Nonetheless, what we have witnessed over the past five years is a sequence of political episodes that derailed Ethiopia’s transformative ambition and regional tensions. Yet addressing the following five interlocking critical challenges, spanning domestic and regional geopolitics, could reverse the polycrisis affecting Africa’s second-most populous country with 120 million people.
Reforming the peace and security apparatus: A fragile and fragmented security architecture, along with democratic deficits, as well as parallel federal and regional armies, caused small and large-scale conflicts in Somali, Amhara, Tigray and other regional states. With the recent northern conflict, Ethiopia suffered the world’s deadliest war in 2020/22.
Left to fill in the security vacuum, regional special forces created their spheres of influence in their respective regions. In response, reflecting many experts’ calls for a sole national army with a clear chain of command, the government took the decision, a constitutional one, to restructure the regional armies. But, the step of integrating regional special forces, which are paramilitary, and informal armed groups like Fano in the Amhara region into the national army, while taking steps to restore security, can only be undertaken after a very cautious and lengthy process of persuasion and consensus building. Failing to pursue a peaceful path, the government’s attempt to disarm the Fano militiamen, who refused to surrender, has resulted in further conflict in the Amhara region, with repercussions for socio-economic progress. Ethiopia has been locked into repeating patterns of violence and prolonged uncertainty. The fragility of the peace and security regime has been more prominent than ever.
Allied with the federal army in the war against the TPLF but with a betrayed sentiment, the regional militia Fano has turned against Abiy, and the Amhara region has been engulfed in heavy fighting since last August. As the fighting surged, the government formed a command post, and a state of emergency in the country’s second-largest region and beyond was declared. Immediately, an airstrike on an overcrowded town square in Finote Selam killed at least 26 and wounded 55 people on Sunday, August 13. In September, Ethiopian soldiers killed more than 70 civilians in Majete, a rural town in north-eastern Ethiopia and Gondar, an important tourist and commercial hub, was gripped by clashes. So far hundreds of civilians are killed. The Ethiopian Human Rights Commission (EHRC) expressed concerns about widespread and arbitrary arrests and killings, calling on the conflicting parties to immediately end hostilities. However, without a bold measure for a political settlement, the conflict’s outcome seems unpredictable. Though clashes with regional forces repeatedly occur, it is heart-breaking to see the Ahmed government’s debacle effectively learn from its failures and transform them into valuable political assets. While it might not be considered a panacea, embracing preventive security still presents an opportunity for robust state security policy.
Ending the endemic violence and conflict: Ethiopia has suffered from sporadic and widespread ethnic-based violence, multi-faceted conflict and human rights abuses that have resulted in inter-communal mistrust, the dispossession of civilians, and extrajudicial and mass killings. All this compounded by a recurrent drought, 4.5 million people were forcibly displaced from their homes in mid-2023 – one of the highest numbers of internally displaced people in Africa – intensifying the world’s most serious humanitarian crises.
But there are some positive developments, notably the Pretoria peace agreement signed between the federal government and the Tigray People’s Liberation Front (TPLF) in November 2022. Despite its success, it looks stalled, and many fear it will be a short-lived agreement. However, with the eruption of the conflict in the Amhara region, will the TPLF, which looks like an isolated actor, remain a neutral actor or be Abiy’s ally and engage in revenge politics? This can determine the nature of the war and future inter-ethnic relations among citizens. Additionally, the peace talks initiative with the Oromo Liberation Army (OLA), designated a terrorist by the federal government since 2021, in Zanzibar, Tanzania, was expected to end half a century of violence, but the two rounds were ended without a deal. The government blames OLA for the failure, as Redwan Hussien, Abiy’s national security adviser, posted on X, due to OLA’s obstructive approach and unrealistic demands. Leading Ethiopian opposition figure Jawar Mohammed and his Qeerroo followers are still key political actors, and in his recent interview, he criticised Abiy’s government for seeking military and security solutions for political problems.
Ethiopia is a conflict-prone country, and in breaking the conflict trap, a political settlement is acutely needed to silence the guns and mitigate peace deficits caused by unpredictable clashes, including those involving rebels in the Gambella and Benishangul-Gumuz states. The initiative for transitional justice and reconciliation must be commended for showing signs of building trust and consensus among political actors. To this end, the recently established National Dialogue Commission should be empowered to be more inclusive, heal fractured intercommunal relationships, and bring about political settlements in Ethiopia, moving on from the failure of the dissolved Ethiopian Reconciliation Commission.
