Small Notes, Big Squeeze: Informal Workers Foot the Bill for Ethiopia’s Currency Gap

Shopkeepers across Addis Abeba are turning away customers or extending informal credit because they cannot make change. The culprit is not a cash shortage but a currency-quality collapse: the small notes still in circulation are torn, faded, and disappearing faster than commercial banks can replace them, according to reporting by Addis Fortune.

No new 10 Br notes have entered circulation since the 2020 currency changeover, even as annual inflation stood at 13.9pc last month, with food prices running higher still at 15.1pc. Faster price rises push more transactions through the smallest denominations, and each exchange of hands wears the paper down further. Central Bank data cited by Addis Fortune show Birr in circulation reached roughly 346.9 billion Br by mid-2025, up sharply on the year. Yet the 10 Br note accounts for under two percent of that stock, and the five Birr note under one percent, a mismatch between how often Ethiopians use small notes and how few of them the system holds.

Commercial banks say the shortfall is not for lack of asking. Requests for fresh small-denomination stock have reportedly gone unanswered by the Central Bank for months at a stretch, with no clear timeline for resupply, Addis Fortune reported.

The burden lands hardest on people who deal in small cash all day. Bar and cafe staff say tips have shrunk as employers instruct them to hand out larger notes instead of risking damaged five and 10 Br bills as change, pushing some transactions onto mobile money platforms instead. Taxi conductors and street vendors describe discarding notes too tattered for customers to accept, treating the loss as a routine cost of doing business, according to accounts gathered by Addis Fortune. More than 350 billion Br is estimated to circulate outside the formal banking system altogether, a pool of cash that rarely reaches a bank teller long enough to be sorted, retired, and replaced, and that limits the Central Bank’s visibility into how much of the currency stock is actually still usable.

Bankers argue that reprinting small notes on a rolling basis is a costly, short-term fix for a problem inflation itself has created: the face value of a 10 Br note buys a fraction of what it did five years ago, yet demand for it in daily trade has not fallen. A push toward digital payments, part of the government’s cashless-by-2030 target, is widely seen as the durable answer, but patchy electricity access, limited telecom infrastructure, and the cost of smartphones relative to income mean that shift will take years, not months.

The imbalance shows up clearly in the Central Bank’s own breakdown of notes in circulation, cited by Addis Fortune. The 200 Br note makes up 64.4pc of the total value in circulation, with the 100 Br note at 27.3pc and the 50 Br note at 5.5pc. The 10 Br note trails at 1.97pc, the five Birr note at 0.62pc, and the one Birr coin at a mere 0.13pc. Large denominations dominate the stock even though small notes carry the heaviest daily transaction volume, since they change hands with every bus fare, every loaf of bread, and every round of change at a market stall.

That mismatch is not just an inconvenience. It is a signal of how much of the economy’s cash layer sits outside formal channels altogether. With an estimated 350 billion Br circulating beyond the banking system, according to Addis Fortune, a significant share of currency in daily use never passes through a teller for sorting or verification. For a Central Bank trying to manage money supply and plan reprinting schedules, that is a visibility gap as much as a physical one: officials cannot easily gauge how degraded the small-note stock has become until it fails at the point of sale.

Some in the banking sector argue the fix lies less in reprinting than in rethinking denominations altogether. Proposals floated include higher-value notes, such as 500 Br and 1,000 Br bills, to better match inflation-adjusted transaction sizes, alongside coins or alternative materials for the smallest values. Addis Fortune reported that bankers caution that any switch carries its own costs, since coins can cost more to mint than their face value, and reworking the note series would reshape how all denominations circulate, not just the smallest ones.

For now, the fix remains informal. Cafes and bars route more transactions through mobile money to sidestep the shortage. Taxi conductors write off torn notes as a cost of business. And small shopkeepers keep a mental ledger of what customers owe, waiting on change that the formal system has not yet found a way to deliver.

The episode underscores a broader point for policymakers: currency management is not a back-office function but a daily constraint on how easily Ethiopians can transact. Until small-denomination supply catches up with the pace at which inflation wears it down, or until digital payment infrastructure closes the gap, the shortage will keep functioning as a quiet, informal tax on the country’s smallest transactions.

Source: Reporting and data drawn from Addis Fortune, “Small-Notes Squeeze Worn, Torn, Never Returned,” Aug 1, 2026.