As the African proverbs for tales, “when a household fights, the house burns”. Conflict and instability in the household will lead to the disruption and final demise of a household. In the same token, when conflict and instability rage a country, development will be a distant dream and underdevelopment and poverty divulges the country. The prospect of sustainable development becomes disconsolate. This paper aims to show the role of conflict, particularly political instability, and its impact on sustainable economic development in Ethiopia.
Ethiopia has been in constant political instability due to endless wars with itself and neighboring countries in the last fifty years. It is the only African country that has been so busy with war for many years. The war in Eritrea lasted for 30 years, and the Tigray region raged for seventeen years. Instability in Oromiya, Ethiopia’s biggest region, has been there for the last fifty years. It is among a few African countries that waged three major wars with its neighbor (including the involvement of Eritreans in the Tigray war). Ethiopian history has also registered protests and uprisings. Ethiopia had never registered sustainable economic development in those years except the one decade between (2006-2014) when there was no major recorded war. Ethiopia is, in fact, one of the top poorest countries in the World. Niger was a country that registered 0% development in the year 2006-2012. Botswana was the country that registered 1000% growth from 1960-2010. The former is imbued with instability, while the latter is blessed with stability. The article tries to show that saving other factors constant, political instability is one of the major causes of Ethiopia’s lack of sustainable development.
The root causes of political instability and conflict began in the late 19th century when other independent regional forces were brought under the northern kings, notably Menelik II. The asymmetric relationship between those at the center of power and hitherto independent regional parties led to constant friction. The former wanted to maintain control, and the latter fought for autonomy/ independence. Failure to resolve this conflict by the centralizing agency has made instability reign till today.
Political instability invariably contributed to the low level of economic development. Instability expressed the forms of war/conflict and riots/protests caused damages to economic infrastructures, reduction in agricultural production, inflation, unfavorable exchange rate, suspension of foreign aid, the skewed balance of trade, rising military expenditure, human capital crisis (death of the young and active labor and brain drain), humanitarian disaster and damage to the social fabrics. As such, Ethiopia seems to be far away from attaining lower-middle income by the year 2025. Unless the political issue is resolved and stability ensured, economic growth and sustainable development seem to be distant dreams in Ethiopia.
Conceptualizing Political instability and conflict
Researchers have tried to define political instability in many ways. Some have been referred to as ‘cabinet changes’, i.e., the ‘number of times in a year in which a new premier named/or 50 per cent or more of the cabinet posts are occupied by new ministers’. Some define political stability as a condition of the non-existence of internal conflict and violent events. Others define Political stability as ‘the measure of the perceptions regarding the probability that the government will be destabilized or overthrown by unconstitutional or violent means, including domestic violence and terrorism’. Pehlivan categorizes political instability into three broad concepts: social irregularities, myopia polarization, and weak government approaches. The former, namely, social irregularities, according to Ahmet Diken et al., refers to the absence of a social order in which the connection between the parts of society and the social system is in disharmony. Myopia and polarization, on the other hand, refer to the instances of changes in the government. Weak government approaches manifest in the form of critical political problems that ‘threaten the existence of power and life’. Asteriou and Price have the opinion that political instability includes: strikes, elections, regime change, and terror. Polacheck and Sevastianova (2011) categorize war as another political instability indicator.
Ethiopian political history harbours all the elements of political instability mentioned by different writers above. However, due to unavailable data, space, and time limitations, we will confine our analysis to violence/war, change of government, and riots/protests.
Political Instability and Economic Channels
Different economic channels through which political instability plays its way in affecting economic growth have been studied by various researchers. Some studied physical and human capital accumulation. Roe & Siegel observed the financial sector. Aisen and Veiga studied the impact of political instability on GDP growth, inflation, and productivity. Landa and Kapstein observed the interaction between labour and the market on the one hand and political stability on the other. Others investigated investment and political instability. Alesina and Perotti have seen into property rights and political instability. Some researchers also studied the relationship between political stability and the monitory process.
