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The Commercial Bank of Ethiopia CBE’s planned headquarters in Addis Ababa, Ethiopia.
Getty Images/Xinhua News Agency
Selamawit Girma, a mother of three who lives in Addis Ababa, Ethiopia’s capital, is concerned.
Her 4,000 birr ($91) monthly salary isn’t going as far as it used to. Inflation in Ethiopia crossed 20% last year and continues to rise—it reached 24.5 percent in June—as the country grapples with the economic fallout of the covid-19 outbreak.
She told The Addis Standard, “I am quite afraid of the current pricing [of products].”
“I’m terrified of being out on the streets with my kids.” House rent, transportation, foods, and non-food products are all increasing in price, and the government appears to be doing nothing about it.”
It’s not for a lack of attempting. Ethiopia’s economy is one of Africa’s most stable and diverse, thanks to a forward-thinking government that has routinely met development goals for its 117 million people. Since 2000, the number of Ethiopians living in poverty has more than halved.
Regardless of internal progress, Ethiopia is part of a global financial order that places the US dollar—the world’s only reserve currency—at its apex.
The US Federal Reserve, which has a duty to preserve US economic interests, is entirely responsible for the supply of these currencies.
While printing trillions of dollars to boost demand appears to benefit America—at least in the short term—the practice is wreaking havoc on poorer countries whose currencies are directly or indirectly tethered to the US dollar.
MORE FOR YOU “The Fed’s job is to solve US monetary problems, not [those of] other nations,” said a representative for Project Mano, an Ethiopian lobbying group that wants Addis Ababa to look into whether bitcoin, a decentralized cryptocurrency with a fixed quantity, might break the inflationary loop.
“It’s our problem because we rely on the monetary policy of another country.” They don’t do it to hurt us or to spite us… “Holding cash is a personal decision.”
It’s not difficult to see how the West’s ultra-loose monetary policies harm emerging countries.
The dollar, which isn’t all-powerful.
Ethiopia’s National Bank now owns around $3 billion in foreign exchange reserves, the most majority of which are in US dollars.
Because the value of these holdings does not increase proportionally as the Fed issues more money, inflation steadily erodes their real value—or buying power.
At the same time, Ethiopia’s government is overseeing a continuous depreciation of the birr, the country’s own currency, in order to keep the country’s $12 billion trade deficit from growing any greater. (Devaluing a currency lowers the cost of domestically produced items on the foreign market, boosting exports and helping to balance the books.)
Each of these tendencies would be manageable if looked at separately.
However, there is a clear and present threat of economic disaster when the value of a country’s local currency falls in lockstep with the value of its foreign reserves. To protect itself from hyperinflation at home, Ethiopia must maintain the value of its USD holdings—or an analogous reserve currency.
And it’s becoming increasingly difficult to do so—not only because of the Fed’s never-ending money pumping, but also because Ethiopian Airlines, one of the country’s biggest foreign currency earners, is facing an uncertain future as a result of covid-19.
Ethiopia is staring default down the barrel of a gun, with its GDP rate now expanding four times slower than its inflation rate.
So, what are your options?
It may simply be used to purchase more money. That is China’s strategy: it is estimated that USD accounts for more than half of its $3.2 trillion in foreign exchange reserves, which it utilizes to influence the USD/CNY exchange rate and keep exports flowing.
The problem is that underdeveloped countries such as Ethiopia cannot afford to accumulate trillions of dollars.
There are three options: hope that the United States will stop debasing the world’s reserve currency; discover new, stable sources of USD; or diversify the state’s holdings beyond dollars—preferably by acquiring an asset with a fixed supply that cannot be manipulated by other governments. Then there’s bitcoin.
“Adoption of bitcoin or cryptocurrencies in general is frightening for any government,” Initiative Mano claimed, “but… our project primarily targets at researching alternatives to alleviate the concerns the government may be experiencing.” “Because everything else they have grows in supply, even gold, we propose them locate something that doesn’t.”
The long-term goals of Project Mano include mining bitcoin, holding bitcoin, and tying bitcoin to the birr.
In theory, the latter two would solve the problem of a depreciating reserve currency—but only if bitcoin lives up to its potential and grows into an internationally recognized asset class. The government will consider this as a “gamble,” according to the lobbyists.
Their plan to mine and monetize bitcoin is a safer gamble, especially given Ethiopia’s unique energy terrain and developmental state.
