By Yafet Girma
Ethiopia stands at an economic crossroads. The past two decades have been characterised by ambitious development plans, heavy public investment in infrastructure, and an unrelenting optimism about the country’s potential to leapfrog into middle-income status. But as the dust settles on another tumultuous fiscal year, signs of strain are surfacing beneath the rhetoric of resilience.
The ambition remains palpable. Government planners tout the second phase of the Homegrown Economic Reform Agenda, a programme framed around macroeconomic stability, export diversification, and increased private sector participation.
It is, at least on paper, a laudable roadmap. Yet the country’s economic challenges are no longer technical, they are structural and deeply political.
Inflation, particularly food inflation, continues to erode purchasing power in both urban and rural areas. The Central Statistics Service’s latest figures paint a grim picture for consumers. A country where nearly 40pc of the population lives below the national poverty line cannot afford double-digit inflation year after year.
Meanwhile, foreign exchange shortages persist, stifling import-dependent industries and complicating even the most basic of business transactions. The Birr’s depreciation, while expected under a managed float regime, has not been accompanied by sufficient export growth to balance the scales. Remittances and humanitarian inflows now fill the gap where manufacturing and service exports have yet to deliver.
Investment is shifting, but not fast enough. The state-dominated model that once drove Ethiopia’s growth is being cautiously dismantled. The partial liberalisation of telecoms, finance, and logistics signals progress. However, bureaucratic inertia, policy inconsistencies, and political instability continue to undermine investor confidence.
In a country with one of Africa’s fastest-growing urban populations, the housing shortage, both in supply and affordability, reveals the stark mismatch between demographic realities and economic planning. It is telling that while Addis Ababa’s skyline has transformed with private and public high-rises, millions remain trapped in dilapidated rental homes or informal settlements.
The solution lies not in retreat but in recalibration. Policymakers must prioritise productivity, particularly in agriculture, to anchor food security and generate meaningful rural employment. The private sector must be empowered not just through policy, but through practical reforms: reliable power supply, access to credit, enforceable contracts, and reduced regulatory friction.
Fiscal discipline must be matched with social investment. Ethiopia cannot afford to underinvest in education and health at a time when its youthful population is both its greatest opportunity and its greatest vulnerability.
Above all, political stability remains the foundation upon which any economic future must be built. Growth without peace is a mirage; development without accountability is a gamble.
The path forward is not easy, but it is navigable. Ethiopia’s future will not be determined by declarations or reform agendas alone, but by the ability to translate vision into action, equitably, consistently, and transparently.
Editor’s Note: The views expressed in this article are those of the author and do not necessarily reflect the editorial stance of KVA