The Prophet of Currency Doom: Why Steve Hanke’s Ethiopian Birr Warnings Deserve Our Undivided Attention
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A Commentary by The Ethiopian Tribune
In the rather theatrical world of international economics, few figures command attention quite like Professor Steve H. Hanke. Rather like a Victorian-era town crier with a PhD, the 82-year-old American economist has made quite the career of proclaiming monetary doom from his academic perch at Johns Hopkins University. And when it comes to Ethiopia’s beleaguered birr, Hanke’s pronouncements have proven disturbingly prescient.
The Man Behind the Metrics
Before we delve into his latest Ethiopian economic prophecies, it’s worth examining the credentials of this self-appointed global currency watchdog. Steve H. Hanke is no mere armchair critic. A professor of applied economics at Johns Hopkins since the Reagan era, Hanke served as a senior economist on President Ronald Reagan’s Council of Economic Advisers in the early 1980s. He’s also a senior fellow at the Cato Institute and co-director of Johns Hopkins’ Institute for Applied Economics, Global Health, and the Study of Business Enterprise, a title so impressively long it practically demands respect.
What sets Hanke apart from your typical academic economist is his hands-on approach to currency reform. He’s not content merely to theorise from Baltimore; he’s actually implemented currency boards and monetary reforms in emerging markets across the globe. This practical experience lends considerable weight to his observations, particularly when he turns his analytical gaze toward troubled economies.
Ethiopia’s Monetary Maelstrom
Hanke’s recent commentary on Ethiopia’s currency crisis reads like a post-mortem examination of a patient still clinging to life. Through his Troubled Currencies Project, which tracks exchange rates in both official and black markets, Hanke has documented the birr’s spectacular decline with the methodical precision of a forensic accountant.
The statistics are rather sobering. According to recent data, the Ethiopian birr has depreciated by nearly 40% against the US dollar since January 2022. More alarmingly, current trading data suggests the currency has weakened by over 136% in the past 12 months alone, with the USD/ETB exchange rate hitting 136.50 as of mid-July 2025. These aren’t merely numbers on a spreadsheet; they represent the slow-motion collapse of Ethiopian purchasing power.
But currency depreciation is only one facet of Ethiopia’s economic malaise. Hanke’s most damning assessment concerns inflation, where his characteristic bluntness transforms into something approaching academic fury. “Inflation continues to PUNISH Ethiopians,” he declared in his recent analysis, employing capital letters with the theatrical emphasis of a Victorian moralist. His methodology, utilising high-frequency data rather than official government statistics, paints a far grimmer picture than authorities care to acknowledge.
Where Ethiopia’s official inflation rate sits at a seemingly manageable 14.4% annually, Hanke’s calculations reveal a staggering 41% inflation rate, nearly three times the government’s figure. This isn’t merely a statistical disagreement; it’s an economic chasm that reflects the lived reality of ordinary Ethiopians watching their purchasing power evaporate like morning mist in the Simien Mountains.
The Gloves Come Off: Personal Attacks on Leadership
Where Hanke’s academic training might typically demand diplomatic language, his assessment of Prime Minister Abiy Ahmed’s administration abandons all pretence of scholarly restraint. In a particularly scathing pronouncement, he branded the Nobel Peace Prize winner as “ARROGANT, INCOMPETENT & CORRUPT”, a trinity of damning adjectives that would make even the most hardened political commentators wince.
This isn’t merely academic criticism; it represents a complete breakdown in the usual courtesies extended between international economists and sovereign governments. Hanke’s assessment suggests a level of economic mismanagement so severe that it transcends ordinary policy disagreements and ventures into the realm of moral condemnation.
The inflation discrepancy, 41% versus the official 14.4%, becomes particularly significant when viewed through this lens. If Hanke’s calculations prove accurate, it suggests not merely incompetence but a deliberate attempt to obscure the true scale of Ethiopia’s economic crisis from both international observers and the Ethiopian people themselves. Such statistical manipulation, if verified, would indeed warrant the professor’s unusually harsh characterisation of the current leadership.
His broader assessment of Ethiopia’s economic management has been characteristically blunt throughout the crisis. “The economic mismanagement has destroyed the country,” he declared in 2023, a statement that might seem hyperbolic were it not supported by such devastating empirical evidence. His Troubled Currencies Project has consistently ranked the Ethiopian birr among the world’s worst-performing currencies, a distinction no developing nation wishes to claim.
