The 2024 Float: The Reckoning, the IMF, and the Birr's Collapse

The day the official rate told the truth

On Monday 29 July 2024, the National Bank of Ethiopia announced that the birr would, henceforth, be traded at a market-determined rate. The same day, the IMF Executive Board approved a four-year Extended Credit Facility arrangement of SDR 2.556 billion (approximately $3.4 billion at the time, 850 percent of Ethiopia’s IMF quota), with a $1 billion immediate disbursement.¹ The World Bank followed within days with the pledge of $16.6 billion over three years, including a $1 billion IDA grant and a $500 million concessional loan.² The 29 July package was, in scale and ambition, the largest single restructuring of Ethiopian economic policy since the 1991–92 transition.

This article argues that the float was less a reform than a recognition — an acknowledgment, at the cost of substantial household purchasing power, of what the parallel market had been saying for thirty years. The decision was correct, in the series’s editorial view, but it was decided by the cost of further delay rather than by an underlying philosophical conversion to floating exchange rates. The float happened because the previous regime had become impossible to sustain, not because the political coalition supporting the float had genuinely concluded that floating was the right long-term arrangement. This matters for the analysis of what follows, because a reform undertaken under duress is more reversible than a reform undertaken from conviction.

The article describes the float, the IMF programme that anchored it, the immediate consequences for the population, and the institutional questions about durability that articles 22 and 27 will return to.

The exchange-rate move

The 29 July decision moved the birr from approximately 57 against the US dollar to a market-determined rate. The initial market-clearing level was contested. The Awash Bank reported the Commercial Bank of Ethiopia’s exchange rate at 90.00/94.50 birr per USD in the immediate aftermath, dropping further within days to 83.94/85.62.³ Within ten days, the rate had reached approximately 112–114 birr per USD — a depreciation of nearly 100 percent from the pre-float official rate.⁴ The IMF and the NBE characterised this as the immediate adjustment to align with the parallel rate.

The subsequent drift has been substantial. By mid-2026, the NBE-published indicative rate was approximately 157 birr per USD.⁵ Trading Economics reported the rate at 158.28 on 22 June 2026.⁶ Analyst projections, including Reporter Ethiopia’s February 2026 reporting, anticipated the rate stabilising in the 160–165 range by the end of fiscal year 2025/26.⁷ The cumulative depreciation from the pre-float rate is approximately 175 percent — the most rapid sustained depreciation in the post-Derg period.

The parallel premium, which had been over 100 percent immediately before the float, narrowed sharply in the post-float period. By the second IMF review (November 2024–January 2025), the IMF was reporting the spread between formal and parallel markets “below 10 percent.”⁸ By 2026, the premium was reported at approximately 12 percent — substantially elevated relative to a fully unified system, but down from its pre-float levels by an order of magnitude.⁹

The IMF programme

The IMF Extended Credit Facility approved on 29 July 2024 was, by IMF standards, an unusually large programme. The $3.4 billion total represented 850 percent of Ethiopia’s quota at the IMF — well above the standard 100–200 percent for ECF programmes — reflecting both the scale of the macroeconomic adjustment required and the Ethiopian government’s negotiating leverage in a situation where the IMF needed Ethiopia’s reform commitment as much as Ethiopia needed the IMF’s financing.¹⁰

The programme’s policy commitments, articulated in the structural-benchmarks documents accompanying the ECF, were comprehensive. They included: market-determined exchange rate (the float itself); elimination of central-bank financing of government deficits; phase-out of fuel subsidies; financial-sector reform including modernisation of bank regulation and supervision; reform of the NBE legal framework to strengthen its operational autonomy; engagement with creditors on debt treatment under the G20 Common Framework; revenue mobilisation reforms including VAT and excise tax updates.¹¹

The disbursement schedule was structured around six-monthly reviews, each conditional on the satisfaction of specific quantitative performance criteria (QPCs) and structural benchmarks. By IMF assessment, Ethiopia has met most of the major commitments through the first five reviews:

• First review (October 2024): $340.7 million disbursed.¹²
• Second review (January 2025): $248 million disbursed.¹³
• Third review and 2025 Article IV (July 2025): $262.3 million disbursed.¹⁴
• Fourth review (January 2026): $261 million disbursed.¹⁵
• Fifth review (staff-level agreement June 2026, Board approval pending): $468 million.¹⁶

Total disbursements through the fourth review reached approximately $2.134 billion, with the fifth review bringing the cumulative figure to over $2.6 billion. The remaining disbursements are scheduled through 2028.

