The Golden Tourniquet

Ethiopia has spent $2.2 billion this year to keep the birr from bleeding out. The gold now replenishing those reserves flows toward the same Gulf market that finances Sudan’s war — and runs through a mine part-owned by a UAE-and-China-backed chain, beside a border the state cannot control.

On the twelfth of August, Ethiopia’s commercial banks arrived at the central bank’s foreign-currency auction and asked for roughly four times the dollars on offer. Some bid at rates weaker than the official one. It was a small, technical event, unremarked beyond the trading desks — and it was also a verdict. The market had looked at the birr the National Bank of Ethiopia was defending and concluded, in the only language markets speak, that it was worth less than the state insisted. Two days later the NBE announced an unscheduled special auction of half a billion dollars. The line, for now, would be held. The question this piece asks is a simpler and more troubling one: held with what, and at whose cost?

The headline figure, reported by Bloomberg in mid-August, is arresting on its own. The central bank has spent in the region of $2.2 billion this year defending the currency, and the birr still slid to a record low of almost 162 to the dollar — the worst performer among the twenty-three African currencies the agency tracks. But a figure spent tells you little until you know what it was spent from. And the reserves the NBE is burning are, increasingly, made of gold. That is where the story stops being a currency story and becomes something closer to a map of the country’s entanglements.

An intervention that persuades no one

The bitter irony sits in the reform itself. When Ethiopia floated the birr in July 2024, abandoning years of an artificial peg, the entire logic was to stop precisely what is now happening: the haemorrhage of scarce reserves in defence of a rate the market did not believe. A floating currency was meant to find its own level and spare the treasury the cost of the fight. Two years on, the currency has surrendered close to two-thirds of its value, and the central bank is once again spending reserves to manage the number — a float quietly re-managed whenever the figure grows politically intolerable.

The diagnosis offered by Standard Chartered’s Sarah Baynton-Glen is unsentimental and, one suspects, correct: the shortage is driven by a structural current-account deficit, not a passing squall. The distinction matters, because you cannot auction your way out of a structural deficit; you can only ration scarcity at a subsidised price and hope the calendar is kind. This year the calendar is not. Higher oil prices tied to the Iran conflict have inflated the fuel and fertiliser import bill while thinning the Gulf remittances that once cushioned it, and demand is set to climb into the Ethiopian New Year on 11 September as letters of credit pile up. August into September is a seasonal squeeze laid over a war-driven import shock — and the birr must absorb both.

You cannot auction your way out of a structural deficit. You can only ration scarcity at a subsidised price, and hope the calendar is kind.

What the reserves are made of

Here the government has a genuine achievement to point to, and it is important to grant it plainly. Gross reserves, estimated by the IMF in July at around $5.9 billion, now cover roughly 2.1 months of imports — a substantial climb from the 0.7 months recorded two years earlier, when the buffer sat below a single month almost continuously from late 2021 to mid-2024. The engine of that recovery is gold. Exports reached some $3.5 billion as the state leaned hard into mining-led growth, formalising artisanal output and channelling it through the central bank. On the government’s own terms, this is the reform working.

But 2.1 months is not safety; it is merely a less acute danger. The threshold widely treated as a minimum cushion for an import-dependent economy is three months, and the IMF’s own aspiration — 3.5 months by the end of the programme — remains two years and a great deal of good fortune away. Against a projected 2026 trade deficit of roughly $6 billion, reserves worth two months of imports are the very definition of running to stand still. And so the $2.2 billion already spent this year is not a large expenditure from a comfortable store. It is more than a third of the entire cushion, poured into a fight the market keeps winning. The relevant question becomes urgent: where does the next tranche of gold come from, and to whom is it sold?

The deal that wasn’t

To answer that question, follow the country’s crown jewel. Kurmuk, in Benishangul-Gumuz, is Ethiopia’s first industrial-scale gold mine — a deposit of some 2.7 million ounces, engineered to yield around 290,000 ounces a year in its early life at a cost that comfortably undercuts the current gold price. It is, quite literally, the future of the reserve pile. And its ownership has been the subject of a year-long tug-of-war that the Ethiopian press has, for the most part, reported wrongly.

The story circulated through the first half of the year was that China’s Zijin had bought the mine’s Canadian parent, Allied Gold, outright for some $4 billion, and that Addis had blessed the sale. It had not. The full takeover collapsed on 29 July, when Chinese regulators failed to approve it before the deadline and both sides conceded there was no reasonable prospect they would. What actually completed, days later, was a far smaller and stranger thing: a private placement of around $295 million giving Zijin Gold a minority holding of roughly 9.2 per cent in Allied. Allied’s share price fell some eighteen per cent on the news, and its chairman signalled he remained willing to sell further slices, perhaps to several buyers. The mine did not pass into Chinese hands. A Chinese firm took a sub-ten-per-cent stake in the parent after its bid fell apart. The distinction is not pedantry; it is the difference between a sale and a scramble.

And Zijin was not the first suitor. In February 2025, an obscure Emirati company, Ambrosia — run by an Abu Dhabi businessman of the Al Amry Group — announced a half-billion-dollar deal for half of Allied’s assets, only for it to dissolve when conditions went unmet and the gold price surged. Two acquisitions attempted, two collapsed, before a diminished third limped over the line. The pattern of a distressed asset circled by larger powers is not incidental to this analysis. It is the analysis.

