Ethiopia’s war machine economy is collapsing irreversibly now

The Consumer Price Index of Ethiopia has risen astronomically since the beginning of the Ethiopian Tigray conflict

There is no doubt now that Ethiopia is now in an irreversible state of economic collapse and fragmentation under Abiy Ahmed’s government. Instead of addressing the everyday problems of the people he has caused millions to be displaced, killed, starving, and put Ethiopia in severe debt spending all the countries assets on a failed military adventure.

Everyday consumer items such as diapers, enjera, petrol, vegetables, clothes, etc. have doubled or tripled in price. People are waiting hours to buy a limited amount of fuel for their cars.  Although the official government exchange rate of birr to dollar is 45 yesterday it was reported to be 67 and many forecasters predict it will approach 77 in the near future.

Although over 5 million are starving in Tigray it is now estimated that more than 1 in 4 Ethiopians are suffering food shortages. Locusts, war, changing rain patterns, displacement, lack of government funding for seeds and agricultural necessities giving way to war needs all will result in poor harvests for the foreseeable future. Abiy Ahmed has turned the whole government into a war machine neglecting the needs of noncombatants. 

War and unrest in Oromia, million displaced in Amhara, and lack of hope for peace in the near future is killing any and all export trade. European and American sanctions on Ethiopian exports coupled with escalating prices on imports cannot be sustained much longer. Roads to Kenya and Djibouti are currently blocked by war impeding export and import to only air means. Growing world wide displeasure with Ethiopian Airlines is making it hard for the airline to make enough cash to pay off the monthly loans and leases on its aircraft. There are new calls from many African countries that they have been too dependent on one airline and now wish to develop others.

Noted Ethiopian scholar Alex De Waal in July noted that there are five mechanisms apart from military strategies that would play a role in the collapse of the Ethiopian state. Ethiopia’s decades of growing economic prosperity and development came to a screeching halt in November 2020 when after months of preparation the government of Abiy Ahmed decided to proceed with a plan to crush Tigray out of existence.

At this moment the area of influence of the Ethiopia federal government has significantly contracted. De Waal predicted that the federal government would become isolated, fragmented, and dissolve. Abiy Ahmed has ceded control of Western Tigray to Eritrea who will not likely just give it back. Armed rebellion has not only broken out in Tigray but now includes Gambella, Somali-Afar border where the two ethnic groups are fighting each other, Agaw of Amhara, Beningshagul, Qemont of Amhara, and very significantly in the Oromo region. The sphere of influence and control of the central Ethiopian government has contracted significantly from its status prior to November 2020.

More and more it is appearing in the views of many analysts that the Amhara region which is not held by the Tigray is beginning to function as an independent state. Amhara leaders including the Amhara National Movement are complaining that the Ethiopian Federal government cannot be relied upon to help the Amhara people. Tigray itself is now a defacto independent country.


Failure to negotiate a peace will drive Ethiopia into dependency and economic stagnation

Failure to timely resolve the Tigray Ethiopian conflict will kill the hope of Ethiopia emerging into a middle income country. The resurgence of the Tigray Defense Force and the refusal of the Ethiopian government to negotiate with Tigray’s leaders predicts a prolonged conflict triggering decline into a state of increasing poverty and dependency .

Most of the members of the United Nations clearly see that there is humanitarian crisis in the Tigray region of Ethiopia reminiscent of the previous famines. The clear obstruction of international aid and even communication to the region is perceived as mostly the fault of the Ethiopian government. The presence of the headquarters of the African Union as well the continental headquarters of the United Nations in the Ethiopian capital city of Addis Ababa along with its frequent role as an intermediary in solving African conflicts stands in stark contrast to the “no negotiation” stand of the Ethiopian government.

The Tigray Peoples Liberation Front leaders have stated they wish to negotiate a peace on the following conditions: that restoration of its pre-war condition of semi-autonomy as called for in the Ethiopian constitution. All invading forces of Eritrea, Amhara, and the Ethiopian National Defense Force must leave Tigray. Blockage of power, fuel, food, travel, banking, and communication would be ceased. The 1991 borders of Tigray would remain unchanged. A decision on whether to stay a part of Ethiopia or become independent would be decided by referendum. Those who committed war crimes must be brought to trial.

The increasing isolation of the Ethiopian government from the international community has implications for the welfare of its people and economic growth. The highly touted visit of Samantha Power, recognized genocide expert and now head of the USAID, was basically shunned by the Ethiopian Prime Minister and his ministers. She accused Ethiopia of “brutal treatment of Tigray.. that personal issue were favored over national issues”.

Samantha Power in Addis Ababa finds store of aid

During her brief one day stay she found  58,000 metric tons of international aid stored in a warehouse in Addis Ababa which apparently the Ethiopian government had no plans to distribute.

The United States, Britain, and the European Union have called for withdrawal of Tigray forces from outside its traditional borders present prior to the this conflict as well as withdrawal of Eritrean and Ethiopian forces out of Tigray. Much of what the Western democracies are calling for is similar to the Tigray conditions. All parties must cooperate with the flow of aid to Tigray and the restoration of power and communication.

The reality is that the crisis of Ethiopia is not just in Tigray. At this point the Ethiopian birr is trading at 75 birr per US dollar which is a historic high. Inflation is over 40% for this year alone. Huge multibillion dollar deficits exist between Western countries and China with Ethiopia. The economic output from the country does not meet its import needs of food, fuel, and basic materials for industrial and agricultural development. According to the World Bank Ethiopia remains one of the poorest countries in the world with a real per capital income of only $850 pear year.  Although its annual rate of growth has been positive this is a false indicator because the denominator is so low. Before the Tigray conflict 1 in 4 Ethiopians was requiring international food aid to survive. The continuous waves of COVID-19 in a country with minimal hospital resources and vaccination have further impeded its attempt improve the lot of its people. 

Rebellion against the Ethiopian government is not just in Tigray. The attempt to consolidate power into a single political party, the Prosperity Party, coinciding with a movement towards a national Ethiopian identity has incited opposition in almost every region. As I previously wrote about this identity is more accepted by the Amhara ethnic group and others who are educated in Addis Ababa. Much of the opposition not just in Tigray is a really a revolt to oppression of the national identity felt by the regional states.

When you combine the effect of ongoing poverty, war, pandemic, and political struggle for identity it is hard to see a bright economic future. In the current global environment of cautious economic growth where the only major gains have come upon a greater reliance of internet transactions it seems likely that Ethiopia will have a difficult time participating. Ethiopia has very poor communications. Only 40% of Ethiopians have a cell phone or any phone and 20% have any connection to the internet. The internet present in Ethiopia is very slow and very expensive. 

Millions of people from Tigray, Amhara, Afar, and the Southern regions of Ethiopia are now displaced by ethnic conflict. The locust swarms of the past year caused by an usual wet season added to a severe reduction in harvests that feed the population and sustain farming families who make up 90% of the economic output of Ethiopia. Even before the Tigray Ethiopia conflict the need for food aid was rising.

Prime Minister’s bold claims that Ethiopia will emerge as a superpower rivaling China and the United States by 2060 and the dominant force of Africa in this decade are obvious fantasies.  Instead it seems likely that failure to resolve the war will add to the general decline of Ethiopia into a state of stagnation, increasing dependency, and misery. The author hopes the Tigray leaders and the Ethiopian Prime Minister will cooperate with finding a solution for the benefit of all parties.