A year of war in Ethiopia batters investors and citizens

Record ID: 1651763

  • Title: A year of war in Ethiopia batters investors and citizens
  • Date: 16th December 2021
  • Summary: ADDIS ABABA, ETHIOPIA (FILE - NOVEMBER 30, 2011) (REUTERS) VARIOUS OF LEGESE YADATTA AND HIS WIFE, DEMITU EBISA, CHECKING QUALITY OF TEFF (TYPE OF GRAIN) AT MARKET YADATTA HOLDING GRAIN IN HANDS MARKET SELLER POURING GRAINS INTO SACK YADATTA 'S WIFE, DEMITU EBISA, PAYING FOR TEFF VENDOR COUNTING MONEY (SOUNDBITE) (AFAAN OROMOO) LABOURER, LEGESSE YADATTA, SAYING; "I get thr
  • Embargoed: 30th December 2021 10:20
  • Keywords: Ethiopia conflict India economy finance
  • Location: ADDIS ABABA, ETHIOPIA / UNKNOWN LOCATION, INDIA
  • City: ADDIS ABABA, ETHIOPIA / UNKNOWN LOCATION, INDIA
  • Country: Various
  • Topics: Conflicts/War/Peace
  • Reuters ID: LVA001F8ADG07
  • Aspect Ratio: 16:9
  • Story Text: When Prime Minister Abiy Ahmed took office in 2018, Ethiopia was one of the world's fastest growing economies.
    His pledges to open up one of Africa's last untapped markets thrilled investors.
    But a year of war between the government and rebellious forces from the northern Tigray region has damaged government plans to modernise the economy and deterred foreign investors.
    Far from the fighting, inflation is hitting the urban poor in the capital Addis Ababa.
    At an open-air market, Legesse Yadataa and his wife despaired at the price of teff, a staple grain.
    A kilogram (2.2 lb) cost nearly 50 Ethiopian birr ($1.04), 25% higher than a year ago.
    That's a third of his daily earnings on intermittent construction jobs.
    Parts of Tigray are in famine, the currency's value has plummeted and annual inflation has topped 35%.
    The economy was on track to grow just 2% this year after consistently topping 10% before the pandemic, the International Monetary Fund (IMF) said in its world economic outlook published in October.
    It did not include growth projections for 2022 to 2026, citing an "unusually high degree of uncertainty".
    Officials in Ethiopia's finance ministry and the prime minister's office did not respond to requests for comment.
    However, State Finance Minister Eyob Tekalign Tolina has accused Western media of exaggerating the war's impact.
    The government projects growth of 8.7% for the fiscal year ending in June 2022.
    "Ethiopia is a very strong country, and we are talking about a conflict in one part of the country, but the rest of the country is thriving," Eyob told India's DD TV channel last month.
    Not everyone agrees.
    Fighting ruined harvests in rich agricultural regions, including a swathe of disputed territory claimed by Tigray and neighbouring Amhara, while drought and locust invasions also hit crops.
    Around 9.4 million people need food aid in three regions affected by the war, according to the United Nations, compared with 4 million before the war.
    The fighting has shuttered many firms operating in Tigray.
    Authorities have also targeted Ethiopian companies suspected of working with the Tigray People's Liberation Front, the party that controls most of the region.
    The Ethiopian Investment Commission did not respond to requests for comment.
    Ethiopia is one of three African nations that applied for debt restructuring under the G20 Common Framework, designed to provide permanent relief to poorer countries.
    But progress reworking the external debt has been slow.
    The government has not disclosed the total amount of debt, which the World Bank last year put at $28.4 billion.
    Foreign investors had hoped that Abiy's economic reforms would ease foreign exchange shortages. Instead, they have worsened since war erupted. Ethiopia has reserves of $2.4 billion, government data shows, enough to cover two months of imports - below the three months usually considered adequate.
    The war has also hurt Ethiopia's ability to raise additional funds from the market or other creditors, analysts at JP Morgan said.
    Despite the risks, some investors still cultivate Ethiopia's large and growing market. Spanish-listed wind turbine maker Siemens Gamesa, which in January agreed to build its first power project with state-run Ethiopian Electric Power, said it was business as usual.
    The awarding of an operating licence to a consortium led by Kenya's Safaricom boosted foreign direct investment(FDI) in the second quarter of 2021 to $1.9 billion, from less than $750 million in the first quarter.
    ($1 = 48.2143 birr)
    (Production: Nazanine Moshiri, Kumerra Gemechu)
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