The National Bank of Ethiopia (NBE) says it has lost 407.1 billion birr ($2.61 billion) as a result of IMF-backed foreign exchange reforms that shifted the country from a fixed to a market-based exchange rate regime in July 2024.

The regulator said foreign exchange losses from the revaluation of its foreign currency assets and liabilities rose to 445.23 billion birr ($2.85 billion) in the year ended June 2025, from 38.13 billion birr ($244.63 million) a year earlier, an increase of 407.1 billion birr ($2.61 billion).

The surge pushed the bank’s overall operating loss to 428.56 billion birr ($2.74 billion), up from 10.51 billion birr ($67.2 million) the previous year, a whooping 418.05 billion birr ($2.68 billion) increase.

It also drove NBE into a negative equity position of 380 billion birr ($2.43 billion), raising concerns about its ability to continue as a going concern.“The net operating loss for the 2024/2025 financial year was primarily attributable to unrealised net foreign exchange losses arising from the translation of the bank's foreign currency assets and liabilities following exchange rate realignment,” NBE said in its audited financial statements for the year ended June 30, 2025.

During the period, Ethiopia implemented a foreign exchange policy reform, moving from a fixed exchange rate regime to a market-based system in which rates are determined by supply and demand, as quoted by banks.“As a result of this policy change, the bank translated its foreign currency monetary assets and liabilities using the indicative mid-exchange rate, determined as the average market rate quoted by banks, with effect from the date of the reform,” NBE said.“This translation resulted in an unrealised net foreign exchange loss amounting to 445,232,054,700 birr.”

These losses are primarily attributable to the change in the foreign exchange regime and the Bank's high exposure to foreign currency-denominated assets and liabilities, including obligations to international financial institutions and foreign currency reserves,” NBE said.

Audit firm MSE Audit Service LLP said the scale of the losses, the sensitivity to currency movements and the complexity of the exposures meant foreign exchange losses constituted a key audit matter.

The auditors warned that Ethiopia is significantly exposed to unrealised exchange losses that will crystallise when repayment obligations fall due.“This exposure could exceed the paid-up capital and general reserve balances of the Bank when realised, necessitating strategic intervention to manage the risk and ensure the Bank’s going concern status,” MSE said.“The assessment of the Bank's going concern status, together with the current period’s operating loss, is considered a key audit matter due to the significant risks it presents.”NBE began implementing the IMF-backed flexible exchange rate regime in July 2024 as part of broader efforts to stabilise the economy.

Prime Minister Abiy Ahmed’s administration has faced mounting pressure from the International Monetary Fund (IMF) and World Bank to float the birr and implement foreign exchange reforms in return for financial support.

The widening losses and negative equity position have intensified scrutiny over whether the central bank can meet its day-to-day obligations as they fall due.

NBE said it is conducting a comprehensive capital assessment and policy solvency study to evaluate whether its capital base is adequate to support its mandate and to identify measures needed to safeguard financial sustainability during and after the reform period.“These provisions are expected to strengthen the Bank's capital base, enhance its loss-absorption capacity, and contribute positively to its policy solvency,” MSE said. “The Directors have a reasonable expectation that these measures will support the Bank's continued operational effectiveness and long-term sustainability.”NBE’s authorised capital stands at 20 billion birr ($128.31 million), with minimum paid-up capital of 10 billion birr ($64.15 million). The government is required to ensure the paid-up capital remains undiminished and that the Bank maintains statutory solvency.

A central bank is considered policy solvent when it generates sufficient realised income to cover the costs of monetary policy operations.

In September 2025, NBE governor Mamo Mihretu announced his resignation under unclear circumstances.

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