While Abiy Ahmed has struggled trying to squelch rebellion throughout Ethiopia and proclaiming wonderous record economic growth truth of financial collapse is coming out. This week China’s EximBank decided to hold disbursing $339 million in further loan to Ethiopia because it is default. Currently 12 major infrastructure projects have no capital to continue including the electric railroad from Dijoubti to Addis Ababa. Another $98 million in debt from the African Development bank is also in default.
The railway is currently disabled by forces allied with the Tigray Army but its problems started well before the Tigray Ethiopian conflict. Under Abiy Ahmed’s leadership production of electricity for the whole nation had fallen behind to the extent that often there was not enough power to run the train. Secondly, although the Ethiopian government had dreamed of the train carrying exports including shoes to Djibouti this did not happen.
Since 2018 the African Union and international credit organizations had counseled Abiy Ahmed to focus on realistic economic development and restructure debt in a realistic matter. Instead he fixed his whole plan for fixing the economic distress and debt burden of Ethiopia on visions of selling electricity from the Grand Renaissance Dam.
International financial analysts have warned Ethiopia that the “Chinese model of heavy infrastructure development” financed by Chinese banks was a failed strategy unless domestic economic production was substantially increased. For example instead of being a net exporter of footwear the Ethiopian share of the domestic market is only 10% while 90% are imported.
Abiy Ahmed proclaimed that the Ethiopian Tigray conflict had cost more than $2.5 billion before the expansion of the war into Amhara and further uprising of regional liberation groups active throughout Ethiopia. At this point it is clear there will be no rapid return to the status quo present before November 2020. The war prosecuted by Abiy Ahmed has brought and likely will bring more sanctions from Western democracies as well as more defaults to Chinese, European, and other creditors. Financial stability does not seem attainable for the foreseeable future. There can be no prosperity without peace.
Noted international authority on national debts, Fitch, now rates Ethiopia as ccc which is equivalent to a financially failed state. Now with $40 billion in debt, in a country wide civil war, severe inflation, yearly locust outbreaks and poor forecasts of economic growth unlike was present before he took power there seems no answer but a change in leadership.