The death of the Ethiopian economic dream of prosperity

The International Monetary Fund is so pessimistic about Ethiopian growth it refused to give a report

The conquest obsession of Abiy Abid is rapidly fading any future of economic growth and financial independence for Ethiopia. They seemed to have missed out on the first lesson in any college freshman economic class about the “guns vs butter” trade off.

This month the inflation rate for Ethiopia will reach a record 50% in one year the highest in the world. The consumer price index is expected within a short time to also reach a new high of 300 points above normal. The Central Statistical Agency which normally posts this finding has actually closed its normal reporting website.

The Ethiopian government probably has less the $400 million to run the country for the next 11 months which normally requires about $2 billion. The International Monetary Fund has decided that Ethiopia’s finances are in such disarray that it cannot issue a report on growth. Although the official government report is 6.6% growth this year most analysts are saying it will exceed -2% net loss. Fantasy will not feed the hungry nor create sustainable businesses to drive economic growth.

Prime Minister Abiy Ahmed has spent all cash reserves and transferred most gold reserves out of the country. France and China are trying to broker a new repayment plan for debt that exceeds $40 billion requiring payments of at least $2 billion year alone in debt service. Meanwhile Abiy Ahmed promises to guarantee private loan deals between private companies in Ethiopia and foreign interests have been discovered adding another $25 billion in debt previously hidden. His armies have destroyed hundreds of billions of birr worth of businesses and industries in Tigray. The war damage blight to Tigray now extends to much of Amhara with Ethiopian and Eritrean blanket destruction adding billions of birr in economic production loss and human life. 

At this point the continued war and misery are no doubt going to leave what was formally the prosperous state of Ethiopia in tatters. Severe austerity measures will need to be imposed just to get any country to fund loan repayment and it is likely that natural resources will likely be the mechanism of repayment but not at any significant profit to Ethiopia. The dream of Ethiopia being a second world country that escaped poverty is gone. The previous decades of progress will be just a memory traded for the false promise of conquest and repression. Ethiopia has become another Eritrea. 

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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