Ethiopian and Eritrean destruction will crash Ethiopian Development Bank

The Development Bank of Ethiopia has seen continuation of many loan failures under the government of Abiy Ahmed

Already failing Development Bank of Ethiopia strategies to successfully finance targeted Ethiopian business success are now crashing completely due to the Ethiopian, Eritrean, and Amhara forces destruction in millions of dollars of industrial projects which were 70% financed by the Development Bank of Ethiopia. Now these loans will never be paid and foreign investor interest has been severely discouraged.

The Development Bank of Ethiopia was created to be a mechanism to finance industries deemed vital to the economic development of Ethiopia because there was insufficient private or international alternatives. The Ethiopian Commerce Bank of Ethiopia which held 57% of deposits 18% of profits from private lenders was just not big enough to handle the load. The low interest rates paid by Ethiopian Commerce Bank were just too low to sustain financing for large projects.

Unfortunately over the past decade ongoing inflation and business failure of large projects in government targeted industries was creating a difficult situation to sustain the development bank. In 2020 just before the Ethiopian Tigray conflict began the Prime Minister of Ethiopia, Abiy Ahmed, began to take over policy determination of the Development Bank of Ethiopia. Despite this the number of distressed loans increased to one third of all projects. Under the PM the Ethiopian Investment Commission tried to help 485 troubled government targeted business ventures with additional cash disbursements and loan refinancing sometimes trying to encourage some help from the Ethiopian Commerce Bank but little improvement occurred.

As reported by the Tigray Interim Administration in February 2021 just in Tigray over 100 billion birr of destruction was done by the Ethiopian and Eritrean forces in the so-called law enforcement operation. Thousands of workers lost jobs and foreign investors had no choice but to abandon the projects financed to tens of millions of dollars through the Development Bank of Ethiopia when they saw the destruction and theft of equipment and materials to Eritrea.

Now with the complete destruction of cities and businesses along the highways extending north from Dessie in the Amhara region by poorly controlled carpet bombing and artillery of the Ethiopian forces even more hundreds of millions of dollars in outstanding loans will default to the Development Bank of Ethiopia likely resulting in its collapse. 

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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