A former World Bank president has sharply criticized Ethiopia’s exchange rate reform, arguing that the IMF-backed shift to a market-determined exchange rate has significantly worsened poverty while disproportionately benefiting banks and well-connected firms.
The criticism comes from David Malpass, who served as President of the World Bank Group from 2019 to 2023, in Policy Research Working Paper 11428, published in July 2026 by the World Bank’s Development Economics Vice Presidency. The paper is based on the Stanley Fischer Memorial Lecture delivered at the Annual Bank Conference on Development Economics (ABCDE) 2026 and was cleared for distribution by the Bank’s Chief Economist, Indermit Gill.
Although the paper carries the standard disclaimer that its findings represent the author’s views alone, not those of the World Bank, its Executive Directors, or member governments, Ethiopia serves as the paper’s primary case study.
Poverty and the Cost of Devaluation
Malpass argues that Ethiopia’s July 2024 exchange rate reform, which moved the birr to a market-determined system under the country’s IMF-supported economic program, resulted in a sharp depreciation without a corresponding stabilization strategy.
He traces the birr’s decline from about 28 birr per U.S. dollar in 2019 to around 161 birr per dollar today, describing the July 2024 reform as a turning point that effectively halved the currency’s value.
According to the paper, the World Bank projects Ethiopia’s national poverty rate to reach 43% by 2025, up from 33% in 2016, while multidimensional poverty affects 72% of the population. Ethiopia’s per capita income remains around US$1,100, and Malpass notes that the birr ranked among the world’s weakest currencies in 2025.
He also argues that currency depreciation reduced the real value of World Bank financing. A US$100 million project that would previously have generated about 2.8 billion birr ultimately provided significantly less purchasing power when funds were disbursed. The World Bank has financed roughly 200 projects in Ethiopia, with 43 still active, according to the paper.
Wealth Transfer Through Exchange Rate Reform
A central argument of the paper is that devaluation redistributed wealth within the economy.
Malpass contends that the benefits accrued largely to institutions and firms with privileged access to foreign currency, while the costs were borne by households earning and saving in birr.
He points to National Bank of Ethiopia foreign exchange auctions, including a US$500 million intervention in February 2026, followed by another allocation in May, as examples of how scarce foreign currency was distributed through selected banks.
According to the paper, devaluation shifts wealth from wage earners and savers holding local currency toward those with foreign currency assets or borrowers who secured local-currency loans before the exchange rate adjustment. The resulting inflation, he argues, effectively acts as a tax on households while benefiting the central bank and firms with preferential access to foreign exchange.
Malpass also recalls discussions with Prime Minister Abiy Ahmed in 2019, saying that both he and IMF Managing Director Kristalina Georgieva urged Ethiopia to abandon its multiple exchange rate system and foreign exchange permitting regime, but those efforts were unsuccessful at the time.
Alternative Policy Recommendations
Malpass argues that Ethiopia should have prioritized currency stabilization rather than exchange rate flexibility.
Instead of allowing the currency to depreciate rapidly, he advocates for policies including exchange rate stabilization, expanded low-cost digital payment infrastructure, and temporary unsterilized central bank intervention to break what he describes as a cycle of repeated devaluations.
He cites Malaysia’s 1998 currency stabilization and China’s 1993 exchange rate unification as examples of alternative approaches.
The paper also criticizes the IMF’s reliance on purchasing power parity (PPP) measures, arguing that they delay recognition of the real economic costs of devaluation. Malpass contends that poverty data similarly become available too late to influence policy decisions. Egypt’s recent currency depreciation is presented as a comparable case where the social impacts emerged well before official statistics reflected them.
Ethiopia’s Debt Restructuring
Beyond exchange rate policy, the paper also discusses Ethiopia’s sovereign debt restructuring.
Malpass argues that negotiations have stalled because private bondholders are seeking more favorable terms than those accepted by official creditors, which he says undermines the principle of comparable treatment.
More broadly, he criticizes both the G20 Common Framework and the Global Sovereign Debt Roundtable, arguing that they have failed to deliver timely and effective debt restructuring for developing economies. He instead calls for new international mechanisms modeled more closely on the 1989 Brady Plan.
A Minority View Within the World Bank
While the paper is published under the World Bank’s Policy Research Working Paper series, it explicitly states that the analysis reflects Malpass’s personal views rather than official World Bank policy.
Malpass, who left office in 2023, has long expressed skepticism toward rapid exchange rate liberalization. His criticism represents a minority position within the international financial institutions that supported Ethiopia’s reform program.
Nevertheless, the paper stands out because it uses the World Bank’s own poverty projections to argue that the IMF-backed exchange rate reform has increased poverty and shifted economic gains toward a narrow group of financial institutions and connected firms.
