The government’s recent decision to increase the foreign exchange rate (FER) has significantly impacted the operations of local non-governmental organizations (NGOs), putting their projects and plans under severe strain. With over 4,000 humanitarian organizations active in the country, many are grappling with the reduced purchasing power of their funds due to the rising value of the dollar.
Several NGOs, speaking anonymously, reported that the costs of their projects have skyrocketed. What previously was estimated to cost around 56 ETB now exceeds 90 ETB, placing a substantial burden on their budgets. These organizations, which provide essential services such as food, water, shelter, and healthcare to the most vulnerable populations, are finding it increasingly difficult to sustain their operations.
According to sources, banks have recently begun contacting these charitable organizations, inquiring about their accounts. This unusual request highlights the financial pressures faced by these NGOs, which have already seen the value of their resources diminish by more than 50 percent within a week of the government’s reform.
The foreign exchange rate hike, part of a broader macroeconomic reform program announced by Prime Minister Abiy Ahmed, has led to a rapid devaluation of the Ethiopian birr. As a result, NGOs are reconsidering their agreements with international donors, who typically provide support on an annual basis.
The devaluation has forced some organizations to contemplate drastic measures, such as scaling back projects or reducing staff. “The decision is disheartening, especially for institutions like ours,” said a senior source from an NGO focused on capacity building in the health sector. “We had budgeted for a 57% increase in costs, but the situation has escalated beyond anything we could have anticipated.”
The impact of the hike extends beyond the NGO sector. Some charities report that traders are now hoarding goods, further complicating their efforts to provide services. “We’ve received funds from donors, but their purchasing power has significantly diminished,” one source explained. “Our capital has been devalued, and our balance sheets will inevitably suffer.”
In his statement announcing the macroeconomic reforms, Prime Minister Abiy Ahmed emphasized the benefits of a market-based foreign exchange rate system, which aims to correct imbalances between supply and demand, align prices with market realities, and address payment discrepancies. However, for NGOs on the ground, the immediate effects have been far from positive, raising concerns about their ability to continue supporting those in need.
