Recently, a document purportedly from the Ethiopian Prime Minister's Office circulated on social media, claiming to explain the sources of the design elements of Ethiopia's new birr banknotes. It also described that the front of the banknotes would feature a portrait of Ethiopian Prime Minister Abiy, and stated the basis for printing new 500 and 1000 birr notes as well as their color designs.

However, the Ethiopian authorities stepped forward to clarify the matter, saying that the news that the government would print new 500 and 1000 birr notes was false. They also believed that this fake document was circulating on social media with the aim of spreading false information detrimental to Ethiopia's interests. Moreover, various kinds of fake information and false news targeting Ethiopia had repeatedly appeared earlier.

Although the Ethiopian authorities clarified the matter of printing new birr notes, quite a few people believe the underlying reason is exchange rate instability.At the end of July this year, Ethiopia implemented a major revision of its foreign exchange system, introducing a market-based competitive exchange rate determination mechanism, that is, letting the market determine the exchange rate of the Ethiopian currency, the birr. On the day it was announced, the Ethiopian currency immediately depreciated, by as much as 30%.

A month has now passed since the policy was announced. At the end of July, 1 US dollar bought 57 birr, while it now buys 110 birr, meaning the Ethiopian currency has fallen by nearly 100%. The aim was to narrow the gap between the official exchange rate and the parallel market (black market) rate, and that gap has now been reduced to 10%.

However, the security situation in Ethiopia is currently severe, and Ethiopia's relations with its neighbours Somalia and Eritrea have deteriorated. According to Ethiopian media reports, two Egyptian military aircraft arrived in Ethiopia's neighbour Somalia on the 27th of this month. It is said that after Egypt and Somalia signed a defence agreement, Egypt will deploy 10,000 troops in Somalia, and these two military aircraft and military equipment are part of that.

Ethiopian officials therefore issued a statement saying that they are vigilantly monitoring developments in the region that could threaten national security. Ethiopia remains committed to the peaceful resolution of differences and to working with the people of Somalia and the international community to avert dangers to peace and stability in the region.

In this regard, the vice governor and chief economist of the National Bank of Ethiopia is concerned that disruptions to foreign exchange supply could cause the exchange rate gap to swell again. In theory, after the reform, the depreciation of the Ethiopian birr will boost exports by making them cheaper, but export demand is unstable, while domestically, exchange-rate-driven inflation is pushing up prices and raising costs.

Ethiopia in particular relies heavily on exports of agricultural products such as coffee, but these products are vulnerable to fluctuations such as high-priced imported inputs like fertilizer, as well as domestic inflation and security issues, which do nothing to help their competitiveness. In addition, in recent times armed conflict has continued in multiple regions of Ethiopia and has spread from the north to the south.

These security issues also greatly affect the exchange rate, so in the near term the exchange rate will be rather unstable and may continue to fall. As for the coffee industry, according to Ethiopian economists, because of exchange rate fluctuations it may intensify inflationary pressure, making goods more expensive and potentially causing a surge in illegal trade and the like, because exporters find it more profitable to avoid formal export procedures, so at present exports of agricultural products such as coffee are unlikely to grow significantly in the short term, and exports will slow or stall.