The programme’s continuing operation is, by the IMF’s own reporting, conditional on continued reform implementation. The fifth review’s larger disbursement ($468 million versus the previous $261 million) reflected, in the IMF’s framing, “sharp increases in the price of key imports caused by the war in the Middle East” — the upgraded fuel-price shock that Ethiopia, as a heavy fuel importer, had been particularly exposed to.¹⁷

The immediate human cost

The immediate consequences for the Ethiopian population of the post-float depreciation were substantial and adverse. The pass-through to consumer prices was rapid: imports that had been priced at the official rate were repriced at the new rate, with the result that imported goods became substantially more expensive almost immediately. Inflation, which had been running at approximately 23–25 percent in mid-2024, accelerated into the 30 percent range in the immediate post-float period before easing.

The wage and savings consequences were particularly severe. An Ethiopian salary that had purchased $100 worth of imported goods at the pre-float rate now purchased about $36 worth at the immediate post-float rate, and about $36 at the 2026 rate as well. For households dependent on imported food items, imported medicines, or imported fuel for transport, the purchasing-power loss was direct and immediate.

The full distributional consequences are examined in article 23. The immediate point worth making is that the float was not a costless reform from the perspective of the Ethiopian population. It was a reform that imposed substantial immediate costs on the population, in exchange for the longer-term benefits of (the series argues) a more functional monetary system. Whether the long-term benefits will, in fact, be delivered depends on the durability of the post-float regime, which the next article examines.

The disinflation that briefly worked

One feature of the post-float period worth noting is the disinflation that followed the initial 2024–25 inflation surge. Ethiopian inflation, having reached the high teens through 2025, fell below 10 percent for the first time in many years in December 2025, registering 9.7 percent.¹⁸ The headline number was widely celebrated by the government and by international observers as evidence that the reform programme was working.

The single-digit print was, however, brief. By April 2026 inflation had returned to double digits (11.7 percent), and by May 2026 it was at 13.4 percent.¹⁹ Food inflation, which had moderated through late 2025, accelerated again through early 2026 to reach 15.0 percent by May. The fuel-price shock from the Middle East war was the proximate trigger; the underlying conditions that made the Ethiopian economy vulnerable to the shock — heavy import dependence on fuel, continued food-supply weaknesses, residual monetary disorder — were the underlying enabler.

The December 2025 disinflation was real but partial. The May 2026 re-acceleration shows that the post-float regime has not yet delivered the monetary stability the reform programme is designed to produce. Whether the underlying disorder is being durably resolved, or only displaced and deferred, is the open question that the rest of the series addresses.

The transition pains

The post-float adjustment has produced specific costs that are worth naming because they are concrete consequences of the reform package.

The state-owned-enterprise sector has faced substantial pressure. The Commercial Bank of Ethiopia, whose loan book contained billions of birr in non-performing loans to state enterprises, has required significant recapitalisation — the cost of which has been substantial and has been borne, in part, through the consolidated public sector.²⁰ The Development Bank of Ethiopia has faced similar pressures. The fuel-subsidy phase-out has imposed visible costs on urban consumers and on transport-dependent businesses, with the government having to navigate the political consequences of higher pump prices.

The dollar-denominated debt burden has, predictably, ballooned in birr terms. Ethiopian external public debt of approximately $30 billion, valued at the pre-float exchange rate, represented approximately 1.7 trillion birr. At the post-float rate, the same dollar debt represents approximately 4.7 trillion birr — a near-tripling of the birr value of the debt without any change in the underlying dollar obligation. The fiscal capacity to service the debt in birr terms has been correspondingly strained.

The private-sector transition has been uneven. Some sectors have benefited substantially from the new regime: exporters now retain a larger share of their earnings (the surrender requirements have been substantially relaxed, with the 2026 directives allowing service exporters to retain 100 percent of earnings indefinitely); coffee and gold producers have benefited from the more favourable export economics.²¹ Other sectors — particularly importers and manufacturing businesses heavily dependent on imported inputs — have faced substantial cost increases that they have had limited ability to pass through to consumers.

The post-float reforms

The float was, importantly, accompanied by a substantial menu of other reforms that together constitute the post-2024 architecture this series’s next article will examine. These include:

The introduction of biweekly NBE foreign-exchange auctions as the principal mechanism by which the NBE participates in the FX market, replacing the previous regime of NBE-determined rates.²² The auctions provide a market-based mechanism for liquidity management while limiting NBE intervention to specific instruments.

