Exchange Rate Of Dollar To Birr In Black Market
The exchange rate of dollar to birr in black market has been a topic of concern for many people in Ethiopia. This is because the unofficial exchange rate in the black market is often much higher than the official exchange rate set by the government. In this article, we will discuss the reasons why the exchange rate in the black market is higher, the impact it has on the economy, and what can be done to address the issue.
Why Is The Exchange Rate Higher In The Black Market?
There are several reasons why the exchange rate of dollar to birr is higher in the black market. One of the main reasons is the shortage of foreign currency in the country. Ethiopia is heavily reliant on imports, and the demand for foreign currency is high. However, the government has strict controls on the amount of foreign currency that can be obtained through official channels.
This has led to a situation where there is a large gap between the demand for foreign currency and the supply. As a result, people have turned to the black market to obtain foreign currency. Since the supply is limited, the price of foreign currency in the black market is much higher than the official exchange rate.
Another reason why the exchange rate is higher in the black market is due to speculation. People who have access to foreign currency can sell it in the black market at a higher price, making a profit. This has led to a situation where people hoard foreign currency, creating an artificial shortage and driving up the price.
The Impact Of The Black Market Exchange Rate
The high exchange rate in the black market has a significant impact on the economy. One of the main impacts is inflation. Since the price of foreign currency is higher in the black market, the cost of imported goods increases. This leads to an increase in the cost of living for ordinary people.
The high exchange rate also has an impact on businesses. Many businesses in Ethiopia rely on imported goods or raw materials. The high cost of foreign currency in the black market makes it difficult for businesses to operate and remain profitable.
Another impact of the black market exchange rate is on the government. Since the government relies on taxes from businesses to generate revenue, the high exchange rate makes it difficult for businesses to operate and pay taxes. This leads to a situation where the government is unable to generate enough revenue to fund its programs and services.
What Can Be Done To Address The Issue?
There are several things that can be done to address the issue of the high exchange rate in the black market. One of the main things is to increase the supply of foreign currency. This can be done by promoting exports, attracting foreign investment, and reducing the dependence on imports.
Another thing that can be done is to reduce the bureaucratic hurdles that businesses face when trying to obtain foreign currency through official channels. This will encourage more businesses to obtain foreign currency through official channels, reducing the demand for foreign currency in the black market.
The government can also take steps to crackdown on the black market. This can be done by increasing penalties for those caught engaging in illegal foreign currency transactions and increasing surveillance of the black market.
Conclusion
The exchange rate of dollar to birr in the black market is a complex issue that has a significant impact on the economy of Ethiopia. While there are no easy solutions to this problem, steps can be taken to address the issue and reduce the impact it has on businesses and ordinary people.