Ethiopia faces rising dress prices amid currency reform crisis

In late July 2023, Ethiopia implemented a significant currency reform, allowing the birr to float freely against the dollar. This decision resulted in the birr losing a third of its value almost immediately, with the exchange rate shifting from 55 birr to 112 birr per dollar. The government faced mounting pressure due to a severe trade imbalance, where imports far exceeded exports, leading to a critical shortage of foreign currency necessary for imports. The impact of this reform has been felt acutely by the Ethiopian populace, particularly in the capital, Addis Ababa. Prices for essential goods, including clothing, have surged, with reports of dress prices nearly doubling in just two months. Many citizens, already grappling with high inflation rates that peaked at 30% in 2022, are struggling to afford basic necessities. Economists acknowledge that while the immediate effects are painful, the long-term benefits could include a more competitive export market and improved access to foreign currency for businesses. The previous restrictions had stifled many sectors, preventing them from importing necessary materials and machinery. Despite these potential benefits, public sentiment remains skeptical. Many Ethiopians, particularly those living below the poverty line, express doubt about the government's ability to stabilize the economy. The situation has led to a reliance on remittances from family members abroad, highlighting the ongoing economic challenges faced by the majority of the population.