Mitigating the dysfunctionality of the ethno-federal system: While partly empowering ethnic minorities, the ethnic-based federal system, undermined by a clash of cultural identities, history, psychological make-ups and power-sharing struggles, caused inter-ethnic tension, resource-based conflicts and political instability. Irrespective of ongoing centralist and federalist debates, the government should strive to fix the undesirable outcomes of the ethno-federal system.
Though overdue, Ahmed’s government deserves credit for allowing referendums on regional autonomy for Sidama; the South West and the Southern Ethiopia Regions. However, the configuration of federal-regional government power and resource sharing needs reviewing, while the quest for autonomous regional status in zones like Gurage needs a prompt response, with careful efforts to avoid further human losses. Territorial disputes between regional states are common. The Amhara-Tigray; Somali-Oromia; and Somali-Afar contested areas are notable cases that could draw the country back into sustained and vicious cycles of conflict. Within constitutional and legal frameworks, such disputes may require going beyond a generic approach and intervening with context-based, tailored conflict resolution efforts in Ethiopia.
Fiscal discipline, economic development and employment opportunities: Once Africa’s fastest-growing economy, Ethiopia has been struggling due to the macroeconomic structural configuration, especially related to its scarce foreign-exchange reserves and price stability, even before the eruption of the northern war in November 2020; its delisting from the African Growth and Opportunity Act (AGOA) which may have affected 200,000 jobs, the COVID-19 pandemic, drought and climate change-related vulnerabilities, and global food price crises. All this has made the economic situation difficult, which has revealed the susceptibility of its developmental state economic policy to national and global economic shocks. At least 20 million people need humanitarian assistance due to the recurrent drought. Inflation was at 33.7% last year, while foreign-exchange reserves dropped to USD1.5 billion, which can only sustain the country for a month. At the end of 2023, Fitch downgraded its Long-Term Foreign-Currency Issuer Default Rating (IDR) from C to RD, which stands for Restricted Default. Failing to settle its $33 million ‘coupon’ or interest payment, Ethiopia becomes Africa’s latest sovereign default. Credit ratings agency S&P Global then downgraded the bond to ‘Default,’ facing default on a $1 bln international bond, maturing in December 2024. Unfortunately, its total estimated external debt is expected to increase by 1.8 billion in 2024-25, while the GDP growth rate is expected to remain at about 6.1% per annum until 2028. Between 2018 and 2023, Birr devalued almost 100% against the dollar in the official market (from $1 = Birr 27.530 to Birr 56.11), while being exchanged for Birr 110 in the black market. Therefore, monetary policy is under pressure to deal with the declining purchasing power of Birr, the rising global interest rates and debt servicing.
As Ethiopia’s Minister of Finance, Ahmed Shide, noted, post-conflict rehabilitation needs at least USD20 billion over the next five years – an increase of 26.49% of the federal budget, which is USD15.1 billion for 2022/23. The question is: what can be done to produce a rapid economic recovery that supports a smooth political transition in Ethiopia?
An increase in foreign direct investment (FDI), debt relief from lending institutions and bilateral agreements, particularly with China (to whom Ethiopia owes an estimated USD13.7 billion and further to the recent debt service suspension), relisting Ethiopia in AGOA while diversifying export markets, strengthening social investments to reduce inequalities, reducing overreliance on foreign-aid in the long-term, and restoring fiscal discipline can stimulate employment and accelerate economic growth. The reopening of negotiations with the IMF last March is expected to address the delayed USD26 billion debt restructuring request under the G20 Common Framework for Debt Treatments, ‘the only multilateral mechanism for forgiving and restructuring sovereign debt’. When Abiy came to power, Ethiopia benefited from the $3 billion in aid and investment support from the UAE, but though President Sheikh Mohamed bin Zayed Al Nahyan visited Ethiopia last August and a cooperation agreement was signed, no such lifeline rescue package was officially declared. Abiy’s economic options seem limited to support his Home-grown Economic Reform Agenda (HGER II) and he aims to rely on a new rescue package from the IMF and other lending institutions.
