A World Bank economist on Tuesday, July 22, 2014 noted Ethiopia must devaluate its currency in order to boost export because the nation’s export commodities are mostly unprocessed products and they need to stay competitive on price.

Since 1992, Ethiopia has been following a carefully managed floating exchange rate. The last time a big devaluation took place in the economy was in 2010 when National Bank of Ethiopia devalued Birr by 16.7 percent.

Lars Christian Moller, World Bank's lead economist in Ethiopia, said "By one measure of real exchange rate, Ethiopia's currency is 31 percent overvalued".

During an economic report on Ethiopia, Moller noted Ethiopia will benefit from devaluating it’s currency by 10 percent which will increase the country’s export by 5 percent.

He added, "Ethiopia's exports are relatively unsophisticated, unprocessed and tend to compete in price, that means that we need to look more into what are the export prices, and how can we manage them”. "This is where a competitive real exchange rate comes in. We argue that it could help support export promotion".

During the past fiscal year’s 10 months Ethiopia has secured U.S $ 2.6 Billion which shows an increase of U.S $ 5 Million when compared to the entire 2012/2013.

Nonetheless, according to Reuters, the performance of the nation’s main export commodity, coffee, tumbled to U.S $ 489 Million.

World Bank and IMF both advice the East African nation to loosen its heavily state controlled economy in order to avoid squeezing out the private sector.

Source: Reuters