The foreign exchange black market has revived to eclipse the official exchange again. Banks are buying US dollars for 17.85 birr and selling for 18.21 birr according to official rates set by the National Bank of Ethiopia while the black market is buying a dollar for 18.5 birr.
The increase in black market foreign exchange trading rates marks a new high since the depreciation of the Ethiopian currency against the dollar two years ago,
The difference of almost 5% between the official rates and those on the black market can be expected to divert exchange transactions from official channels to more unofficial ones.
The growing difference between rates on the two markets reflects the disparity between the demand and supply of foreign currency on the market according to financial experts.The current difference in the exchange rate could translate into higher prices exacerbating the inflationary pressures especially for imported goods according to some projections.
Banks are processing letters of credit for selected priority sectors due to a shortage in foreign currency reserves according to a banking executive who wished to remain anonymous.
It is to be remembered that the annual inflation rate in Ethiopia remained at 20% in July according to data revealed this week. Month-on-month prices remained unchanged for the third consecutive month revealed the data.
The pace of increase in food prices, however, has marginally slowed down showed the data. Food inflation decreased to 20.7% from 21.5% and non food inflation fell to 19.8% from 19%.
The year on year inflation rates showed signs of alleviating from 20.9% in June noted the Central Statistics office.
Source: Capital
