Ethiopia’s central bank sold 500 million US dollars to commercial banks on Tuesday in its largest foreign exchange auction to date, drawing bids worth more than 592 million US dollars and highlighting persistent demand for hard currency despite recent macroeconomic reforms.

The National Bank of Ethiopia said the auction cleared at a weighted average rate of 154.81 birr per US dollar, using the official market-based exchange system introduced last year.

The allocation, conducted exclusively for commercial banks, is part of the central bank’s regular foreign exchange auctions aimed at supplying dollars for trade-related payments and improving price discovery in the formal market.

Market analysts said the scale of the auction reflected the central bank’s growing role as a primary supplier of foreign currency but warned that close monitoring would be needed to ensure banks channel the funds toward priority economic sectors.

The strong appetite was evident in the oversubscription, with total bids exceeding the amount on offer by more than 90 million US dollars, underlining continued pressure on Ethiopia’s foreign exchange market.

The auction comes just days after the International Monetary Fund (IMF), one of the country’s principal development financiers, approved an immediate disbursement of about 261 million US dollars following the latest review of Ethiopia’s reform programme.

The funding forms part of a 3.4 billion US dollar Extended Credit Facility arrangement approved in July 2024 to support macroeconomic reforms and strengthen external stability. With the latest release, total IMF support under the programme has reached just over 2.18 billion US dollars.

The foreign exchange auctions have become the main channel through which commercial banks access dollars, providing a transparent reference price for the birr and reducing reliance on administrative allocations.

However, analysts note that sustained stability will depend on whether foreign currency inflows continue to rise and whether demand from importers eases as economic conditions normalise.