By Fayessa A
Ethiopia’s economic reform, without complementary and serious political reform, is not going to remedy the country’s significant challenges, in fact it’s likely to make things worse. The need for economic reform is not in question, given the stubbornly high inflation, soaring cost of living, dearth of foreign currency, crushing debt, high unemployment, and myriad other economic woes that the country is facing. A genuine attempt at reform must first address the underlining causes of these woes, which disproportionately emanate from the political realm.
Prosperity Party’s undemocratic, unaccountable, repressive, chaotic, and incompetent governance has been the source of lawlessness, insecurity, conflict, instability, corruption, and abuse of power. Bad governance has stifled the emergency of a rule-based and market-driven democratic system, dragging the economy down and aggravating the country’s problems. A big chunk of the country is in a devastating, destructive, and costly civil war without any end in sight. Add to this the impacts of periodic drought and natural disasters, and a picture of a country sick to the bone emerges. The country is politically fraught, its economy in shambles, and people are either in a rebellious mood or in the doldrums. Given this dire state of the nation, an isolated approach to “fix” the economy with painful prescriptive measures stands minuscule chance of success.
Under Abiy, the country is devolving further into dark ethnic politics, which has empowered ethnonationalists in national, regional, and local politics and relegated moderates to the periphery at best and to prison, death or exile at worst. Ethnic politics is in fact on steroids in the country, sending asunder vestiges of national cohesion essential for building a modern and functional political economy. Abiy and his top lieutenants make no sincere effort to confront the structural political problems that are insistently pitting ethnic communities against each other. The leaders are uninterested in bringing the country together through real political dialogue aimed at finding negotiated solutions. To the contrary, they openly pit ethnic groups against one another and bask at revenge politics, purposely exploiting and exaggerating historic grievances.
Abiy’s initial overtures to bring the country together and reorient it in a new direction came out to be a cheap stratagem to consolidate power, institute an even more virulent form of ethnic politics, and achieve state capture. Abiy and his lieutenants are actively working to change the ethnic profile of the civil service, the military, and even the business community in favor of their purported supporters. They use urban rehabilitation/revival projects as a convenient vehicle to illegally uproot thousands from their neighborhoods, with the aim of changing the inter-ethnic profile of suspected restive areas and dispersing potential opposition.
Soon after Abiy assumed power, ethnic radicalization went into higher gear and conflicts and lawlessness mushroomed in many parts of the country, claiming the lives of many and displacing millions of others. The disfranchised millions that happen to live in the “wrong killil” are finding their lives unbearable. Even in the capital city and its environs, many became victims of this poisonous scheme. Freedom of movement within the country and sometimes within the same city is seriously curtailed for fear of unprovoked ethnic attacks and violent crime, including abduction and extortion. The virulent extremism that has grown under Abiy’s watch has seriously hampered inter-regional trade and commerce, investment, productivity, free movement of goods, capital, and talent across the country. Higher education, agriculture, manufacturing, tourism, and religious pilgrimages have been negatively affected nationwide. Rather than creating jobs, government action is destroying jobs. The only jobs the government is creating is in the military and security space. The fact is many are forced to join the unemployment line. Certainly, Abiy and his cohorts have not learned from the failures of the TPLF. They seem determined to outperform their nefarious predecessor.
Prosperity Party’s refusal to resolve political grievances peacefully is fueling conflicts in Oromia, Amhara and other parts of the country, claiming the lives of many, displacing millions, and destroying property/infrastructure, further straining ethnic relations and draining the country’s meager resources. Mind you, this is without counting the compounding effect of the devastating war with the TPLF two years ago. Rather than zeroing in on addressing the underlying causes of the country’s increasingly omnipresent conflicts, Abiy is obsessed with glossy, unproductive beautification projects, taking efforts and precious resources away from addressing the serious woes the country is facing. This misalignment of priorities and mismanagement of resources has a lot to do with the growth of urban poverty in the country. With persistence conflicts and drought affecting wide swaths of the rural countryside, the socioeconomic devastation in those places is undoubtedly worse. Millions are starving in the rural areas and many urbanites are finding it impossible to put food on the table. Despite the worsening political turmoil, crumbling economy, and growing destitution, the government is forcefully uprooting thousands from their established neighborhoods and engaged in a mindboggling city beatification and decoration campaign — widening sidewalks, beautifying streetlights, planting expensive decorative trees, and building fountains and bicycle lanes.
