In this article, We learn about "Eritrean Nakfa (ERN)".Let's Go!
The Eritrean Nakfa (ERN) is the official currency of Eritrea, a country located in the Horn of Africa bordering Sudan, Ethiopia and Djibouti.
The Nakfa was introduced in 1997, replacing the Ethiopian Birr used when Eritrea was a province of Ethiopia. The Bank of Eritrea is responsible for issuing and administering Eritrean nakfa.
Exchange rate system
The Eritrean Nakfa has a fixed exchange rate system, with its value pegged to the United States Dollar (USD) at an exchange rate of 1 USD = 15 ERN.
This fixed exchange rate system provides the Nakfa with stability against foreign exchange market fluctuations, although it also makes the currency vulnerable to external shocks and requires strict monetary and fiscal discipline.
Segments and denominations
The
Eritrean Nakfa is subdivided into 100 smaller units called cents.
Coins are available in denominations of 1, 5, 10, 25, 50 and 100 cents and 1 Nakfa.
The banknotes are available in 1, 5, 10, 20, 50 and 100 Nakfa denominations.
Economy and Challenges
Eritrea’s economy is dominated by agriculture, with more than 80% of the population engaged in subsistence agriculture and animal husbandry.
The country also has mineral resources, particularly gold and copper, which are becoming increasingly important to the economy.
However, due to isolationist policies and ongoing conflicts with neighboring countries, Eritrea faces various economic challenges such as high levels of poverty, poor infrastructure, and lack of foreign investment.
Furthermore, the country is vulnerable to external shocks such as drought and global commodity price fluctuations.
Summary
In summary, the Eritrean Nakfa is the official currency of Eritrea and is administered by the Bank of Eritrea.
The currency operates under a fixed exchange rate system, pegged to the U.S. dollar and broken down into cents. Nakfa issues various banknotes and coin denominations.
Eritrea’s economy is primarily agricultural and increasingly focused on mineral resources, but the country continues to face challenges such as poverty, poor infrastructure, isolationist policies, and vulnerability to external shocks.
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