The Governor of the National Bank, Dr. Eyob Tekalign, has moved to reassure the public that the rising cost of the US dollar is not a sign of economic failure, but a necessary step toward a more competitive economy.

Speaking to ETV, Dr.Eyob argued that the perception that the Ethiopian Birr has "collapsed" is based on a misunderstanding of the country's new macroeconomic framework.

Instead, he insisted that the Birr is finally finding its "true value" after decades of being artificially propped up.

The reforms, which were implemented at the start of the 2017 Ethiopian fiscal year, represent a historic shift in how the Horn of Africa nation manages its economy.

According to Dr. Eyob, the Birr had been "overvalued" for a long period, evidenced by a significant gap between official rates and the parallel (black) market. Before the reform, this discrepancy stood at roughly 17%.

"The perception that the dollar became expensive and the Birr lost its value is incorrect," Dr.Eyob said. He explained that by ending a system that had been in place for over 50 years, the government has allowed the market to determine the currency's worth, which is essential for making Ethiopian exports competitive.

As part of the shift, the National Bank has handed over the day-to-day management of foreign exchange to commercial banks. While Dr.Eyob admitted that "miraculous changes" should not be expected overnight, he emphasized that the move is already boosting foreign exchange reserves and attracting international investors.

Despite the seismic shift in currency policy, Dr.Eyob painted a picture of a domestic banking sector that is not only stable but "exceptionally profitable."

He pointed to several key indicators that suggest the financial industry is outperforming regulatory requirements:

Capital Reserves: Banks currently hold a capital ratio of 18%, more than double the 8% minimum required by the National Bank.

Liquidity: Cash reserves in the system stand at 31%, comfortably above the 15% regulatory floor.

Profits: The industry is recording its highest-ever profit margins, despite the transition.

A significant driver of this stability appears to be the rapid adoption of digital technology. Dr.Eyob revealed that digital banking transactions have surged to 18.5 trillion Birr, a figure he described as "extraordinary."

Furthermore, the interest-free banking sector—a growing segment in Ethiopia—has seen deposits exceed 400 billion Birr.

However, the Governor acknowledged that challenges remain. He noted that many citizens are still hesitant to use formal channels for remittances, preferring illegal black-market offices.

"We are in the middle of a societal mindset shift," he said, adding that further work is needed to fully integrate informal actors into the legal financial system.