The reform of the NBE legal framework, including provisions to strengthen the bank’s operational autonomy and to formalise the prohibition on monetary financing of government deficits. The IMF’s January 2025 review of the second ECF programme commitment noted that “the new law governing the NBE represents a significant advance on the existing legal framework in most respects,” while flagging “remaining gaps with respect to governance and autonomy” that the reform programme commits to addressing.²³

The introduction of an interest-rate-based monetary policy framework, replacing the previous regime in which monetary policy operated principally through credit allocations and exchange-rate management. The framework is, as of mid-2026, still in its early stages of implementation.

The opening of the Ethiopian financial sector to foreign banks, with a regulatory framework for foreign-bank licensing developed through 2024–25 and the first foreign-bank licenses expected to be issued in the period 2026–27.

The launch of the Ethiopian Securities Exchange, designed to provide a domestic capital-market mechanism that — over time — could replace some of the central-bank financing functions the previous regime had relied on.

Each of these reforms is consequential. Together, they constitute the most ambitious monetary-architecture overhaul since 1945. The question of whether the reforms will prove durable, or whether they will prove reversible under future political pressure, is the open question that defines the post-2024 period. Article 22 examines this question directly.

The governorship change

One specific event worth noting because of its political significance is the September 2025 resignation of NBE Governor Mamo Mihretu and his replacement by Eyob Tekalign, the State Minister of Finance who had been a key architect of the post-2024 reform programme.²⁴ The resignation was officially attributed to Mihretu’s decision to “pursue other passions,” but the timing — three years into the reform programme, during sensitive debt-restructuring negotiations — raised questions about internal political dynamics within the reform coalition.

The transition to Eyob, a known and committed reform advocate, did not signal a change of reform direction; if anything, it consolidated the reform leadership at the NBE. But the manner of the transition — apparently a senior policy disagreement rather than a planned succession — is one of several indicators that the reform consensus within the post-2018 government is not as solid as the official rhetoric suggests. The political durability of the reform programme is a separate question from its technical merit, and the political durability question remains open.

The next article examines what comes after the float — the new institutional architecture under construction, and whether it is sufficient to prevent the disease this series has been tracking from returning under a future government.

---

Footnotes

1. International Monetary Fund, “IMF Executive Board Approves an Extended Credit Facility Arrangement for Ethiopia,” IMF Press Release 24/291, 29 July 2024. ↩

2. Credendo, “Ethiopia: The floating of the birr unlocks badly needed IMF support,” October 2024, https://credendo.com/en/knowledge-hub/ethiopia-floating-birr-unlocks-badly-needed-imf-support. ↩

3. Eastern Africa Association, “Ethiopia’s IMF backed reforms prompts currency devaluation by 30%,” August 2024. ↩

4. PWC Kenya, “Ethiopian Birr Devaluation,” August 2024; Health Poverty Action, “Economic updates from Ethiopia,” August 2024. ↩

5. Capital Market Ethiopia, “National Bank of Ethiopia Exchange Rate Today,” April 2026. ↩

6. Trading Economics, “Ethiopian Birr,” https://tradingeconomics.com/ethiopia/currency. ↩

7. The Reporter Ethiopia, “The National Bank Of Ethiopia’s Directive And Its Implications For Pricing And Unofficial Markets,” February 2026. ↩

8. IMF Press Release 25/006 (January 2025), Second ECF Review. ↩

9. Capital Market Ethiopia, “National Bank of Ethiopia Exchange Rate Today,” April 2026; The Reporter Ethiopia, February 2026. ↩

10. IMF Country Report 24/241 (July 2024). ↩

11. IMF Country Report 24/241 (July 2024), Letter of Intent and Memorandum of Economic and Financial Policies. ↩

12. IMF Press Release 24/383, October 2024. ↩

13. IMF Press Release 25/006, January 2025. ↩

14. IMF Press Release 25/234, July 2025. ↩

15. IMF Press Release 26/009, January 2026. ↩

16. IMF Press Release 26/183, June 2026. ↩

17. IMF Press Release 26/183, June 2026. ↩

18. Trading Economics, Ethiopia inflation series, December 2025; Finance in Africa, “Ethiopia inflation eases to 9.7%,” March 2026. ↩

19. StockMarket.et, “Ethiopia’s Inflation Climbs to 13.4% as Food Prices Accelerate,” May 2026. ↩

20. IMF Country Report 25/188 (July 2025), discussion of CBE recapitalisation. ↩

21. The Reporter Ethiopia, “The National Bank Of Ethiopia’s Directive,” February 2026. ↩

22. IMF Press Release 26/009, January 2026; The Reporter Ethiopia, February 2026. ↩

23. IMF Press Release 25/006, January 2025. ↩

24. The EastAfrican, “Ethiopia bondholders’ $1bn debt restructuring talks collapse,” October 2025, noting Mihretu’s departure. ↩