Ethiopia announced adopting a market rate foreign exchange regime, a prerequisite for an IMF program as the country rolled further into economic crisis. Ethiopia’s economy has been hit hard by a full blown out war in the Northern Tigray region as well as other global shocks including the war in Ukraine and environmental catastrophes. The Horn of African nation is still rife with conflict across the region and has struggled to meet its debt repayments, defaulting on its Eurobond payment last year. 

Now, Ethiopia has agreed to economic reforms in accordance with IMF guidelines that avail a $3.4 billion program over the next four years. The two key objectives of the program are to float the currency and increase domestic revenue mobiliization. For a country with less than a months worth of FX reserves, it had run out of options. 

Now, the question on everyone’s mind is what will be the impact of the devaluation on inflation. We have some ideas but only time will tell. 

In this first episode of the Africa News Update, I speak with Getachew T. Alemu