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Can Prime Minister Abiy Ahmed heal the Ailing Ethiopian Economy?

By Berhanu Tsegay
Tigrai Online, April 10, 2019

Can Prime Minister Abiy Ahmed heal the Ailing Ethiopian Economy?

It is undeniable that a lot of changes have been seen with in a year since Abiy took power. Political, economic and to some extent social changes are made. However, directions of the changes are different. Under the political change, some plausible actions are taken. Despite it is a half-done, resolving the age-old animosity with Eritrea is undoubtedly a historic move accomplished by Dr. Abiy Ahmed. Additionally, calling all opposition political parties from abroad; opening the spectrum more wider for press-freedom as well as democracy; and releasing many prisoners (although debatable on political and criminal prisoners), all those deeds can averagely be categorized under positive measures that Abiy might be thanked for.

Under the societal impacts resulted in, various internal conflicts are being experienced. At this time, more than 3 million people are displaced due to widespread conflicts at different spots of the nation. This made Ethiopia the 1st in the world in number of Internally Displaced People.

When we look at the changes related to economy, it is unequivocal that for the last 10 years (before Dr. Abiy came to power), the country had been bringing double-digit economic growth rates, ranking among the few top in the world. Relying on these sustainable and fastest growth rates coupled with the overall sound economic performance, the World Bank (WB) and IMF used to report that Ethiopia would definitely attain the level of a middle-income economy by 2023 before 2025 when the former administration had planned.

However, the aforementioned economic performance has already begun to suddenly fade away currently owing to Abiy’s infant and handicapped administration which lacks experienced technocrat advisors in addition to his unclear direction and ambivalent rhetoric. Many slips of his tongue have cost him in swiftly accumulating dislikes on him by various categories of the societies.

Due to the PM’s unknown blueprint on his economic policy, the amount of incoming foreign investors is promptly abating at a breakneck speed. Consequently, foreign direct investment (FDI) of the country is by now endangered. Besides, because of the ever deteriorating peace and tranquility, even the existing foreign manufacturing companies’ exports are shrinking while substantial number of them are closing down and leaving the country.


Abiy’s administration has already encountered with acute shortage of hard currency.  The black market exchange rate skyrocketed from around 30 to 39 birr per a US dollar. Recently, the government has announced that no more hard currency is available on its treasury excepting for few which are allocated only for importing medicine and fuel. As a consequence, the private sector could not obtain the required hard currency for Import-Export investments. This indicates a great blow is hovering on the macro-economy.

In line with this, the prevalence of high urban unemployment, further weakening export, and worsening trade deficit are also stiff challenges where Dr. Abiy should devise remedies for. But, it seems beyond his range due to shortage of FDI on top of his poor aptitude to contrive alternative economic solutions. Henceforth, registering a double-digit economic growth looks like an unattainable and would only remain as a wishful thinking.

‘Hoping’ to minimize those macro-economy gaps, Abiy’s administration is currently taking impromptu austerity measures on some micro-economy sectors. For instance, the monthly fee charged for electricity power consumption (at household-level) has soared by an average price of more than 300%. This has created a great disgruntlement predominantly among the poor and middle-level urban dweller societies.

By the same token, the amounts of taxes imposed (mainly on the small and middle level private sector businesses) have also levied badly which further goaded the tax-payers and aggravated their frustrations on the newly crowned government.  Equally, inflation rate on basic food items is also expeditiously mounting higher and higher at a daunting rate.

Few days ago, FAO reported that Ethiopia is listed among the top 8 countries which are stricken with chronic food starvation in the world. More than 8 million people in Ethiopia are currently in need of urgent food aid.


Even though, about 85% of the country’s population is directly dependent on subsistence agricultural activities, however almost all the PM’s economy-related speeches are typically delimited to merely urban (largely Addis Ababa’s) issues. He almost, if not utterly, is not taking in to account cases related with the agricultural sector which is characterized as backbone economy of the country. Abiy is repeatedly seen to pay visits to abroad, but he is not doing the same to the rural farmers. It seems that he has abandoned this large category of the population. So, it wouldn’t be wrong to tag him as a ‘PM of the urban’ or a ‘PM of the 15%’.

All in all, the high deviation between Abiy’s ambitious promises made during his early months in office and his practical ineffectiveness (cumulatively) at present has infuriated most of his former supporters. Consequently, currently, the number of his adherents is dwindling from time to time in a free-fall manner.

If the PM could not solve the ongoing economic crises and take a workable measure on the unprecedentedly ailing economy, obviously the country’s economy will fall into recession very soon and may easily revolve into economic-depression. As a result, the once, more-democracy demanding mass-protest staged last year, which paved a way for Abiy in holding power, may compel him to resign before toppled by a new wave of mass-protest criticizing his incompetence at least in stabilizing the spiraling down economy.


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