According to Ethiopia’s finance minister, post-conflict reconstruction will cost around $20 billion and will necessitate assistance from foreign organizations and investors.
“We need about $20 billion over five years,” Ahmed Shide said of the amount needed to help conflict-affected communities, primarily in northern Ethiopia, recover from hostilities that ended with a peace agreement announced in November.
Federal and regional budgets would be used to achieve this, but assistance from the World Bank — whose president, Ajay Banga, visited Ethiopia this month as part of his first trip to Africa — would also be required, Ahmed told the Financial Times at his office in Addis Abeba.
According to him, Ethiopia has suffered more than $28 billion in damages and “economic losses” as a result of the civil conflict. “Given the unprecedented levels of damage and destruction, recovery and reconstruction will come at a significant financial cost.”
In 2020, fighting erupted in Ethiopia’s northern Tigray province after Prime Minister Abiy Ahmed accused fighters of attacking the government troops. The battle expanded to the Amhara and Afar regions before the Ethiopian government and the Tigray People’s Liberation Front reached an agreement in South Africa two years later.
Hundreds of thousands of people are estimated to have died in a war known for the horrors committed by both sides.
The war also slowed the growth of one of Africa’s fastest expanding economies. According to World Bank figures, the economy of Ethiopia, Africa’s second-most populated country, increased at an annual rate of 10% for 15 years prior to the civil war.
Foreign donors withdrew billions of dollars in aid once the violence began, and the United States halted Ethiopia’s duty-free access to its markets. According to Ethiopia’s industry ministry, the latter cost over 12,000 jobs in the booming textile industry.
Analysts say that recent violence in the Oromia region, as well as fresh strife in Amhara, where the government imposed a state of emergency following fighting between the federal army and a local militia over attempts to disband it, offer additional hazards.
Despite the obstacles, the coffee exporter’s economy increased 6.4 percent in 2022-23, according to finance ministry figures, about double the Sub-Saharan Africa average.The government predicts 7.5% growth between 2023 and 2024.
Ethiopian officials believe that the African Union-backed agreement in Tigray will free up cash that had been frozen throughout the conflict and pave the way for “billions” of dollars in international assistance to help drive through changes in the $126 billion economy.
Ahmed described talks with the World Bank as “positive,” and said Ethiopia was in “advanced talks” with the IMF ahead of the fund’s members’ visit to Addis Abeba next month.
“As Ethiopia… continues to implement new economic reform measures,” he continued, “we’re very optimistic about this renewed relationship with our development partners.”
According to IMF spokesperson Julie Kozack, the US-based lender might “potentially” back some Ethiopian “economic policies and reforms.” “The conflict has abated, and they’ve done seminal work,” a senior official from another international organization remarked, “but they still have much work to do.”
After taking office in 2018, Abiy began a series of pro-market reforms as part of a plan to open up the Ethiopian economy, which had been state-controlled for decades, a process that was hampered by the Tigray war.
His administration is now planning to sell a 45 percent share in Ethio Telecom, as well as portions of Ethiopian Shipping Lines and a state-owned but Hilton-managed hotel opened by Emperor Haile Selassie in 1969. It will also be the first open stock exchange in Ethiopia’s 3,000-year history.
Ethiopia’s central bank governor, Mamo Mihretu, stated that the government is “committed to not only implementing, but also deepening economic reforms,” including opening the banking sector to international corporations as soon as this year.
“The market potential is high, and interest is there,” said Mehrteab Leul, managing partner of MLA, an Ethiopian law company that advises international investors. “One challenge after a conflict is that the government must work proactively to gain the trust and confidence of foreign investors.”