Theoretical Framework
Sustainable development has been defined and conceptualized by researchers in many ways. Yet the reference to its three key dimensions, namely, economic, environmental, and social, seems indisputable. An economically sustainable system must produce goods and services on a continuing basis, maintain manageable levels of government and external debt, and avoid extreme sectoral imbalances that damage agricultural or industrial production. Yet research on determinants of sustainability has primarily been biased towards the quantitative measurable environmental and economic aspects than the less quantifiable social aspects such as political instability. This paper will see sustainable economic growth as it is impacted by political unrest.
Neoclassical economic thinking has long tried to identify why some countries managed to grow while others did not. Fernando Tohme noted that, in 2010, about five countries had an income per capita of fewer than 200 USD and eight counties with over 30,000 USD. Regarding growth rate, for 1960-2010, eight countries registered a negative growth rate, but four countries reported well over 1000%. Can the issue fully be explained in terms of the lack of the accumulation of physical, human capital and technological advancement? Some further critical thinking entices you to ask again what Acemoglu (2009) first raised, and Tohme (2021) pondered again: ‘why is that some societies do not improve their technologies, invest in physical capital, and accumulate human capital as much as others?’ According to Tohome, it was Niger that registered a negative rate of development in the years 2006-2012, while Botswana scored a 1000% growth rate between 1960 and 2010. The former was imbued with repetitive coups, social unrest, and war, in other words, political instability and conflict, while the latter enjoyed a democratic establishment and a stable government since independence. Is that a coincidence or indicative of some relationship between political stability and economic growth? Is there any case in the Horn of Africa?
Research on the interaction between political stability and economic growth has identified the following primary directions in which political instability negatively impacts economic growth. First, it intrudes into the healthy relationship between market activities and labour relations, which has an undesirable effect on productivity. Secondly, the amount and rate of investment remarkably diminish during political turmoil and violence. Third, in a country where political instability and violence reign or attempted or successful revolutions, strikes, and civil disobedience are observed, established property rights will be severed, affecting economic development’s general performance. Fourth, wars, strikes, assassinations, and guerilla warfare affect the economy since they consume resources and decrease predictability in economic performance. Fifth, violence diverts investors from a country where the violence is underway or is feared to happen to another more stable country such that it affects GDP growth. Sixth coups d’états are also another form of political instability that impacts GDP growth, affecting the rate of employment, which again impinges on the quality of human capital. Polacheck and Sevastianova argued that war affects economic growth, and the higher the intensity, the higher its impact on economic growth. Seventh, an unstable political system or executive turnover damages long-term economic growth since there is a great chance to be corrupt and also face myopia in fiscal policy decisions, leading governments to heavier borrowing.
Alesina and Perotti (1996) showed that socio-political instability produces an unpredictable politico-economic environment, raises risks, and diminishes investment confidence. In a similar vein, Jong-A-Pin (2009) also argues that political instability increases conditions of uncertainty, hurting investors’ confidence. Aisen and Veiga have also shown that political instability causes inflation, which affects the well-being of people. Changes in governments (or cabinets) cause inflation and interference in the employment policy, which might be unfavourable for economic performance. Instability also limits the option of governments to produce effective long-term monetary policy as governments are forced to deal with short-term political instability. By the same token political instability impinges on the GDP by diminishing physical and human capital accumulation. One can then argue that stability predicates a predictable socio-political environment which creates suitable conditions for healthy economic growth. The question here is – how does this manifest in Ethiopia?
The political instability arguments and their relation to the economy and sustainable development alone, however, do not explain the root causes, dynamics, and needs that drive conflict or political instability. The theory of conflict analysis developed by different researchers, however, fills this gap. According to Wallenstein, the dynamic approach to conflict analysis provides the process that unfolds during conflict and instability (Wallenstein 2019). Thus in the following parts of the paper, I use these approaches in dealing with conflict and instability and its impact on sustainable development.
