NBE Kicks Off Fiscal Year with Biggest FX Splash

The National Bank of Ethiopia will offer $150m at tomorrow’s foreign-exchange auction, more than twice the amount put up since the sales began in March, as it restarts bi-weekly auctions for the new fiscal year. The central bank says stronger-than-expected hard-currency inflows have allowed it to channel more to the banking system without jeopardising price and external stability.

FX inflows rose by 33% last year to $32bn, buoyed by higher coffee and gold prices, a welcome boost in the year Ethiopia floated the birr. Banks sold an average of $25m a day to businesses, according to the NBE’s annual report. Even so, the bank fell short of its ambition to bring inflation into single digits; it remains stuck at about 14%.

By signalling ample reserves at the year’s first auction, the NBE appears keener to project confidence in its ability to manage a floating currency. The previous sale attracted bids from 12 banks, with the weighted average rate of successful offers coming in at 134.95 birr to the dollar.