Ethiopia talking to USA now because economically has no choice

Ethiopia’s massive foreign debt to China and Western democracies will not be continued with Chinese financing alone. Photo from South China Morning Post

The Ethiopian Prime Minister is talking to the United States after a period of defiant silence because Ethiopia’s economic survival is threatened. Ethiopia cannot survive economically and continue the Tigray war indefinitely. Take a class in basic economics about nations and you quickly learn about “gun vs butter”. All nations need both. Now Abiy Ahmed is learning that lesson.

As reported earlier this year in the influential South China Morning Post and later by the Global reporting center in The World, China is at a crossroads about how much more it can lend to Ethiopia.  The Chinese are the first to say they did not cause the Ethiopian conflict with Tigray and other groups. This conflict works against Ethiopian prosperity and debt repayment.

Abiy Ahmed has said in the past he would always prefer loans from the International Monetary Fund or World Bank which he equates to “borrowing from one’s mother” rather then the Chinese because the terms of Chinese loans are high interest rates with short repayment schedules. In addition to which there are hidden costs that Ethiopia bears by “guaranteeing” the loans against business failure.

At an estimate of Ethiopia’s debt exceeding $60 billion by the end of 2022 and no agreement yet reached with special negotiators, China and France, for the IMF it is clear that Ethiopia will need to negotiate with the West to stay afloat. In the past Ethiopia tried to “play off Europe vs China” but now the bet that China or even the Middle East alone are a way to finance Ethiopia’s economic growth appears to have been a grave misjudgment.

Author: Professor Tony Magana

Professor Tony Magana is Head of the Department of Neurosurgery, School of Medicine, College of Health Sciences at Mekelle University in Mekelle, Ethiopia. He directs a neurosurgery residency and training program as well as neuroscience research.

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