The Eritrean Nakfa (ERN) is the official currency of Eritrea, a country located in the Horn of Africa, bordered by Sudan, Ethiopia, and Djibouti.
The Nakfa was introduced in 1997, replacing the Ethiopian Birr, which was used during Eritrea’s time as a province of Ethiopia. The Bank of Eritrea is responsible for issuing and managing the Eritrean Nakfa.
Exchange Rate System
The Eritrean Nakfa operates under a fixed exchange rate system, where its value is pegged to the US Dollar (USD) at a rate of 1 USD = 15 ERN.
This fixed exchange rate system provides stability for the Nakfa against fluctuations in the foreign exchange market, although it also makes the currency susceptible to external shocks and requires strict monetary and fiscal discipline.
Subdivisions and Denominations
The Eritrean Nakfa is subdivided into 100 smaller units called cents.
Coins are issued in denominations of 1, 5, 10, 25, 50, and 100 cents, as well as 1 Nakfa.
Banknotes are available in denominations of 1, 5, 10, 20, 50, and 100 Nakfa.
Economy and Challenges
Eritrea’s economy is predominantly agricultural, with over 80% of the population engaged in subsistence farming and animal husbandry.
The country also has mineral resources, particularly gold and copper, which have become increasingly important for the economy.
However, Eritrea faces various economic challenges, such as high levels of poverty, underdeveloped infrastructure, and a lack of foreign investment due to its isolationist policies and ongoing conflicts with neighboring countries.
Additionally, the country is vulnerable to external shocks, such as droughts and fluctuations in global commodity prices.
Summary
In summary, the Eritrean Nakfa is the official currency of Eritrea and is managed by the Bank of Eritrea.
The currency operates under a fixed exchange rate system, pegged to the US Dollar, and is subdivided into cents. The Nakfa is issued in various banknote and coin denominations.
Eritrea’s economy is predominantly agricultural, with a growing focus on mineral resources, but the country faces ongoing challenges related to poverty, underdeveloped infrastructure, isolationist policies, and vulnerability to external shocks.