The Methodology Behind the Madness
What makes Hanke’s inflation analysis particularly compelling and potentially damaging to Ethiopian authorities is his reliance on high-frequency data rather than official government statistics. This approach, whilst academically rigorous, essentially accuses Ethiopia’s statistical apparatus of either gross incompetence or deliberate deception.
High-frequency data collection involves monitoring price changes across multiple sectors on a daily or weekly basis, rather than relying on monthly or quarterly government surveys. This methodology provides a more immediate and accurate picture of inflationary pressures, particularly in economies experiencing rapid currency depreciation.
The 26.6 percentage point gap between Hanke’s calculations and official figures isn’t merely an academic disagreement, it represents millions of Ethiopians whose economic suffering remains statistically invisible to international observers relying on government data. When Hanke declares that inflation “continues to PUNISH Ethiopians,” he’s not engaging in hyperbole but describing the mathematical reality of a currency crisis that official statistics appear designed to obscure.
His academic credentials are impressive enough to warrant serious attention. Beyond his Johns Hopkins professorship, Hanke holds positions at the Independent Institute in Oakland, serves as a senior adviser at Beijing’s Renmin University International Monetary Research Institute, and acts as special counsellor to New York’s Center for Financial Stability. This portfolio of affiliations suggests a man whose opinions carry weight in diverse academic and policy circles.
The Ethiopian Context
Hanke’s warnings about the birr don’t exist in a vacuum. Ethiopia has been grappling with a perfect storm of economic challenges: foreign currency shortages, inflationary pressures, and the lasting economic effects of regional conflicts. The government’s attempts at currency devaluation and economic reform have so far proved insufficient to stem the tide of depreciation.
Recent World Bank data indicates that the Ethiopian birr posted the second-worst currency drop in Sub-Saharan Africa, a sobering distinction that validates Hanke’s earlier warnings. The currency crisis has created cascading effects throughout the Ethiopian economy, from import difficulties to inflationary pressures that disproportionately affect ordinary citizens.
The Oracle’s Track Record
Hanke’s pronouncements on troubled currencies have historically proven remarkably accurate. His early warnings about hyperinflation in Zimbabwe, Venezuela, and other emerging markets were often dismissed as academic alarmism until reality proved him correct. This track record of prescient prediction lends considerable credibility to his current Ethiopian analysis.
The professor’s Twitter commentary, delivered with the theatrical flair of a monetary Cassandra, may seem overwrought to some observers. Yet his predictions have consistently materialised with uncomfortable accuracy. When Hanke ranks a currency among the world’s worst performers, markets and policymakers would be wise to pay attention.
Looking Forward: The Price of Academic Honesty
Whether one appreciates Hanke’s sometimes dramatic delivery or not, his analysis raises uncomfortable questions about Ethiopia’s economic trajectory and the integrity of its statistical reporting. His work suggests that without fundamental reforms to monetary policy, economic governance, and statistical transparency, the birr’s travails may continue whilst ordinary Ethiopians bear the hidden costs of officially underreported inflation.
The challenge for Ethiopian policymakers extends beyond mere currency stabilisation. If Hanke’s inflation calculations prove accurate, it suggests a crisis of governmental credibility that transcends economics and ventures into questions of democratic accountability. When official statistics diverge so dramatically from independent analysis, it becomes difficult for citizens to make informed decisions about their economic futures.
Furthermore, Hanke’s personal attack on Prime Minister Abiy Ahmed, however undiplomatic, reflects the frustration of an economist watching preventable economic suffering unfold whilst government officials maintain statistical fiction. His characterisation of the leadership as “arrogant, incompetent & corrupt” may violate academic decorum, but it also represents the logical conclusion of his empirical analysis.
The question remains whether Ethiopian authorities will address both the underlying economic crisis and the apparent statistical discrepancies that Hanke has highlighted, or whether they will continue to present rosy official figures whilst the professor from Baltimore documents the harsh mathematical reality from afar. Based on Hanke’s analysis, the window for effective intervention may be narrowing with each passing day, whilst inflation continues its relentless assault on Ethiopian living standards.
