Despite the value of birr depreciating every year by about 25 percent in the past few years, the government reaffirms that official devaluation will not transpire.
One of the hotly debated talks around town has been that government is under preparation to introduce a new round of devaluation on the birr against major hard currencies.
Some experts in the private sector and financial industry had put forth various notions stating that the government may apply a devaluation approach as like in 2010 and 2017 as a result of a push from global partners like the International Monetary Fund (IMF).
A big private manufacturing industry leader, who has vast experience in the financial sector, argues that international partners would provide support in connection with the peace deal agreed upon by the central government and the rebels in Tigray.
“When you get a fund as a nation, the state is also required to fill its macroeconomic position and revenue through different instruments, for instance, by emplacing a suitable fiscal policy. But when the country fails to fill or improve the revenue gap through tax or other instruments it may probably be forced to devalue the birr against international major currencies to keep the value of birr appropriate with hard currencies,” he told Capital.
On the other hand, some other sector actors argued that the government would not follow the previous experience of applying devaluation.
Of the lot believing that government will not take such measures is Eshetu Fantaye, President of Ahadu Bank, who stated that he does not expect the government to devalue the birr.
“I don’t expect government to resort to undertaking official devaluation but definitely crawling depreciation will happen,” Eshetu told Capital a couple weeks ago.
The president of one of the newly formed financial firms also recalled that in the past few years, the government had been following a policy to depreciate birr on a daily basis with gradual approach.
The bank president who demanded anonymity said that on average, the government depreciated the local currency by 25 percent every year. So if the devaluation would happen the change must be very big, he underlined stating, “In my view the government will follow through with the measures that is has been applying for the past three years.”
On his latest tweet, Eyob Tekalegn, State Minister of Finance and Board Member of the National Bank of Ethiopia, stated that there is widespread rumors that devaluation is in the making, “This is just a rumor. Completely unfounded.”
“A sensible macro reform is always our agenda but there should not be any concern about mere devaluation,” he said.
In 2010 and 2017 the government applied a 17 and 15 percent depreciated respectively, whereas when the reformist government came to power in 2018 it introduced the Homegrown Economic Reform Agenda (HERA), a three year economic plan applied from September 2019. The new government said that it will follow the fast depreciation until the exchange market gets to be governed by the free market by the end of the program, which currently has ended with HERA 2 being on the way to be introduced.
Because of the local and international pressure on the economy, the government was unable to apply a market led exchange rate as per the HERA. It is expected that the new exchange rate policy would be applied in the second HERA.

The wealthiest people on the globe who account for only 1 percent of the world population grabbed nearly two-thirds of all new wealth nearly 60 percent of the world’s hungry population reveals a new Oxfam report.
New wealth worth 42 trillion dollars was created to the financial elite since 2020 which in perspective was almost twice as much money as the bottom 99 percent of the world’s population according to the report.
Billionaires have seen extraordinary increases in their wealth. During the pandemic and cost-of-living crisis years since 2020, 26 trillion dollars (63 percent) of all new wealth was captured by the richest 1 percent, while 16 trillion dollar (37 percent) went to the rest of the world put together. During the past decade, the richest 1 percent had captured around half of all new wealth.
A billionaire gained roughly 1.7 million dollar for every 1dollar of new global wealth earned by a person in the bottom 90 percent. Billionaire fortunes have increased by 2.7 billion dollar a day. This comes on top of a decade of historic gains the number and wealth of billionaires having doubled over the last ten years.
The report shows that billionaire wealth surged in 2022 with rapidly rising food and energy profits as 95 food and energy corporations had more than doubled their profits in 2022.
The said corporations made 306 billion dollars in windfall profits, and paid out 257 billion dollars (84 percent) of that to rich shareholders. At the same time, at least 1.7 billion workers now live in countries where inflation is outpacing wages, and over 820 million people roughly one in ten people on Earth are going hungry. Women and girls often eat least and last, and make up nearly 60 percent of the world’s hungry population.
