What is the ETB (Ethiopian Birr)

The Ethiopian Birr (EBT), the national currency of Federal Democratic Republic of Ethiopia, is issued by the National Bank of Ethiopia, which manages its value through a dirty float. Each Birr subdivides into 100 santims.

BREAKING DOWN ETB (Ethiopian Birr)

The Ethiopian birr takes its name from a local word for silver. Ethiopia considered one of the earliest sites of homo sapien occupation, lays on the Horn of Africa. The region avoided European colonialism through a series of Muslim rulers and hereditary monarchs for centuries. In 1987, rebels overthrew the ruler, creating the Soviet-backed People's Democratic Republic of Ethiopia, which was itself overturned in 1991. Since that time, the Federal Democratic Republic of Ethiopia existed. 

The nation has a rocky history of human rights abuse and wealth from years of positive economic growth is not distributed evenly. These abuses led to public protests in 2016 where the police killed many people. The government declared a state of emergency which lasted nearly a year before ending briefly and being reinstated in February 2018.

In foreign exchange markets, the birr is generally considered an exotic currency. Trading in exotic currencies tends to occur at low volumes, which can make them difficult to trade. Exotics also typically respond more readily to changes in the political landscape than major currencies. Since 1992, the National Bank of Ethiopia has managed the value of the birr against other currencies using a dirty float system. Under this policy, the central bank periodically intervenes in foreign exchange markets to change the birr’s valuation if it deems it to be over- or undervalued.

In 2017, a trade deficit which generated limited availability of foreign exchange in the country drove the central bank to devalue the birr by 15 percent, while adjusting the primary interest rate to balance potential inflationary pressure from the devaluation. The move came at the urging of the International Monetary Fund and World Bank.

Between 2008 and 2011 the nation faced inflation of nearly 40-percent. Critics point to monetary policy as a major driver of the inflation. Today, the Republic has a fast-growing, non-oil dependent economy. Exports consist of agricultural products and gold. According to 2017 World Bank data, Ethiopia experiences a robust 10.2 annual gross domestic product (GDP) growth and a 6.3% yearly inflation deflator, which is at its lowest inflation point since 2014.

History of the Ethiopian Birr

The name birr began as a local-dialect synonym for the Maria Theresa taler, minted in Vienna and named after the Empress of the Holy Roman Empire. Ethiopia officially adopted taler coins as its national currency in 1855, though foreign trade continued to take place using the Indian rupee (INR).

The first Ethiopian birrs were minted in Paris in 1894 for former Ethiopian Emperor Menelik II. This birr was established at par with the Maria Theresa taler and subdivided into 20 Gersh. New birr coins minted in 1903 along with coins valued at fractions of a birr.

In 1905, Menelik II established the Bank of Abyssinia, which introduced banknotes into circulation in 1915. By 1931, former Ethiopian Emperor Haile Selassie purchased and restructured the Bank of Abyssinia, creating the National Bank of Ethiopia. At this time, the bank also subdivided the birr into 100 metonnyas.

Italy’s occupation of Ethiopia led to the introduction of the Italian lira in 1936. The arrival of British forces in 1941 launched the East African shilling, which supplanted the lira and became the nation’s legal tender between 1942 and 1945.

The current-day birr was re-established as the country's legal tender in 1945 at a rate of 1 birr to 2 shillings. Its subdivision into santim also dates from this time. Banknotes use the label of “Ethiopian dollar” as the official English translation of the currency until 1976, when Ethiopia declared its national money the birr in all languages.