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“You’re looking at a new Ethiopia”: A Briefing from the Minister of Finance

Ethiopia is one of the largest counties in Africa both in terms of size and population. It has also registered growth rates of over 8% for the last 15 years. This sustained growth has driven progress on many key social indicators. Between 2004 and 2018, per capita income increased sixfold, secondary school enrolment rates more than tripled and the mortality rate for the under-fives more than halved. As the country’s State Minister of Finance, Dr. Eyob Tolina, is keen to point out, Ethiopia is building on its past success not starting from scratch. The main task facing the government, he says, is making growth sustainable.

Despite its relatively impressive track record, however, the Ethiopian economy continues to suffer from macro-economic imbalances and barriers to entry. Financial services continue to be closed to foreigners, unemployment remains a major challenge for a country with 40 million people under the age of 15 and the private sector continues to be underexploited. Prime Minister Abiy Ahmed’s ambitious Homegrown Economic Reform Agenda promises an ambitious liberalisation and private-public partnerships across key sectors of the Ethiopian economy.

Chief amongst them is telecoms. The move to issue two new telecoms licenses in one of Africa’s largest, and previously closed, markets has attracted significant international attention for good reason. The announcement this summer that the members of the Ethiopian diaspora will be able to participate in financial markets is a sign of more change to come. Speaking to investors in London last week, Dr. Eyob Tolina pointed to the railway as a target for upcoming liberalisation programme and highlighted the efforts being made to address foreign exchange imbalances, cited as the top barrier to doing business in Ethiopia.

At the same time, new special economic zones have been created to drive the country’s manufacturing base. This approach has been bearing fruit as Calzedonia, the Italian clothing giant, has opened its first Ethiopian factory in the Tigray region. This in line with the government’s strategy of diversifying the economy by developing key strategic sectors including textiles, leather, manufacturing, tourism and pharmaceuticals. Amongst the global brands now with operations in Ethiopia are H&M, Unilever, Diageo, Huajian and Hyundai.

Politically, Abiy Ahmed continues to face significant challenges as he pushes his agenda through Ethiopia’s complex federal system. Managing regional tensions ahead of the promised 2020 election will be key. Though the government’s reform agenda may take longer to come to fruition than many hope, Ethiopia remains one of the most rewarding markets in Africa.

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