The release of a leaked document of Ethiopia’s Prosperity Party Meeting at Hawassa, December 2021, entitled, The journey towards prosperity through permanent victory: War aftermath challenges and redress, after victory over Tigray PLF reveals that the Ethiopia government is well aware that continuing the armed conflict with the Tigray Defense Forces will likely lead to economic ruin for Ethiopia. The goal of continuing the conflict in the short term was to weaken the spirit of the Tigray so that Ethiopia could bargain from a strong position. Ethiopia believed the United States interest in the conflict related to wanting to remove Isaias Afwerki as head of Eritrea. Discussion was being held about limiting the power of the Amhara militia group, FANO.
The growing weakness and worsening forecast of the Ethiopian economy for the next year was highlighted in a recent forecast. The highly regarded Fitch Country Risk and Industry Research group published an economic forecast for Ethiopia this week that sees continued worsening deficit in the Ethiopian government fiscal accounts for at least the next year. While the Ethiopian government has boasted almost $1.1 billion in revenue from coffee exports of 280,000 tons this year a close look by Fitch determined that Ethiopian coffee production would increase by only 0.3% in the near future. At the same time world wide prices for coffee are expected to fall by 6.3. Coffee exports make up about 32% of the total exports from Ethiopia.
The removal of Ethiopia for the foreseeable future from the African Growth and Opportunity Act will see the trade deficit from necessary imports to Ethiopia increase from $9.3 to $10 billion yearly. The potential for future improvement in Ethiopian economy is now heavily dependent on the peaceful resolution of conflicts within Ethiopia involving the Tigray and Oromo This would weigh heavily on investor sentiment and foreign capital inflows, weakening the country’s balance-of-payment position.
Similarly, the World Bank continues to see challenges in Ethiopia’s development due to ongoing conflict. Ethiopia has one of the lowest Human Development Indexes in the world at 0.38 which reflects the economic potential of the average citizen. The diversion of educational funds, nutritional support, and health funding by the Abiy Ahmed lead Prosperity Party to buying weapons (reports are that Ethiopia wants to quadruple military spending) and increasing deficits is leading to an uneducated and unhealthly workforce which will be unable to develop the country.