Ethiopia, along with Egypt, Argentina, Iran, Saudi Arabia and UAE, joined the emerging economies bloc BRICS in the new year. As the bloc expands its influence in the global political order, Ethiopia considers this a geoeconomics and geopolitical win. However, whether the IMF package or its admission to the BRICS and through its New Development Bank (NDB) will contribute to ending economic woes and rescuing the economy remains to be seen. Despite its vast economic potential, Ethiopia remains far from reaching its goal of attaining lower-middle-income status by 2025.
Regional diplomacy and cross-border dynamics: Ethiopia faces critical cross-border and regional diplomatic challenges. However, Ethiopia, geopolitically, can position itself at the forefront of regional peacebuilding and economic integration by addressing its cross-border concerns. Yet, this is bound up with its domestic politics.
In an effort to gain access to the sea, Abiy signed a controversial deal with the self-declared breakaway Somaliland this month, in which Ethiopia to recognise Somaliland’s independence (to be the first country to do this) and offered a share with Ethiopian Airlines in exchange for a 50-year lease on a 20km access to the Red Sea for its naval and commercial activities. However, this unfolding crisis brought diplomatic tension and a rush to form alliances. Considering this as a threat to its sovereignty, Somalia rejected the deal outrightly as ‘null and void’ and rallied against it. Both countries fought a war in 1977, and Ethiopia invaded Somalia in the War on Terror in 2006, claiming al-Shabaab’s anticipatory attacks. Somalia’s President Hassan Sheikh Mohamud said, ‘We will protect every inch of our sacred land and not tolerate attempts to relinquish any part of it.’ It is feared that the sea deal can revive al-Shabaab, the militant insurgent group, by mobilising the young Somalis. At a regional level, this has led to the formation of new alliances and extensive diplomatic efforts. Somalia’s president visited Eritrea and then travelled to see el-Sisi of Egypt, while the Egyptian foreign minister visited Eritrea – all to consult and exchange views on the unfolding political development. IGAD and the Arab League called extraordinary meetings. There is feared a fresh conflict.
Meanwhile, forcing Israel to end the Gaza invasion, the Iranian-backed Houthis’ attack on the Gulf of Aden, one of the world’s most important shipping routes, led to US and UK counterattacks. The Red Sea security regime is volatile and there is an urgent need for conflict prevention and negotiating peace.
Ethiopia’s neighbour, Sudan is in turmoil. Despite the Ethio-Sudan Al-Fashaga land dispute, Ethiopia should strive for de-escalation and a peaceful solution, and prioritise bringing the two warring generals to the table. Eritrea backed the federal army during the Tigray War, altering the balance of power. However, it is unclear how it will react to the ongoing conflict in the Amhara region. Furthermore, the recent move of Abiy Ahmed’s public claim to own a port in the Red Sea has negatively affected their diplomatic relationships. Looking beyond the initial rapprochement with Eritrea and the Tigray War, advancing post-conflict and inter-communal healing interventions, and cross-border economic integration would mutually benefit the two countries’ struggling economies and create a basis for long-term cooperation.
The Grand Ethiopian Renaissance Dam (GERD), which cost $4 billion, has continued to be a source of hydro-political tension with Sudan and Egypt, where Ethiopia reported that it completed the fourth filling of the GERD during the summer. Resuming the disrupted talks, Egyptian President Abdel Fattah el-Sisi and Abiy Ahmed discussed the Sudanese crisis and GERD during the Sudan’s Neighbouring States Summit on July 12 in Cairo. Both leaders committed to finalising an agreement on the dam before the end of 2023. Despite resuming the tripartite talks four times last year, the negotiators have failed to reach a deal. This long-standing dispute requires Ethiopia’s leaders to make considered diplomatic moves.
To conclude, Ethiopia’s path to prosperity has been derailed; nonetheless, development partners’ reinvigorated role in financial stabilisation, with support for local and regional peace initiatives and economic development, is critical to altering its precarious path. Focusing on restructuring the security apparatus and federal system, and advancing transitional justice for inclusive and wider political participation are absolutely necessary in taking positive steps towards putting the country back on track. Interlocking domestic and regional crises mean Ethiopia must embrace a robust and holistic approach, with greater political will than ever in its quest for peace, stabilisation and a successful political transition.