Empirical Studies
Looking at the relationship between political stability and economic growth in Turkey, Diken et al. stated that political stability, which results from solid institutions and democracy, is directly linked to economic growth. This research showed that political instability negatively affects investment which is the main engine of development. Another macroeconomic variable that is directly affected by the political instability in Turkey, according to these researchers, is inflation. The Turkish economy has exhibited a shrink during inflation since the value of the Turkish lira put downward pressure on the economy. Tang and Absedera (2014)- in their panel data analysis of 24 countries in Africa and the Middle East, analyzed sectors such as energy consumption, tourism, and their relationship with political instability and found similar trends. In his 19-country analysis covering the period of 18 years, Pehlivan also found a positive relationship between economic growth and political stability. A single-country case study on Pakistan on the relationship between political instability and economic growth using the GARCH model has revealed the existence of a negative impact leading to fluctuation and damage to the GDP.
A look at the impacts of political instability caused by the Arab Spring in five Arab countries showed the pervasiveness of a negative relationship between exchange rate and political instability. In their cross-country study, Levine and Renelt (1992) demonstrated the impacts of political instability on international trade and investment, which significantly influence long-term economic growth. Among the very few such studies on Africa and Sub-Saharan Africa is the study by Godwin Okafor on ECOWA member states, which looked at the relationship between terrorism, poor governance, social unrest, youth unemployment, death rate, and natural resource rent as having a negative association with economic growth. In Romania, researchers found that political instability affects the level of economic growth by lowering the value of real GDP per capita.
Yet it must be stated that the large sum of case studies so far conducted on the interaction between political instability and economic growth is concentrated on non-African, notably non-sub-Saharan African countries, and none is done on Ethiopia- a country which is inherently troubled by instability and conflict and whose economy has exhibited turbulence and unsustainability through ages.
Political Instability and Conflict in Ethiopia
In this section, I will outline the significant instances of political instability in Ethiopia. Political instability in Ethiopia ranges from civil strife/ protest, civil war, demonstrations, change of governments, terror attacks, attempted coups, and ethnic and religious conflicts. However, as stated above, due to the unavailability of corresponding economic data and time and space limitations, we will see violence/war, change of government, riots/protests, and their impact on the economy and sustainability.
The Civil War & Change of Government, 1974 and 1991
There was a long history of conflict and instability in Ethiopia. Ethiopia came into its current shape in the later part of the 19th century through the conquest of independent regional states by the then-powerful king Menelik II, supported by European Imperial power who vie over the sphere of influence in the Horn of Africa. Subsequent leaders, notably Haile Selassie I, worked hard to consolidate a newly formed empire but was himself subjected to sporadic, yet at a time, fierce opposition from different corners of the country. In 1974, a brewing internal conflict in the form of a student movement, a revolt of taxi drivers, and the military toppled the ancient regime. A military junta that came to power declared a socialist ideological stance and soon began to liquidate political opposition. Yet the White Terror was launched by the opposition parties such as the EPRP and the Red Terror by the Derg (military junta that took power), which used brutal tactics such as executions, assassinations, tortures, and imprisonment without trial. It consumed a considerable number of innocent lives and disrupted the social fabric. According to some estimates, from 10,000 to 700,000 people lost their lives, the majority of them civilians. Banned parties and subnational liberation organization fronts sprouted elsewhere in the country. The Ethio-Eritrean War that started in 1961, when the emperor revoked Eritrean autonomy, raged for thirty years until 1991 when the socialist regime collapsed. The war with Somalia in 1979 cost human lives and national resources. As the civil war intensified in the North and Southern part of the country, the national economy was diverted to serve the war under the banner of ‘everything to the war front’. After roughly two decades, in 1991, the Marxist regime of Mengistu Hailemariam was toppled by the rebel forces from Eritrea, Tigray, and Oromiya.
