nakfa

In 1997 Eritrea has introduced its own currency:Nakfa. From the very outset Nakfa was faced with a reluctance of Ethiopian authorities.
For Ethiopia, the introduction of Nakfa has posed a threat of Eritrean currency being used as a legal tender in Ethiopia, side by side with Ethiopian Birr.

From Ethiopian perspective, this would have destabilized its economy
and ultimately lead the country to “committing financial suicide”.
The Eritreans, on the other hand, saw Ethiopia’s fears as baseless.
Referring to the Protocol Agreement in the Harmonization of Economic Policies from 1993, Eritrea accentuated its right to use the Birr only
until the introduction of its own currency.

In his “Cause of the Ethio-Eritrean Border Conflict" AlemsegedTesfai, arguesthat Eritrea has never suggested parity or free circulation of both currencies and thus the “Nakfa-Birr” controversy is a mere Ethiopian creation.
Also, Eritrea saw itself as a victim of the Ethiopian monetary policy prior
to the introduction of Nakfa. The Eritrean economic expert,
Dr. Woldai Fitur, suggests:

“(…) the arrangements in the facto the currency union, which did not allow Eritrea a voice in Ethiopia’s conduct of
monetary policy, worked more in favor of Ethiopia.” [16]

It is clear that after 1993 economic ties between Ethiopia and Eritrea started breaking off. With each country striving to stand on it’s own mutual misunderstandings and hostilities were significantly accentuated.
Soon, it became obvious how utopian the idea of economic separation was.

Seeing each other as rivals, the two countries continued to expand their
economic, ethnic and territorial grievances that finally triggered the war
in 1998.

IRelated articles

Nakfa- Birr Analysis
the extensive analysis of Nakfa, the reasons it
was introducedas well as its later sucess;
written from Eritrean perspective.

Ethiopian perspective on Nakfa
Created by the Ethiopian embassy in the
United Kingdom,
outlook on detrimanteal effects of Eritrea's
introduction of Nakfa

Homepage I Causes of War I Territorial I Economic I Nakfa
Divergent economic policies I The ports
International Involvement I US role I Peace negotiations
Aftermath of war I Bibliography I Related Sites