Historical Sketch

Ethiopia's state tradition dates to at least the 12th century, when the Solomonic dynasty assumed the throne of the emperor (king of kings). In the early 18th century, the empire disintegrated into rivalling states, the so-called "Princes Era". In 1855, state unity was restored, and in 1889, the Solomonic dynasty, during the Princes' Era rulers of the Shewa kingdom, returned to power. Briefly before, the Emirate of Harar, which had existed since the mid-17th century had been conquered by Shewa and was now incorporated into Ethiopia. In 1889, the treaty of Ucciali (Wuchale) between Italy and Ethiopia led to the establishment of the colonial rule over Eritrea and the recognition of Ethiopia's independence by the European colonial powers. In 1936, Ethiopia was nevertheless annexed by Italy but liberated again five years later. The monarchy got restored and lasted until the coup d'état of 1974. Eritrea joined Ethiopia in 1952 and seceded again in 1991 after a decades long civil war. Since 1995, Ethiopia has been a federal republic.

Monetary History Overview

Traditionally, economy in Ethiopia was using ingots and various commodities like cloth as means of payments. In particular, standardized blocks of salt of approx. 700 grams were widespread in domestic trade until the late 19th century. They were called "Amole" after the tribe in whose area the salt was extracted. Coined silver flew in through foreign trade, the Maria Theresa Thaler developed even into a weight standard for precious metals.

The Emirate of Harar used an accounting unit "Ashrafi" which (probably) once corresponded to an Egyptian gold coin but had no physical counterpart since the late 17th century. Beside low-valued local subsidiary coins called "Mahallak" the Maria Theresia Thalers and Egyptian coins were used in trade. In 1889, Ethiopia and Italy, which had just conquered the coastal region of Eritrea, agreed on the Maria Theresia Thaler as common coinage standard to be used in trade. The coinage act of 1893 introduced the Ethiopian Thaler as national currency. The local coins circulated alongside the Maria Theresa Thalers. In 1915, the Egyptian-based Bank of Abyssinia began issuing paper money which, however, found only little acceptance among the population. It went into liquidation in 1931 and got replaced by a state-owned commercial bank. In 1936, Italy occupied Ethiopia and united it with Eritrea and Somalia into the Italian East Africa colony. Italian money was nominally introduced but did hardly get used in Ethiopia. In 1941, British troops invaded Eritrea and Ethiopia and dissolved the Italian East Africa colony. The British Military Command tried to introduce the British East African Shilling as currency for Ethiopia, but in 1945, Ethiopia passed a new currency law introducing the Ethiopian Birr (initially, the international currency name was "Dollar", this was changed in 1976). A state-owned commercial bank, which in 1964 got transformed into the central bank, was issuing the Ethiopian paper money. The Maria Theresa Thaler was finally demonetized in 1947, and its possession was even made a punishable offence. The Birr was pegged to the US dollar at a rate that remained more or less unchanged for more than four decades. In 1992, a close to 60% devaluation was carried out, and two years later, the exchange rate was floated. For the next decades, the Birr's depreciation was moderate until in the late 2000s, a 50% devaluation was done in several steps. Afterwards, the Ethiopian currency has started a steady decline in value.

Ethiopia joined the International Monetary Fund (IMF) on 27.12.1945 as a founding member.

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Monetary History Sources