Economic
The human and material cost of the war, which took about two decades in the internal civil war and three decades in the Eritrean War of Independence, was immense. Some reports indicate that in the Civil War of 1974-1991, 1.4 million people died, of which 400,000 were by the famine of 1984-1986, which the government could not adequately respond to due to partly the civil war. More than one million died in combat. Agriculture was severely affected, with crop production declining by 12.22% per year from 1982 to 1984. Crop production fell by 12.2% per year from 1982 to 1984. In general, famine and the war affected more than 10 million people, which was five times greater than the 1973 drought.
The military expenditure is so staggering:
In the last years of the military regime, defense spending peaked at almost 1 billion dollars or nearly 14 percent of gross domestic product (GDP). In the mid-1990s, spending shrank significantly to about US$130 million (or 2 percent of GDP). The onset of war with Eritrea in 1998, however, spurred massive spending to cover capital investments in new weapons systems, and by 2000 defense expenditures exceeded US$830 million (or nearly 11 percent of GDP). Military spending during the war is thought to have averaged at least US$2 million per day.
Thus, the war has consumed much physical and human capital, impeding the economy’s growth. Eleven percent of the GDP military expenditure is too much for a poor country such as Ethiopia.
Ethio Eritrean War, 1998-2000
The Ethio-Eritrean War of 1998/9 was another indicator of political instability in Ethiopia and Eritrea. The war, on its facade, was framed by academies, international communities, and commentators as a border conflict over the bare strip of land called Badime and differences between the two states with regard to their economic and fiscal policies and the extent of government control over the economy. Others, however, argued that it was instead an ’a similarity, notably, in terms of identity, the conception of power, governance structures, economic policies and political orientation’ and, such a social base conditioned them not to formalize their relationship but left to assumptions. The latter argument holds that it is instead the manifestation of the political configuration within and between these states that led to the war such that unless meaningful calibration is in place, sustainable peace and stability between and within the states is far from reality. The 2020 Tigray War, in which Eritrea played a significant role against their Tigrayan foe partly as the revenge for the 1998 defeat (which is the manifestation of political culture), is a testimony to this argument. The war had, in fact, led to the fragmentation of the Ethiopian and Eritrean ruling parties, further fermenting instability and conflict within the heart of both countries’ body politics.
Economic 1998-2000
According to reports, the government of Ethiopia mobilized a huge army which increased from 60,000 to 350,000. Defence expenditure surged from 95 million USD in 1997/8 to 777 million USD in 1999/2000, which implies an 800% increase in nonproductive expenses, i.e., military costs. The military expenditure became 49. 8 percent of the nation’s total recurrent expenditure. In the short period of two and half years, the war consumed more than 2.9 billion USD. External aid significantly decreased from 700 million USD to 500 million. Social transport and economic infrastructures were demolished and looted. National saving, private investment, and trade exhibited a substantial decline. The human cost of the war is nearly 100,000 on both sides. In terms of the cyclic nature of conflict, the 1998 Ethio-Eritrean war precipitated a two-decade ‘no war, no peace’ atmosphere between the two states. One invested a lot of material and human capital to destabilize the other through different proxies and opposition armed fighters. More importantly, the 1998-2000 war served as the source of vengeance for the Eritrean part when the Tigray War broke out in 2020.
Youth Uprising, 2014-2019
The 1991 fall of the socialist regime and subsequent establishment of the Transitional Government of Ethiopia could not transition the country into a democratic social and political order. Oromo Liberation Front, one of the opposition entities that contributed to the regime’s downfall and formulation of the Transitional Charter, was forced to leave the coalition and resumed organizing protracted armed resistance and fomenting popular uprisings. Subsequent elections in 2010, 2015, and 2015 became a sham election, only installing a dominant party system amassing 99%, 100%, and 96% seats in the parliament and bent on human rights abuses and brutal repression of alternative voices.
