Ethiopia's Prime Minister defended the decision to float the currency, rejecting complaints of devaluation

Ethiopian Prime Minister Abiy Ahmed has defended the decision to float the birr and insisted that the move was not a devaluation of the currency. Ahmed stated that the aim is to unify the official and parallel exchange rates. Reports suggest that Ethiopia's decision to float the birr was quickly rewarded with a $3.4 billion financial package from the International Monetary Fund.

Birr lost more than 30% in a week

Ethiopian Prime Minister Abiy Ahmed has defended the decision to float the local currency, claiming that it was aimed at bridging the gap between the official exchange rate of the birr and the parallel market exchange rate. According to Abiy, the floating of the currency—which resulted in the birr devaluing more than 30% within a week—does not constitute devaluation.

Following the announcement of floating the currency , local authorities took action against businesses that raised prices. Although the move is said to satisfy one of the International Monetary Fund's (IMF) conditions, some local commentators predict an increase in the inflation rate.

However, in a late-night televised address on August 1, Prime Minister Abiy insisted that the decision was the right one for a country struggling with a foreign currency shortage.

“It is wrong to say that Ethiopia devalues ​​its currency. There are two markets. One is 100 and the other is 50. So when the gap between the two markets becomes wide, it brings many dangers. So what we said (the two markets) should be unified,” the Ethiopian Prime Minister said.

A report by Reuters , citing an unnamed official, said Ethiopia's decision to float the birr was immediately rewarded with a $3.4 billion financial package from the IMF. The World Bank then approved $1.5 billion in budget support, a first for the African country. The package is expected to help Ethiopia save $200 million from restructuring its $1 billion Eurobond.

Do you agree with the Ethiopian Prime Minister's assertion that floating the currency does not mean devaluing the birr? Please share your thoughts in the comments section below.

Source: bitcoin . com news
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