The relationship between the British Pound Sterling (GBP) and the Ethiopian Birr (ETB) has evolved significantly over time, influenced by economic policies, international trade, and political events. This article delves into the historical context of the GBP to ETB exchange rate, highlighting key milestones and factors that have shaped its trajectory.
On Thursday, November 6th, the British Pound Sterling traded against the Ethiopian Birr at 200.8343, marking a 0.23 percent increase from the previous session. In terms of trends, the GBPETB has risen by 2.90 percent over the past four weeks and by 26.95 percent over the last 12 months.
According to projections from Trading Economics global macro models and analysts' expectations, the British Pound Sterling is forecasted to be priced at 199.8732 against the Ethiopian Birr by the end of the current quarter and at 195.5157 in one year.
Early Monetary History of Ethiopia
The birr (Amharic: ብር) serves as the primary unit of currency in Ethiopia. In 1931, Emperor Haile Selassie formally requested that the international community use the name Ethiopia instead of Abyssinia. Consequently, the issuing Bank of Abyssinia also became the Bank of Ethiopia.
Although the Kingdom of Aksum issued copper, silver, and gold coins, trade in the 18th and 19th centuries was primarily facilitated through barter or the use of "primitive money." This included items such as bolts of cloth, iron bars, beads, gold bracelets, and cartridges. The most prevalent medium of exchange was blocks of salt called amole tchew, used from the Danakil Depression to as far south as Lake Zway.
Banknotes & History: Ethiopia 1949
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Between 1771 and 1805, the Maria Theresa thaler was gradually accepted as currency in Ethiopia. Locally, the thaler was known as the birr (meaning 'silver' in Geʽez and Amharic) or talari.
Introduction of Ethiopian Currency
As early as 1875, Menelik II, then king of Shewa, considered issuing an Ethiopian currency. However, it wasn't until the Treaty of Uccialli that substantial progress was made. An Additional Convention, negotiated by Ras Makonnen and signed on October 1, 1889, specified that the Emperor of Ethiopia could issue currency, with coins struck in the King of Italy's mint.
Following Ethiopia's victory in the Battle of Adowa, a new Ethiopian coinage was introduced. The new silver birr maintained the same weight and fineness, but the smaller denominations were reorganized. Silver half and quarter birr coins were kept, and a silver gersh was added (initially valued at 1/20 of a birr, later 1/16). The only non-silver coin issued was a copper metonnya, worth 1/100 of a birr. These coins were produced at the Paris Mint, which minted 815,000 birr in the first three years. By 1915, a total of 1,297,830 birr and 19,494,308 of the smaller denominations had been minted.
Despite the number of coins issued, Menelik's currency initially struggled to compete with the Maria Theresa thalers. The Bank of Abyssinia, established in 1905 by Emperor Menelik and the European banking group behind the National Bank of Egypt, was officially inaugurated on February 15, 1906, with a branch in Harar.
The Ethiopian coinage gained acceptance gradually, and the Bank of Abyssinia continued to import Maria Theresa thalers. By the outbreak of World War I, the bank was still importing approximately 1,200,000 of these coins annually. In 1915, the Bank of Abyssinia introduced banknotes, denominated in birr in Amharic and thaler in English.
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Under Empress Zawditu, only lesser denominations were issued, and these only gained acceptance in Shewa and parts of southern Ethiopia. With the advent of Haile Selassie, more paper money was issued in larger quantities, although it still struggled to gain traction in the countryside. It was observed that paper currency only circulated beyond the capital in Gondar and Harar on the eve of the Second Italo-Abyssinian War. A new system of lesser currency, minted from nickel and bronze, was introduced on July 12, 1933, but it also failed to gain acceptance outside of the towns.
Italian Occupation and Currency Changes
Emperor Haile Selassie bought out the Bank of Abyssinia in 1931 for £235,000 sterling to transform it into a purely Ethiopian institution, which was then reorganized as the Bank of Ethiopia. At the same time, the currency was decimalized, and token nickel and copper coins were introduced, with the birr becoming equal to 100 metonnyas (often written as matonas).
Following the Italian occupation and the attempted transformation of Ethiopia into Italian East Africa, the Italian lira was introduced on July 15, 1936. Ethiopian banknotes were withdrawn from circulation at a rate of 3 lire per talari (birr). To promote the use of Italian paper money, the exchange rate for silver coins (Maria Theresa thalers) was increased, eventually reaching 13.50 lire. Regular Italian coins and banknotes of Banca d'Italia circulated after July 15, 1936. Special notes with a red overprint were authorized for Italian East Africa on September 12, 1938, and a large quantity was printed.