On November 9, 2006, organized by the clandestine Oromo Liberation Front (OLF) operatives, the Oromo youth and student movement broke the long silence. The movement was branded as Revolt Against Tyranny, invariably referred to as Fincila Diddaa Gabrummaa in Afaan Oromoo. High school students in Ambo staged a massive demonstration. The regime security officers killed students named Jagama Badhane and Kabbada Badhasa and another female student. The uprising for the coming three months spread throughout Oromiya schools and universities, the biggest regional state in the Ethiopian federal arrangement. In January 2006, more than 52 schools closed. Some reports indicate that more than 105 students were killed and 232 wounded. On February 21, 2007, in Eastern Oromiya, Hararge, at a place called Gara Sufi, 19 students were killed. In April 2011, the National Youth Movement for Freedom and Democracy, otherwise called Qeerroo Bilisummaa Oromo, was created by the OLF as a clandestine network that would shape the future of the youth movement that led to the change of government in 2018. The movement engulfed several universities across the country. But repression mounted. On April 7, 2011, 114 students were wounded at Mizan Teppi University. In 2014 the Youth movement began to gather momentum. New resistance media, such as Radio for National Youth and Democracy Movement (Radio Qeeroo Bilismumaa Oromoo), Oromo Media Network (OMN), and Musical Band called Qeerroo Bilisummaa Oromoo Music Band, which galvanized the youth movement, came into being.
The government, amid this youth movement, launched what it refers to as the ‘Addis Ababa Integrated Master Plan’. The master plan was designed to engulf farmers and their lands within an almost 100 km radius of the city of Finfinnee (Addis Ababa), which was perceived to be detrimental to the lives of these farmers, but above all, usurp the ownership of the town from the Oromo. Resistance against the Master Plan becomes a symbol and a driving force for the youth moment. An opposition that went through the whole week resulted in the killing of 78 youths in Ambo town on April 30, 2014. In subsequent years, 2016, 2017, and 2018 the revolution grew in depth and breadth. It drew prominent activists such as Jawar Mohammed, who played important, to its circle. Inspired by the Oromo Youth Movement, a new strike also broke out in Amhara regional State. On 31 July 2016, a big demonstration took place in Gondar, which assured its alliance with the movement in Oromiya. On October 2 2016, on the Oromo National Thanks Giving Day, called Irreecha, on the gathering of an estimated 5 million participants, a vibrant youth chanted and called for the removal of the party in power. A helicopter gun hovered over the crowd. Live bullets rained. Around 670 people died due to life bullets and stamped. The revolution reached a point of no return. The youth vowed to end the regime’s span of life. On 11 December 2017, security forces killed 19 civilians in Eastern Hararge at a place called Chalenqo. In March 2018, it forced the then Prime Minster, Haile Mariam Desalegn, to resign. On April 2, the House of People’s Representatives selected a new Prime Minister, Abiy Ahmed. As soon as he came to power, he promised to transit Ethiopia to a democratic order. However, the promise remained hollow, and Ethiopia continued to harbour intense political instability to a scale it had never seen before. Throughout the revolution, roadblocks, sit-ins, several market boycotts, brutal repression, detention, killings, and a state of emergency (declared more than six times), curfews, and blockades of the internet and social media devastated the social fabric and the economy.
The government of the new Prime Minster did not embark on the promised transition. Opposition party leaders and activists were jailed in mass. Offices of opposition parties closed. In June 2021, the delayed general election was conducted in a solo run, especially in Oromiya, by the ruling party, which had already metamorphosed itself into a “Prosperity Party’.
The economic impact of the protest.
The Oromo Revolt Against Tyranny (RAT)- Fincila Diddaa Gabrummaa has ended the ‘Ethiopian rising’ myth. Ethiopia has been nicknamed the ‘African Lion’ and Africa’s ‘golden boy’ due to its reported double-digit growth, especially from 2010 till up to the onset of the widespread and intensive revolt in Oromiya. At the outset of the RAT or Oromo Protest, one writer observed that ‘this would not only threaten the government’s authority but also undermine or even reverse its impressive development statistics. Having made such impressive socio-economic progress, the Ethiopian government’s automatically autocratic response to any kind of opposition risks reversing their gains. There’s got to be a better way’.
