Ethiopian Prime Minister Abiy Ahmed has defended the decision to float the local currency, stating that it aims to close the gap between the birr’s official and parallel market exchange rates. According to Abiy, the currency float—resulting in a more than 30% depreciation of the birr within a week—does not constitute a devaluation.

Following the currency float announcement, local authorities have taken action against businesses that raised prices. While the move reportedly fulfils one of the International Monetary Fund’s (IMF) conditions, some local commentators predict an increase in inflation rates.

However, in a late-night televised address on Aug. 1, Prime Minister Abiy insisted that the decision was right for a country grappling with shortages of foreign exchange.

“Saying Ethiopia has devalued its currency is wrong. There were two markets. One is 100 and the other is 50. So when the gap between the two became wide, it brought many dangers. So what we said (the two) should be unified,” the Ethiopian Premier said.

A Reuters report, quoting an unnamed official, stated that Ethiopia’s decision to float the birr was promptly rewarded with a $3.4 billion financial package from the IMF. Later, the World Bank approved $1.5 billion in budget support, its first for the African nation. The package is expected to help Ethiopia save $200 million from restructuring its $1 billion Eurobond.

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