The World Bank revealed that the world is seeing the biggest increase in global inequality and poverty since World War 2. As noted, most countries are facing bankruptcy, with the poorest countries now spending four times more repaying debts to rich creditors than on healthcare. Three-quarters of the world’s governments are planning austerity-driven public sector spending cuts including on healthcare and education by 7.8 trillion dollars over the next five years.
The report shows that taxes on the wealthiest used to be much higher. Over the last forty years, governments across Africa, Asia, Europe, and the Americas have slashed the income tax rates on the richest. At the same time, they have upped taxes on goods and services, which fall disproportionately on the poorest people and exacerbate gender inequality.
“While ordinary people are making daily sacrifices on essentials like food, the super-rich have outdone even their wildest dreams. Just two years in, this decade is shaping up to be the best yet for billionaires a roaring ‘20s boom for the world’s richest,” said Gabriela Bucher, Executive Director of Oxfam International.
Half of the world’s billionaires live in countries with no inheritance tax for direct descendants. They will pass on a 5 trillion dollar tax-free treasure chest to their heirs, more than the GDP of Africa, which will drive a future generation of aristocratic elites. Rich people’s income is mostly unearned, derived from returns on their assets, yet it is taxed on average at 18 percent, just over half as much as the average top tax rate on wages and salaries.
“Taxing the super-rich and big corporations is the door out of today’s overlapping crises. It’s time we demolish the convenient myth that tax cuts for the richest result in their wealth somehow ‘trickling down’ to everyone else. Forty years of tax cuts for the super-rich have shown that a rising tide doesn’t lift all ships just the superyachts,” said the Executive Director, adding, “Taxing the super-rich is the strategic precondition to reducing inequality and resuscitating democracy. We need to do this for innovation, for stronger public services, for happier and healthier societies. And to tackle the climate crisis, by investing in the solutions that counter the insane emissions of the very rich.”
According to new analysis by the Fight Inequality Alliance, Institute for Policy Studies, Oxfam and the Patriotic Millionaires, an annual wealth tax of up to 5 percent on the world’s multi-millionaires and billionaires could raise 1.7 trillion dollar a year, enough to lift 2 billion people out of poverty, fully fund the shortfalls on existing humanitarian appeals, deliver a 10-year plan to end hunger, support poorer countries being ravaged by climate impacts, and deliver universal healthcare and social protection for everyone living in low- and lower middle-income countries.
Oxfam to this regard calls governments to Introduce one-off solidarity wealth taxes and windfall taxes to end crisis profiteering. Permanently increase taxes on the richest 1 percent, for example to at least 60 percent of their income from labor and capital, with higher rates for multi-millionaires and billionaires. Governments must especially raise taxes on capital gains, which are subject to lower tax rates than other forms of income. Similarly, taxing the wealth of the richest 1 percent at rates high enough to significantly reduce the numbers and wealth of the richest people, and redistribute these resources has been said to be essential. This includes implementing inheritance, property and land taxes, as well as net wealth taxes.

General inflation rate decreases to 33.8 percent in December 2022 after reaching highs of 35.1 percent in November 2022, the Central Statistics Service monthly general inflation report reveals.
According to the report, the country level food inflation recorded a high of 36.8 percent as compared to Non-food inflation rate which stood at 29.8 percent in December 2022. According to the report in December, food inflation dipped to 32.9 percent down from 34.2 percent in November 2022.
As the report indicates, in December, some important cereals including; teff, rice, wheat, barely and sorghum has shown a slight decrease. Similarly, vegetables; onions, garlic, cabbage, tomato, as well as coffee beans and non-alcoholic beverages have had notable decreases albeit fractional.