A pricey green revolution is underway.
The East African country has plenty of renewable energy: indigenous hydropower plants provide 90% of the country’s electricity, with the rest coming mostly from wind, solar, and geothermal sources.
That’s only a sliver of what it could be in the future. By 2037, the government plans to increase renewable energy capacity by fivefold to 25,000 megawatts (MW), with 6,500MW coming from a single flagship project: the Grand Ethiopian Renaissance Dam (GERD) on the Blue Nile.

The Grand Ethiopian Renaissance Dam (GERD), a 145-meter-high, 1.8-kilometer-long concrete behemoth, is on track to become Africa’s largest hydroelectric plant.
Getty Images/AFP/AFP/AFP/AFP/AFP/AFP/AFP/AFP
The total capacity of renewable energy projects under consideration in the country is anticipated to reach 60,000MW.
The stakes are significantly higher for ordinary Ethiopians.
With only 48% of the population currently connected to the grid, success in the green energy industry is vital from a developmental standpoint.
Electricity exports have also been identified as a vital source of foreign revenue: in 2019, Sudan and Djibouti paid $66 million for Ethiopian electricity.
In countries like Ethiopia, though, building infrastructure isn’t a silver bullet. Price volatility, inconsistent demand, and logistical obstacles have all muddied the waters, making it harder for investors to forecast profits and, as a result, impeding progress.
In a recent editorial for Bitcoin Magazine, Alex Gladstein, chief strategy officer of the Human Rights Foundation, addressed the problem—and a possible solution:
“The stranded electricity problem affects billions of people in developing countries. They must improve their electrical infrastructure in order to boost their economies, which is a capital-intensive and complex task. However, when they… build power facilities in remote locations to try to capture renewable energy, that power typically has nowhere to go.”
“This is where bitcoin might be a game-changer in terms of incentives,” he concluded. Even without transmission connections, new power plants can earn immediate revenue by directing their energy to the bitcoin network and converting sunlight, water, or wind into money… Any extra energy can be channeled towards bitcoin mining until the towns surrounding the plant catch up.”
In a word, Project Mano’s most persuasive proposal is as follows.
Bitcoin faucets are available for free.
According to its calculations, merely 5% of the GERD’s generating capacity would generate 2,100BTC per year under current network circumstances. At the time of writing, this equates to an annual return of $70 million, versus a one-time capital cost of $105 million for the purchase of 10,000 S19 ASIC bitcoin mining equipment.
The infrastructure required to export GERD electricity to Ethiopia’s neighbors, on the other hand, is anticipated to cost $1.7 billion.
Importantly, the government is not required to mine bitcoin or to take any risks by owning it.
“Even if Ethiopia doesn’t start mining directly, it could be a good energy exporter to mining companies who will gladly help build infrastructure for shared earnings,” Project Mano explained, citing Ethiopia’s low business electricity charges ($0.02/kWh, compared to $0.10 in Nigeria and $0.18 in Kenya).
“It may just sell power… Any miner will find cheap power, clean energy, and supporting government policies appealing.”
The GERD may not be the ideal poster child for bitcoin adoption in Ethiopia, according to the spokeswoman.
For years, the project has been dogged by controversy, with Egypt and Sudan, two downstream neighbors, vowing retaliation if the dam threatens their water supplies, as they fear. Tensions increased again this month when it was revealed that Ethiopia had started filling the reservoir for the second time.
The GERD, on the other hand, is simply one of the country’s numerous renewable energy projects, any of which would be “less problematic routes for the government to look into if they take us seriously.”
And, with Cairo and Khartoum now pursuing a diplomatic settlement, it’s not difficult to see a bitcoin-sharing agreement putting the subject to bed once and for all—at no direct expense to Addis Ababa.
There’s no doubting that bitcoin isn’t a topic of conversation for most Ethiopians today.
However, it is certainly true that their economy is suffering—at least in part as a result of monetary policies set thousands of miles away from Africa and with no consideration for the wellbeing of its people.
Ethiopia’s government has an exceptional track record when it comes to embracing new technology and ideas.
It’s past time for bitcoin to make an appearance in Addis Ababa’s political debate.
“All we’re asking is for [the government] to think about diversification into other, uncorrelated portfolios,” Project Mano stated. “Having a plan B is not a terrible idea if the US currency falls harder than predicted.”/nRead More

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