Ethiopian economist says Ethiopian war crashing economy like a car without brakes

Luxury cars like a recent late model Mercedes Benz on sale on the Ezega internet site are selling at record prices of millions of birr.

The Addis Ababa newspaper, The Reporter, this week discussed an unusual paradox being seen in the collapsing Ethiopian economy due to the rapid birr devaluation and instability due to the ongoing war.  Simply put the wealthy are grabbing up high value assets while the poor and middle class are struggling just to meet daily needs. Amin Abdella (PhD) long time researcher as well as sectorial director at the Ethiopian Economics Association described how those with access to wealth in the form of foreign currency are buying up cars, buildings, real estate to liquidate their birr. He called it a “property craze”. This may explain why many wealthy Amhara in the country still support Abiy Ahmed as they are partaking of this temporary bonanza and do not yet comprehend it cannot last. The failure of the Ethiopian government under Abiy Ahmed to seek peace is continuing to devastate poor and middle income families..

Whilst the cost of living has reached record increases approaching 50% for many needs of daily living over the past two years causing the poor and middle class to struggle in paying rents, buying foods, fuel for their vehicles, and other essentials. Meanwhile the wealthy who have foreign currency assets are buying up real estate, cars, and other assets to the extent that it is driving inflation even higher. This abandonment of the birr is making the economy even worse. Even if the war stops today it will take years to recover the economy.

To make things worse, experts say investors’ disinterest in keeping their money in birr is already wreaking havoc on the whole economy.

“The price bubble does not stop at property. It has a domino effect on other services and goods,” … “The economy is in its worst shape and is now like a car that has lost its brakes.”

Ethiopian birr will hit 50 per dollar within days furthering economic collapse

The Ethiopian birr has continually degraded in value since 2018 and this has accelerated over the past year and falling faster the past few months

Complete collapse of the Ethiopian economy into a state of worthless currency and financial chaos is drawing closer every day. Long lines for diesel or gasoline costing many times its traditional costs are now a reality in the capital city of Addis Ababa. In a country where 50% of food requirements must be imported now the government has announced there will be no more food subsidy which will send prices soaring.

Over $2.5 billion in debt has been added just this year in payments to countries (UAE, Turkey, Iran )in hard foreign currency or gold reserves. This has resulted in cuts to medical services and supplies, education, infrastructure, and housing as well as the ending of food and fuel subsidies.

The Ethiopian government national debt is skyrocketing out of control under Abiy Ahmed leadership to levels that are unsustainable

The Ethiopian economy and the value of its currency has been on a continual downslide since Abiy Ahmed and his Prosperity Party took office in 2018. While for the previous 10 years the Ethiopian economy grew at 10% annually for the upcoming year it has become unpredictable but estimated to be -2 to -3% by the International Monetary Fund. Meanwhile the total Ethiopian government debt is now projected to be $60 billion by the end of 2022 and approach $100 billion in the next four years. The Ethiopian government now no longer publishes Consumer Price Index numbers.