Only halfway into the span of the RAT, in 2016, the then Ethiopian Communication Affairs Minister, Getachew Reda, said ‘more than 90 percent of flower farms in an important economic corridor between Ziway and Hawasa in the Oromiya region had been attacked, as well as textile and agro-processing plants. What Ethiopia achieved in the last 15 to 20 years is being destroyed in the Oromiya region. — they tried to create an ‘ungoverned space’. Dutch flower company Esmeralda Farms closed its operation. A fruit processing Dutch company harbours 2000 people as its employee and Africa Juice B.V. was burned amidst the protest.
In the bid to control the protest, the government shut down the internet eight times, and in 2019 the PM said he would shut done the internet forever since it is ‘neither water nor air’.The impact was immense. Netblock, a civil society group that monitors global internet security, reported that Ethiopia lost 100 million USD after the massive protest after the murder of a prominent Oromo musician. The block lasted for 23 days. The group said that beyond the impact on fundamental rights, each day of an internet shutdown in Ethiopia runs up a bill of over 4.5 million in terms of the economic impact on the GDP’. Tourism also suffered as many countries in Europe issued a travel ban. Ethiopia lost more than 400 million in the year 2016 only, which is detrimental to this year’s (2016) plan government to generate 3 billion dollars.
The crux of the matter is the political domination of one group over the other beginning from the late 19th century and the ensuing instability that emanates from the lack of genuine remedy since then, and the ever polarization due to lack of genuine representation is the major political instability that holds back the Ethiopian economy from flourishing. The then Prime Minister Haile Mariam Desalegn said 49% of the population was not represented in the country. The author of this article thinks that lack of political representation was visible in a condition in which one party wins 100% of the seats of the federal parliament, and political instability is inevitable when opposition parties are totally barred from any meaningful participation. The resultant economic unsustainability is thus clear.
It is evident that “an economic model which is built on denying democracy, denying people basic human rights, isn’t sustainable, and it will collapse.” An observer said, ‘If I am a foreign investor, I look for opportunities. I understand that there are risks, but in the face of this growing unrest where foreign companies have been targets, given all that has happened in terms of displacement of people and their lands given away to foreign investors, it would be astute to not go into a country like that’.
War in Oromiya
In the last month of 2022, PM Abiy Ahmed sees the ‘Oromo Liberation Army grow in his own back yard’. In November 2022, OLA staged a coordinated attack in many major cities in Western Ethiopia, blocked strategic gateways into the west, and released several prisoners. In the last week of February 2023, the OLA staged a similar coordinated attack in the western part of the country. In the same year, a parliamentarian emphasized that the relabels had already taken 392 rural towns and villages. The response from the government was so indiscriminate. Several drone attacks targeted rebel military bases and civilian areas. In a small village called Bila in Western Wollega, the drone strike killed more than 80 people, and a priest confirmed that he buried 11 unarmed civilians. In West Showa, a drone strike took 68 civilian lives. On 22 April, in West Shewa’s Abuna Gindeberet district, a government drone strike killed 20 civilians. In the Ada’a Berga district, there were government extrajudicial killings of 46 civilians on 28 April 2022, and mass killings in the Warra Jarso district. Human suffering is immense. One report indicates that there were almost a million displaced persons in the region of Oromiya as early as 2018, where 77% of the cause was conflict and instability (DTM, October 2018). In 2022, human displacement in almost all regional states of Ethiopia engulfed more than 4.5 million people.
Similar to the Revolt Against Tyranny (RAT) or the Oromo Protest mentioned above, the armed conflict in Oromiya has its roots in the history of state-making in Ethiopia. In the 1970s, like other national fronts in Ethiopia, the OLF came into being. Since then, it continued armed resistance against the state unabated. As indicated above, the 1991 Transitional Government of Ethiopia and the subsequent political process failed to resolve the underlying causes of instability. In 2018, the Asmara Agreement between the government of Abiy Ahmed and the OLF was repudiated due to the lack of genuine resolution of the underlying political problems and appropriate Demobilization, Rehabilitation, and Reintegration (DRR) program in the Oromiya region. As a result, OLA, the armed wing of OLF, continued its military operation in Oromiya to date.
