The Effect of Availability of Foreign Exchange and Devaluation of BIRR on the Performance of Companies in Ethiopia (Instance of Sample Company)

Kirsneh Alemu Kebede
International Journal of Economics and Business Administration, Volume XII, Issue 1, 99-117, 2024
DOI: 10.35808/ijeba/835


Purpose: When a country devalues its currency, some firms benefit from any resulting changes in relative prices, while other firms are relatively unaffected or suffer a loss in competitiveness. By taking a sample of import and export firms, this study assessed the effect availability of foreign currency and devaluation of BIRR (the Ethiopian national currency) on performance of firms in Ethiopia in general. Design/Methodology/Approach: The study used both primary (collected through questionnaire) and secondary data collected from financial statements of the companies. The study applies both the descriptive and inferential analysis. Findings: After detail analysis, the increase in private driven business, informal channels of inflow of foreign currency, increased population and corruption will worsen appropriate use of FOREX and aggravate challenges of shortage of it. And also it is found that the foreign currency shortage has affected the firms in many ways such as profit loss, lay off employees and discourages new investment. Practical Implications: Devaluation of BIRR against the foreign currencies makes Ethiopian commodities to be competitive in international markets. And it can also attract new investments and increase exports. Originality/Value: The study intended to assess the main challenges to access foreign currencies, assess the effects of foreign currency shortage on import/export firms, assess the effects of devaluation of BIRR on import/export firms and assess company-specific factors.

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