese company, TOPPAN Gravity, to build a large infrastructure in Addis Ababa Bole, Lemi industrial park, to print Ethiopian Birr locally.
The video uses footage of various government officials and TOPPAN Gravity administrators to support its claim.
However, an investigation by Haqcheck reveals that the agreement is not for printing currency, but rather for producing high-security documents like Passports: National ID cards, ATM cards, Mastercard products, and other governmental documents.
On May 8, 2024, Fana Broadcasting Corporate (FBC) an Ethiopian public media outlet news release covered the issue as the agreement between Ethiopia and TOPPAN Gravity focuses on the production of secure documents, including Passports: Providing citizens with secure and tamper-proof travel documents, National ID cards: Enhancing identity verification and security measures, ATM cards: Ensuring secure access to financial services, Mastercard products: Enabling secure and reliable payment transactions, and these documents will incorporate embedded microchips, further enhancing their security and authenticity.
In addition to Fana’s report TOPPAN Gravity too announced the agreement “With the launch of the manufacturing plant in Ethiopia as a first step, the TOPPAN Group plans to harness its technologies and solutions to establish capabilities for the provision of a full range of government ID solutions in the African market, intending to produce IDs and passports for neighboring countries in the future. The government of Ethiopia, meanwhile, will ensure operational design aligned with local needs by establishing rules and regulations for passports and IDs.”
Mr. Mamo Mihretu, governor of the National Bank of Ethiopia, also verified for HaqCheck that the agreement does not include printing the Ethiopian currency.
Recommendations
HaqCheck urges social media users to be cautious and cross-check information rather than accepting and sharing instantly. They should look for original and trustworthy sources for matters.
It is recommended that social media content creators refrain from circulating false information. They should be responsible. The government should guarantee full and open access to information to the media and public. Concerned government authorities should offer timely and sufficient information.
We urge political parties, media outlets, government offices, and other interest group entities to give the media and audiences accurate information.