Reuters reports the World Bank has advised Ethiopia to consider devaluing its currency to boost exports as they are mostly unprocessed products and need to stay competitive on price, a World Bank economist said on Tuesday.
Ethiopia’s main exports are coffee, horticultural products, oilseeds and livestock.
The last big devaluation was in 2010 when the birr lost 16.7 percent of its value to the dollar. The central bank quoted the birr at 19.6511/19.8476 to the U.S. currency on Tuesday.
“By one measure of real exchange rate, Ethiopia’s currency is 31 percent overvalued,” the World Bank’s lead economist in Ethiopia, Lars Christian Moller, said in Addis Ababa.
At an event to launch an economic report on the Horn of Africa nation, he said devaluing the currency by 10 percent could increase export growth by 5 percentage points a year.
“Ethiopia’s exports are relatively unsophisticated, unprocessed and tend to compete in price, that means that we need to look more into what are the export prices, and how can we manage them,” he said.
“This is where a competitive real exchange rate comes in. We argue that it could help support export promotion,” he added.
You gotta love the world bank.
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