Import-dependent companies in Ethiopia are facing increased pressure on working capital and unpredictable costs following major macroeconomic and foreign-exchange reforms designed to shift the economy toward market mechanisms. The National Bank of Ethiopia introduced a revised foreign-exchange framework in July 2024, moving away from administrative currency allocation and strict exchange-rate controls that had defined policy for years.
The birch was allowed to float freely, moving from a range of 43 to 47 per US dollar before reforms to more than 82 per dollar within a month, and later approaching 160 per dollar, according to research from the Center for International Private Enterprise and the Forum for Social Studies. Berhanu Denu, an economist at Addis Ababa University, said the rapid adjustment significantly altered pricing for domestic firms dependent on imported raw materials, machinery and intermediate goods. Many manufacturers have attempted to pass up to 60 per cent of increased input costs to consumers, adding inflationary pressure.
Small and medium-sized enterprises face additional constraints from liquidity shortages and strict collateral requirements from banks. While the National Bank expanded foreign-exchange retention rights for exporters and capped transaction commissions at 1.5 per cent, non-exporting importers remain dependent on commercial-bank allocations, with smaller firms often experiencing delayed or insufficient access that disrupts production.
The reforms aim to improve price discovery and financial-system transparency, and the National Bank now publishes indicative daily exchange rates based on market transactions. Analysts argue longer-term benefits could include increased competitiveness, though experts say currency reforms alone cannot address Ethiopia's structural challenges including export capacity, domestic production capacity and access to finance.