In recent weeks, the parallel foreign exchange market in Ethiopia has seen a significant decline, driven by heightened regulatory actions and a crackdown on banks accused of manipulating forex rates.
The National Bank of Ethiopia (NBE) has stepped up its oversight by conducting regular foreign currency auctions, while the Commercial Bank of Ethiopia (CBE) has approved millions in forex requests, alleviating some of the pressure on the black market.
Market analysts report a notable slowdown in illegal forex trading, as demand diminishes with more businesses and individuals opting for official channels. Just weeks ago, the black market thrived, with traders offering inflated rates; now, sellers are struggling to find buyers, and the gap between official and parallel market rates is narrowing.
A key factor in this shift was CBE’s recent approval of $122.5 million in foreign currency for eligible applicants. However, sources indicate that not all approved funds were collected, as some applicants failed to follow through on withdrawals.
CBE officials confirm that while most approved customers claimed their forex, a portion did not, suggesting that speculative demand may have been overstated.
During a recent meeting with bank executives, the NBE criticized some financial institutions for submitting artificially high bids in forex auctions, which distort the true market rate.
The central bank has committed to continue biweekly auctions until the end of the fiscal year to stabilize the exchange rate.
Looking ahead, financial experts anticipate further stabilization as the NBE maintains its biweekly forex auctions through the end of the fiscal year.
Additionally, the World Bank is set to disburse funds to the CBE, which could further narrow the gap between official and parallel market exchange rates.
These developments signify a turning point in the forex market, as regulatory measures and institutional interventions begin to reduce illegal trading and restore stability.
It has been reported that the NBE maintains ample reserves following the implementation of economic reforms; however, experts suggest that certain interest groups are attempting to promote illegal market activities.
They also argue that some government policies have contributed to the recent surge in the parallel market over the past few weeks.