For the label “UAE-backed Chinese company” is not rhetoric. The Abu Dhabi Investment Authority, the Emirati sovereign wealth fund, has been a major shareholder of Zijin’s parent since 2022, and filings this year showed it among the top ten holders after committing some $680 million. The investor Ethiopia now counts among the owners of its flagship mine is, at one remove, the same Gulf capital that tried and failed to buy it directly a year earlier. Chinese metal and Emirati money are not competing for Kurmuk. They are, increasingly, the same hand.

The reserves keeping the birr alive are increasingly made of gold. And the gold, increasingly, leads to Abu Dhabi.

The geography of complicity

It is where the mine sits that turns a corporate saga into a question of conscience — and here precision matters more than anywhere else, because the distance between what can be documented and what can be alleged is, in this terrain, the distance between journalism and libel. So let the facts stand in their own order, each attributed, none stretched.

Kurmuk lies roughly twenty kilometres from the Sudanese border and about a hundred from the Grand Renaissance Dam. On the very day the Zijin deal was announced, according to reporting by Middle East Eye, mass graves believed to hold victims of Sudan’s Rapid Support Forces were uncovered some twenty kilometres away. The same outlet has previously reported that Asosa, the regional capital, hosts a logistics hub the UAE and Ethiopia have used to train and arm RSF fighters. It is a matter of wider record that the UAE is at once the principal buyer of Ethiopian gold and the main destination for smuggled Sudanese conflict gold, which moves through Dubai; and that Chinese-made weapons have reached the RSF by way of the Emirates despite United Nations embargoes, without visible objection from Beijing.

Set these facts beside one another and the conclusion is not that Kurmuk’s gold funds atrocity — there is no evidence for that claim, and this newspaper does not make it. Allied, asked by Middle East Eye whether it could guarantee its new partners would not exploit the mine’s output to support Sudanese militias, offered no answer for the record; Zijin did not reply; the UAE and Ethiopia both deny any role in the war. The honest conclusion is narrower and, in its way, more damning: Ethiopia’s newest instrument of monetary stability has been placed inside a single geography of Gulf money, Chinese arms and Sudanese blood, and the state has done nothing to demonstrate that the walls between them are sound. Proximity is not proof. But a government that stakes its currency on gold owes its citizens an account of where that gold goes — and Addis has not given one.

The Egyptian ghost

There is a final irony buried in the ledger, and it belongs to Cairo. Kurmuk was run for a decade, from 2007, by the Egyptian firm ASCOM, until its licence was revoked and transferred to Allied in 2017 — reportedly because an Egyptian company operating in the watershed of the Renaissance Dam was judged a national-security risk. Allied maintains that ASCOM and its parent, Qalaa Holdings, exited fully through a negotiated settlement in 2023. Yet documents cited by The Reporter suggest a residual exposure: some sixty-six million dollars still owed in deferred instalments running to September 2027, and a mine that Qalaa has continued to list in its annual filings.

If that residual interest is real — and it is disputed — then a company Ethiopia expelled from the dam’s watershed on grounds of sovereignty may still hold a paper claim on the very asset now anchoring the national reserves. The state that guarded its water from Egyptian hands has, in the same decade, invited Emirati and Chinese ones to underwrite its money. It is worth asking which sovereignty was the more valuable to keep.

The tourniquet and the wound

Return, at the end, to the balance of it. For its 7 per cent free-carried stake in Kurmuk — a holding it earned not in cash but by building the mine’s power line — together with a five-per-cent royalty and corporate tax, the Ethiopian state may collect something in the order of $100 million to $150 million a year. Set against $2.2 billion burned in eight months to hold a currency the market still shorts, it is very nearly a rounding error. This is the arithmetic of the reform stripped of its language: the commanding heights of the mining economy conceded to foreign capital, in exchange for a thin slice of revenue and a reserve buffer that buys months, not security.

The float did not fail. It did what floats do; it found a level, and the level was low. What has failed is the quieter promise beneath it — that liberalisation would restore, rather than mortgage, the country’s command of its own economy. The birr today is kept alive by a golden tourniquet, and a tourniquet is an honest thing: it stops the bleeding, and it heals nothing. This one, moreover, is tied by hands in Abu Dhabi and Beijing, beside a border the state cannot police, in a landscape where its own gold and its neighbour’s war have grown difficult to tell apart. Stability bought on those terms is not sovereignty recovered. It is sovereignty postponed — and the interest, as ever, will fall due.

Sources: Bloomberg (currency intervention and rate data, August 2026); IMF fifth-review estimates (reserves and import cover); Standard Chartered (analyst commentary); Reuters, Mining.com and The Northern Miner (Allied Gold–Zijin deal collapse, 29 July 2026); Middle East Eye (19 August 2026, ownership and regional-security reporting); The Reporter Ethiopia and Qalaa Holdings filings (ASCOM residual interest); Pan African Visions and Addis Insight (fiscal terms). Figures for reserves and import cover are estimates and diverge between the IMF and Afreximbank; the more conservative IMF figures are used throughout.

The Ethiopian Tribune · Independent since 2012