Fighting undermines Ethiopia’s economy
NAIROBI, Kenya — Once home to one of Africa’s fastest growing economies, Ethiopia is struggling as war in its Tigray region resumes and weary citizens far from the front lines plead for peace.
Ethiopians are experiencing the highest inflation in a decade, currency restrictions and mounting debt amid reports of massive government spending on the war effort. Earlier this year, Parliament reportedly approved an additional $1.7 billion for defense.
Last week, a drone strike hit a university campus in Tigray’s capital, Mekele, leaving an unknown number of people injured, according to a media worker who spoke on condition of anonymity as he did not have the permission to speak to other media. He said another drone strike also destroyed regional broadcaster Dimtsi Woyane’s station.
Ethiopian officials continue to paint a rosy picture for the country of more than 110 million people. “Our economy has continued to grow amid natural and man-made problems,” Planning and Development Minister Fitsum Assefa said earlier this month.
But the meeting of the Ethiopian Economic Association this month made it clear that the country is suffering, as international mediators urgently seek to advance talks to end the fighting.
Internal conflicts, destruction of infrastructure and uncontrolled spending are hurting the economy while ordinary Ethiopians face falling incomes and growing poverty, economist Alemayehu Seyoum told the meeting.
Ethiopia was seared into the global consciousness with a devastating famine in the 1980s. The country has since transformed its economy with megaprojects like the Grand Ethiopian Renaissance Dam, the largest in Africa, and construction projects on a large scale in Addis Ababa, the diplomatic capital of Africa.
The economy has grown by an average of 11% over the past decade.
But the war in the northern Tigray region, which began in late 2020, has caused immense disruption. In June, the International Monetary Fund said growth was likely to fall to 3.8% for 2021-22 due to war and a “sharp decline in donor funding”, among other factors.
The finance ministry has refused to approve funding for three industrial parks, symbols of Ethiopia’s development with Chinese characteristics, citing “fiscal pressure”.
Instead, the economy turned to war.
The Ministry of Finance is now begging the public and the large Ethiopian diaspora to contribute to a “national cause” for reconstruction and war aid. The National Bank of Ethiopia has introduced changes to give the government all possible access to foreign currency, including requiring foreign residents to convert everything they own upon entry.
Some development work is continuing, including Prime Minister Abiy Ahmed’s flagship projects such as the beautification of the capital.
But some critics, like the spokesman for the banned Oromo Liberation Army, Odaa Tarbii, say the “vain projects” are no longer needed now.
Anything perceived as criticism of the war can be suppressed. Earlier this month, authorities blocked 31 local civil society groups from holding a press conference calling for peace.
Following criticism that its financial support was enabling the government’s war efforts, the World Bank said last week it would continue its partnership, but expressed concern.
Some public sectors of the Ethiopian economy continue to open up to investors, as Abiy promised after taking office. The cabinet this month approved the entry of foreign banks, an important step.
Ethiopian Ambassador to the United States Seleshi Bekele said “the international community should support this initiative by helping to disarm hostile forces [Tigray forces].”
US Special Envoy Mike Hammer visited Ethiopia again recently to “discuss the urgency of an immediate cessation of hostilities”, according to the State Department, which said “the people of Ethiopia have suffered tremendously of this conflict”.
The Ethiopian government was unstable when the United States withdrew it last year from a preferential trade program due to its failure to end the Tigray war which the United States says has led to ” gross violations” of human rights. Addis Ababa is pushing for a reversal.
Since then, global companies like PVH Corp have left Ethiopia, citing security concerns, and others are laying off thousands of employees.
Ethiopian Airlines, Africa’s largest aviation group, remains one of the few profitable companies in the country, but has been accused by Tigray forces of transporting troops and weapons to the war front. The airline denied.
Inside Tigray, millions of people are still largely cut off from the world. Communications and banking services are down and their restoration has been a key request in the mediation efforts.
An agricultural survey conducted in several accessible parts of Tigray last month by staff from Mekele University, shared with The Associated Press, found that many crops were failing due to lack of fertilizer. Even commuting had become “boring” due to lack of fuel, according to the survey.
Other shortages are deadly. In an email to the AP, the head of Tigray’s health bureau said vaccines for children ran out more than a year ago and women had no family planning supplies . Humanitarian deliveries have ceased due to renewed fighting.
“The list is very long. I just don’t want to bore you with the details,” wrote Amanuel Haile. “The above is just enough.”