The War in Tigray, 2020-2022
The Tigray War that sparked in 2020 was another recent war that has shown the natural face of Ethiopia as a ‘war forever nation’. On November 4, 2020, the Ethiopian Prime Minster, dressed in a military uniform, called for an all-out military stance against what he framed as ‘the TPLF strike against the Northern Command’. The TPLF, on their part, argued that they made a preemptive strike against the Federal government’s earlier military action, including an attempt by the commando unit to arrest the Tigrayan leadership. Whatever the reason from either side, the flare-up of the conflict had its roots in Ethiopia’s conflict-ridden and contested history of state formation, authoritarianism, and regional competition (a reference to Eritrea). The specific causes include the apprehension of the Tigrayan towards Premier Abiy’s decentralization of the state structures pitted by his rhetoric of glorifying the Ethiopian imperial past and ‘Ethiopiawenet’ through his concept of ‘medamer’; the Ethio-Eritrean peace accord of 2019, which largely occurred without the meaningful participation of the TPLF leadership which trigged suspicion from the Tigrayan towards PM Abiy and Isaias concord for the latter to avenge earlier grudges; the formation of Prosperity Party in 2019 by the Prime Minster Abiy abolishing the earlier coalition party, EPRDF, which the Tigrayan perceived as a ruse to marginalize them; the postponement of the 2020 election by the Federal government and the defiant regional election held in Tigray as a symbol of autonomy. It has gradually become clear that ‘the ideological contradictions between the new P.P. policy of enhanced national unity and Ethiopiawinet and the TPLF’s insistence on the multinational federal order and emphasis on ethnic autonomy were too deep to bridge’. This ideological rift was not new. It was a systemic expression of Ethiopian endemic instability manifested in the form of armed conflict between regional forces fighting for autonomy or independence and centralizing hegemonic Ethiopia at the centre.
Shortly after the November 4 military strike on Tigray, the federal forces entered Mekelle and established an interim government, which only lasted a few months. In June 2021, the TPLF, after a few but decisive onslaught on the Federal army, recaptured Mekelle. On 28 June, the Ethiopian government declared a unilateral ceasefire which the TPLF declined and continued their advances towards Finfinnee/ Addis Ababa. On August 24, 2021, the war mounted when the Federal force, using an aerial weapon, namely a drone procured from Turkey, Iran, and China, launched a counter-offensive. TPLF, only 160 km from the capital, retreated to the north. Eritrean National Defense Force, Amhara Regional forces, and the Ethiopian National Defense Forces made a continuous attack from the north and south. Even if towns in northeastern Tigray began to fall into the hands of the coalition, they could not advance deeper into Mekelle. A peace deal led by the African Union sealed the cessation of hostilities in Pretoria on November 2, 2022.
Economic Impacts of the War in Tigray
In 2021, only some months after the war began in Tigray, Ethiopia’s Ministry of Trade and Industry estimated the closure of factories and mining sites in Tigray cost 20 million USD every month. Important European and Asian agribusiness, textile industries, and manufacturing closed operations. The biggest factory in Ethiopia’s industrial Park in Hawasa, a global fashion giant, PVH Corp, closed its operation. Addis Pharmaceutical Factory, which provided 70 % of national demand, was looted and destroyed. Almedia Textile, Goda Bottle, and Glass Share Company were shattered. By late February 2021, almost all central and eastern Tigray factories were out of use. Before the war grew in width and breadth, the interim government estimated that infrastructure rehabilitation required at least 100 billion birrs. The scenario puts Ethiopia at a B2 credit rating, equivalent to ‘high risk’. The depressive environment led the IMF to estimate Ethiopia’s economic growth at 3.8%. In March 2021, only five months after the outbreak of the war, Medians Sans Frontiers reported that 70% of the health facilities in Tigray had already been made nonfunctional.
