CAPE TOWN – Ethiopia should slowly liberalize its exchange rate regime but is unlikely to move to a fully floating rate for the birr currency within the next three years, its central bank governor told Reuters on Friday.
Ethiopia’s Prime Minister Abiy Ahmed, who took office last year, has launched an ambitious economic reform drive aimed at opening up one of Africa’s fastest-growing but most closed economies, but his government has kept a tightly managed currency regime in place.
“There is no doubt that we should move slowly to the market type of forex management. But our issue is that we need to look at the timing,” National Bank of Ethiopia governor Yinager Dessie said in an interview on the sidelines of the World Economic Forum’sAfrica summit in Cape Town.
Dessie forecast that economic growth would average 10% in annual terms over the next three years and that export growth would be around 15% in the current fiscal year thanks to the agriculture and manufacturing sectors.
The International Monetary Fund forecast in November that “medium-term economic growth was envisaged to converge to around 7%” given the government’s current policies.
“We have to focus on export growth otherwise economic growth will not be sustainable,” Dessie said. “We are now conducting a very rigorous economic reform program that can sustain the double-digit growth we have seen in the past years.”
Albert Zeufack, chief economist for Africa for the World Bank, told Reuters that a projection for 15% export growth this fiscal year seemed “very ambitious” but that the Bank did forecast a rise in exports over time.