Although billed as home-grown, Abiy’s economic reform is far from it. It is likely driven by both domestic and external factors as well as actors. Negotiations with the IMF and World Bank (WB) have been ongoing for the past few years. While the government is desperate to tap into the IMF/World Bank financial facilities, the institutions are interested in liberalizing the country’s economy and integrating it into the Western-led global economic system. Out of self-interest and nudged by these institutions, the government has taken several liberalization steps in the recent past: opening the telecom sector (Safaricom), capital market development (ongoing), and most recently floating its currency (the birr). Tellingly, exactly a day after Ethiopia made public its decision to float the birr, the WB/IMF announced a $1.5 billion and a $3.4 billion loan/grant/debt relief package, respectively. Financial sector reform is likely next, with an eye to encouraging, among other efficiencies, banking sector consolidation and entry by foreign banks.
The PM himself unwittingly admitted that the reform is not home-grown when he was lecturing his obedient lieutenants on the subject. He said that the Commercial Bank of Ethiopia, the biggest bank, is teetering under the weight of an unrecoverable large loan portfolio (i.e, liquidity crunch) – most of it likely accumulated under the nearly defunct TPLF oligarchy rule. He stated that a significant part of the IMF/WB funding (about $800 million) will be injected to give the bank a lifeline (liquidity) at least for now. The oligarchs of today are themselves engaged in accelerated corruption and embezzlement of public funds and resources, further aggravating the problem. This is the state of Ethiopia’s severely sick economy, which needs desperate resuscitation. However, the IMF/WB supported, and “home-grown” economic reform, is unlikely to revive the economy — because the economy is operating within an acute political environment. The reform might provide measured and temporary relief of symptoms but is unlikely to send the acute patient out of the intensive care unit. Again, economic reform is desperately needed — no qualms about that. The issue is it is unlikely to succeed without instituting more pressing and existential reforms needed in the political sphere.
The disconnect between the country’s immediate needs and the government’s priorities is astounding and a perfect example of failure of leadership. Take the palace and other structures Abiy is building in a cordoned area of Addis (Chaka Project), estimated to cost over $10 billion. When questioned by Parliament about this project and the source of its funding, he famously retorted that no one should question him on a pet project he is building using almes collected from undeclared foreign sources. The sheepish Parliament, including its token opposition members, didn’t push back on this dismissive hubris. Despite Abiy’s disrespectful, shameful, and obnoxious nature of response, civil society organizations and the opposition should work to unearth what Abiy gave the UAE (the putative doner) in exchange for the $10 billion handout. We all know there is no free lunch. What remains critically unanswered is how does this shoddy/secretive transaction impact the country’s national security interests? Efforts should be made to establish the facts and identify any deleterious impact on national security. At minimum, this should be documented for future investigation and possible legal action.
The country’s economic and political maladies are intertwined, hence the need for a comprehensive and genuine reform. Such reform can only be successful if it’s people-centered, inclusive/consultative, comprehensive, and genuine. The biggest shareholders of the IMF and the World Bank (US, Germany, Japan, etc) should use their significant leverage (votes in the institutions) to encourage comprehensive structural political reform that incentives accountable and democratic governance and creates the enabling environment for the country and its economy to come back to life. Otherwise, they should know they are throwing good money after bad. Ethiopia’s opposition and civil society leaders should also mobilize and put pressure on the government to implement genuine and comprehensive reform. Political leaders and elites should put aside their parochial interests of today and agree on a sustainable, board based, and win-win home-grown reform. They should do this if not for the country out of long-term self-interest!
