Is the Birr’s Managed Depreciation Helping Exports or Eroding Household Welfare?
Ethiopia’s exchange rate policy—anchored for decades in a tightly managed depreciation of the birr—has been one of the most consequential yet contested elements of its macroeconomic framework. Policymakers have justified gradual devaluation as a tool to restore export competitiveness, correct chronic balance-of-payments deficits, and align the official rate with market realities. Critics, however, argue that persistent depreciation has disproportionately harmed households through inflation, eroded real incomes, and failed to deliver a decisive export breakthrough. The core question, therefore, is not whether depreciation has effects—clearly it does—but whether those effects are structurally beneficial or socially corrosive in Ethiopia’s specific economic context. This essay argues that managed depreciation has delivered limited export gains while imposing significant and uneven welfare costs on households , largely because Ethiopia’s export base, production structure, and import ...