Ethiopia central bank announces 15% devaluation of Birr
This news broadcast covers the major changes made by the National Bank of Ethiopia. These adjustments were made with two goals in mind, reports the news anchorman on this video. Firstly, to encourage commerce. Secondly, to create a culture of saving among the Ethiopian population.
Hiwot Degefu takes over and begins with a background about the second phase of the Ethiopian Growth and Transformation Plan. She informs the audience that the goal of increasing exports which is a paramount part of the Growth and Transformation plan wasn’t achieved in the past two years. In continuing, Hiwot reports that the National Bank has finished preparations to help increase the amount of foreign currency accrued from exports in the current 2010 (Ethiopian Calendar) budget year. It is in this regard that the bank has made improvements in currency valuation and interest rate.
Yohannes Ayalew (Ph.D.) National Bank of Ethiopia’s Deputy Governor and Chief Economist Gives Press Release
The Chief Economist begins by stating two points.
- A 15% increase in Birr currency exchange starting from Tikimit 1, 2010.
- A 7% Minimum interest rate for savings and deposits. The previous rate was 5%
Yohannes Ayalew explained that this is to encourage export-oriented companies to perform better. The second is to create a bigger market for Ethiopian based countries. In short, the dual objectives are import-substitution and export promotion.
While international prices for such Ethiopian exports are dropping, explains Yohannes Ayalew, local demand for coffee and other produce is rising. The rise of local demand is due to economic growth. This discourages farmers from focusing on export-oriented products. export-oriented products include coffee, oilseeds, pulses (kidney beans, lentils, green mung) and livestock.
Farmers will get more, in birr terms, for their goods, even if world prices for produce remain low, he explained.
The short newscast shows textile workers inside a large factory. These are also beneficiaries of this recent change by the NBE according to the deputy governor.