ADDIS ABABA: At least two Ethiopian local governments have ordered the closure of dozens of businesses found hiking prices of basic commodities after the central bank floated the national currency, officials said on Thursday. The Ethiopian birr weakened by 28 percent against the dollar this week after the central bank adopted a market-determined foreign exchange rate to secure a new International Monetary Fund lending program and to put debt restructuring back on track.

“The businesses were caught making unreasonable price increases mostly on food items ... The stocks were imported before the new exchange rate,” said Sewnet Ayele, a spokesperson for the Addis Ababa City Trade Bureau. Some 71 businesses have been affected by the closure order, Sewnet said. In Oromiya region, another 19 businesses were closed and three people detained, said Meseret Assefa, head of the Trade Bureau of Oromiya. “Those whose business are closed were the ones who increased prices on items just immediately after the (exchange rate) announcement,” Meseret said.

The main commodity whose price has gone up is cooking oil, which is selling at 25 percent, or 300 birrs, more, said a trader in Addis Ababa, who did not wish to be named. Other commodities whose prices have gone up by a smaller margin include rice, said the trader. Although the removal of foreign exchange trading restrictions helped Ethiopia to clinch the IMF deal and funding from other creditors like the World Bank, some Ethiopian analysts fear it will cause price hikes that hit the poor hardest.

The government and its development partners say the liberalization will help the private sector make a bigger contribution to the economy and boost long-term growth.

The World Bank approved a $1.5 billion financial package to support cash-strapped Ethiopia’s economic reform program after officials loosened curbs on the local currency. The World Bank’s financing is the first in a series and will include a $1 billion grant and a $500 million concessional loan, the Washington-based lender said on Tuesday. “This operation supports the government of Ethiopia at a critical time in its efforts to accelerate poverty reduction and shift to more inclusive, sustainable, and private sector led growth,” World Bank Ethiopia director Maryam Salim said.

“Importantly, there is a strong emphasis on protecting poor and vulnerable people from the cost of economic adjustment.”

Africa’s second most populous nation is in dire need of financial help as it weathers a severe economic crisis marked by rapid inflation. The World Bank said it expected to provide an additional $6 billion in new commitments over the next three fiscal years. Analysts had said the IMF was demanding several reforms of Ethiopia’s state-controlled economy, including floating the currency, in order to unlock the funding.

Battered in recent years by several armed conflicts, the COVID pandemic and climate shocks, the country has about $28 billion of external debt and is grappling with sky-high inflation at around 20 percent and a shortage of foreign currency reserves. Under the shift to a market-based exchange rate regime, the National Bank of Ethiopia said banks could buy and sell foreign currencies to their clients and among themselves.

When he took office in 2018, Prime Minister Abiy Ahmed pledged to embark on reforms of Ethiopia’s closed and state-dominated economy, but progress has been slow. – Agencies