Additionally, the non-food inflation sat up on 35.2 percent in December, a decline from 36.5 percent in November. Even though there is slight decrease compared to the previous month as the report indicated there is still rise in the prices of clothing and footwear, housing repair and maintenance including cement and corrugated iron sheets, and energy, furniture and home furnishings and fuel, medical care, educational materials and jewelry including gold.
According to the agency, when compared to November’s inflation, December’s food CPI decreased by 0.5 percent and during the same period non-food CPI registered 1.8 percent increase.
Inflation rate on November 2022 was recorded at 35.1 percent, after reaching 31.7 percent in October. The main factor behind December’s general inflation rate decline were decreases in food prices.
As the New Year (GC) takes pace, inflation has been noted to become unendurable for the working class with food, housing, fuel, industrial input, and rent skyrocketing in price.
Hard hit by the pandemic, the conflict in the northern part, crippling drought in certain parts of the country and the fallout from Russia-Ukraine war, the inflation has been surging in the nation.
May 2022, Ethiopia recorded a general inflation of 37.2 percent, one of the highest levels in recent years. Since then Ethiopia’s general inflation rate has see-sawed, decreasing to 30.7 percent in September, but then climbing upwards to reach 35.1 percent in November last year.
The government as well as regional administrations have been implementing various efforts to control inflationary pressures with mixed results so far.
Although there is a decrease, the percentages are small in comparison to the government targets to which the Ministry of Finance expects to cushion inflation to 11.9 percent until the end of this fiscal year, which seems unrealistic.

Despite registering a loss in its first year of operation Hijra Bank, one of the two pioneering full-fledged interest free banks (IFB), has stated that it is in a good position with regards to its other activities.
The bank which operated for ten months in the 2021/22 financial year stated that in the reporting period which closed June 30, 2022, it has enabled to mobilize over a billion birr in deposit.
In the financial year, the bank mobilized 1.34 billion birr in deposit, while during its ten month operation it managed to open 40 branches including the capital as well as other cities across the country.
The board of directors’ brief report indicated that in the first six months of the operational period, the bank was working aggressively to expand its branches which contributed to the amassing of significant amount of deposit from customers.
Similarly, the report cited that the bank also provided service to almost 135,000 customers with different accounts which it introduced.

As of June 30, Hijra’s total asset stood at almost 2.3 billion birr and of that, 989 million birr was cash while the balance was with banks. Of that, 440 million birr was aligned with short term investment, and 284 million birr was allocated for building and office furniture.
It can be recalled that before its inception, Hijra bought a nine story building at a 130 million birr cost.
Regarding liability, the amount in the first year sat at 1.4 billion birr with the lion share going to depositors.
At the end of the year, the bank’s total capital has sat at 862.5 million birr.
Regarding revenue, in its ten months of operation, the bank has secured 27.6 million birr and 19.1 million birr stemming from financing and investment followed by commission and fees that amounted to 7.4 million birr.
However, in the period the bank’s total expense was 170.6 million birr which is more than six folds when compared to its revenue.
As the sector experts explain, this instance is not a surprise particularly for such kinds of unusual financial institutions, that is, IFBs.
From the total of over 170 million birr expense, the employee salary and benefit consumed 97.4 million birr while the operational expense came in second with a 44 million birr expense.
The annual report explained that from the ten months operation, the first six months was a period where the bank worked aggressively to expand its branches whilst focusing on mobilize deposit, “as a full-fledged IFB, the major source of revenue comes from profit share of financing. To obtain that, expanding branches and mobilizing savings was a priority.”
The bank reported that it was engaged on financing in the last four months of the financial year, due to that its revenue stood at a lower position when contrasted with its expenses.
In the year under review, the bank registered a 143 million birr loss, while the report argued that some of the major expenses are long term investments that would make the bank reap benefits in the future.
According to the report, the bank has developed an in-house five year strategy which is already under implementation.
As a challenge the bank mentions, lack of skilled labour on Islamic banking, lack of awareness, inflation, stiff competition in the sector and instability as its hurdles in the report.