Post-Occupation and Reintroduction of the Birr
During the East African Campaign of 1941, British forces introduced Indian, Egyptian, British, and British East African currency, all of which were accepted in official payments. Italian coins and notes of up to 50 lire remained in circulation for small change, while higher denominations were withdrawn at a rate of 24 lire per shilling. Maria Theresa thalers were allowed to circulate with a value of 1 shilling and 10+1⁄2 pence (or 45 lire).
The birr was reintroduced on July 23, 1945, at a rate of 1 birr per 2 shillings. The name Ethiopian dollar was used in the English text on the banknotes and was divided into 100 santims.
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Modern Monetary Reforms
In 2024, Ethiopia implemented reforms, including the liberalization of its foreign exchange market, leading to the floating of the Ethiopian Birr. The National Bank of Ethiopia (NBE) spearheaded this initiative, receiving $13.5 billion from international partners to support the transition. This funding, primarily from multilateral lenders like the IMF and World Bank, aimed to facilitate the adoption of a flexible exchange rate system. Concurrently, Ethiopia secured over $15 billion in financial support from the World Bank, including direct grants, debt extensions, and investment commitments.
The Ethiopian Birr experienced a substantial decline, falling 63% against the US dollar within a week of floating. The government's introduction of a floating exchange rate led to a volatile period, with the Commercial Bank of Ethiopia and private banks rapidly adjusting their foreign exchange rates.
Coins and Banknotes Over the Years
Between 1894 and 1897, copper coins were introduced in denominations of 1⁄100 and 1⁄32 birr, along with silver 1 ghersh, 1⁄8, 1⁄4, 1⁄2 and 1 birr, and gold 1⁄4, 1⁄2 and 1 werk. In 1944 (EE1936 in the Ethiopian calendar), coins were reintroduced, with copper 1, 5, 10 and 25 santim and silver 50 santim coins. A second series was issued in 1977 (EE1969), consisting of aluminium 1 santim, brass 5 and 10 santim, cupro-nickel 25 and 50 santim, and bi-metallic 1 birr coins.
Coins dated before 1977 (EE1969) feature the Conquering Lion of Judah. Coins were struck at several mints, including Paris, Berlin, and Addis Ababa. Coins without mint marks were generally struck at Addis Ababa.
The Bank of Abyssinia introduced banknotes for 5, 10, 100 and 500 birr in 1915, with 280,000 birr worth of notes printed. The text on the notes was in Amharic and French. The Bank of Ethiopia issued notes in 1932 in denominations of 5, 10, 50, 100 and 500 talaris. On July 23, 1945, notes were introduced by the Bank of Ethiopia in denominations of 1, 5, 10, 50, 100 and 500 birrs.
On September 14, 2020, Ethiopia announced the introduction of new banknotes of 10, 50, 100, and 200 birrs, with the latter being issued as a high denomination note to tackle inflation. Older issues of 10, 50, and 100 birr notes were demonetized in December.
The federal government reported that over 113 billion birrs ($3.6 billion) remain hidden from the banks and believes this money is being used to fuel instability in Ethiopia. Following the announcement, Ethiopian banks took in 14 billion birrs (around $500 million) in just one month.
Announced by Prime Minister Abiy Ahmed, the measure was intended to combat hoarding, counterfeiting, and other forms of corruption affecting the economy. The country spent 3.7 billion birrs ($101.2 million) to print the new banknotes. Companies and individuals can only cash up to 1.5 million birrs ($41,000), and cash withdrawals from banks should not exceed 100,000 birrs ($2,737).
Table: Key Events in the History of Ethiopian Birr
| Year | Event |
|---|---|
| 1905 | Establishment of the Bank of Abyssinia |
| 1915 | Introduction of banknotes by the Bank of Abyssinia |
| 1931 | Emperor Haile Selassie buys out the Bank of Abyssinia, decimalization of the currency |
| 1936 | Introduction of the Italian lira during the Italian occupation |
| 1945 | Reintroduction of the birr after the end of Italian occupation |
| 2020 | Introduction of new banknotes and demonetization of older notes |
| 2024 | Liberalization of the foreign exchange market and floating of the Ethiopian Birr |