Even if official figures have not come out yet, the national budget was highly constrained as the war raged. In 2022, the Ministry of Finance and Economic Development declined to approve a budget for three industrial parks, Ethiopia’s China-like development, which is hoped to bring structural change to the economy, due to ‘budgetary pressure’. However, the parliament approved 1.7 billion USD in military expenses as an additional budget for 2022. Trading Economics foresees the growth of military expenditure hitting $502m (£365m) by 2021, up from $460m in 2020. In March 2021, Antonio Guterres, the U.N. secretary General said that the war ‘drained over a billion dollars from the country’s coffers’.
The exchange rate of local currency, i.e., the birr, was severely affected. In 2019, the USD was exchanged at 29.07 for one birr. In 2020, 2021, 2022, and 2023 one USD equals birr 39.93, 43.73, 53.53 and 53. 19 respectively. However, the parallel black market reached more than 100 birr for one USD at the end of 2022 and the beginning of 2023. The cause is attributed mainly to a plunge in production at the national level, coupled with the tax revenues plummeting to less than 9% of the GDP, deterioration of export earnings, and unwise diversion of foreign exchange to the purchases of military equipment. The official inflation rate skyrocketed to 33.6 percent in 2022, the highest for the decade. Food prices reached 43 % in May 2022, which might also contribute to worsening poverty.
Data shows a substantial decrease in foreign aid and trade during the recent war. On January 01, 2021, the USA annulled Ethiopia’s access to duty-free export to the U.S. market. In 2020, Ethiopia earned about US 245 million, which amounts to half of its expertise in the U. S. The European Union has withheld budget support of 88 million euros until humanitarian aid reaches northern Tigray. Since Ethiopia is a major aid recipient country, the impact is foreseeable.
The humanitarian situation as of October 2022 has also reached the severest state in recent decades. The major contributor is the conflict that raged the country, as it directly impacts humanitarian responses and also indirectly debilitates the government’s capacity to properly address climate impact. According to ACAPS, out of the total population of 124, 574,000, about 4. 7 were displaced; 38.2 million are in need, while 11.2 million people are in severe humanitarian conditions. The record of humanitarian risk for Ethiopia toward the end of 2022 is so alarming. INFORM ranks human disaster at very high, i.e., 7.3/10, lack of capacity for coping at 6.7/10, and vulnerability at 7.1/10. ACAPS puts crisis severity at 4.3, impact at 4.2, humanitarian conditions at 4.5, complexity at 4.2, and access constraints at 5 points, where all the indicators are measured out of 5 points. The crux of the matter is that the war and instability put the country in a dire social and humanitarian situation, which impacts economic development. Such a prospect is not welcome for a country aspiring to reach a lower-middle-income by 2025.
Conclusion
The above unstable years are only the tip of the iceberg in the conflict-ridden political history of the country. As shown above, those instabilities manifest in the forms of conflict that involve war, popular uprising, and election violence. Ethiopia has been imbued with continuous and underlying instability since its birth in the 19th century. Ethiopia is again one of the ten poorest countries in the World. This is not accidental. The underlying cause of instability rests in the way Ethiopia is created and how those structures are maintained to date. The friction between the forces that try to keep it and the forces that try to change that political configuration creates permanent instability. Ketil Tronvoll writes, “The perennial contested issue involves what ‘Ethiopia’ is and should contain—in other words, how the state should be configured, and what an Ethiopian identity should comprise and invoke.” That instability invariably contributed to the low level of economic development resulting from damages to economic infrastructures, plummeting agricultural production, inflation, blockage of foreign aid, the skewed balance of trade, humanitarian disaster, and resultant damage to the social fabric. Ethiopia seems to be far away from attaining lower-middle income by the year 2025. Unless the political issue is resolved and stability ensured, economic growth and sustainable development seem to be distant dreams for Ethiopia.
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