Weighed down by the war in Tigray, Ethiopia is trying to open up its economy

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After seventeen months of conflict in Tigray and a health crisis that has weakened its economy, can Ethiopia still attract foreign investors? This is what the Addis Ababa authorities seem to be hoping for by relaunching the liberal reforms carried out by Prime Minister Abiy Ahmed when he came to power in 2018. A dynamic embodied by the creation, in February, of a sovereign fund called Ethiopian Investment Holdings (EIH).

Presented by its director, Mamo Mihretu, as “the strategic investment arm of the government”, the structure is expected to incorporate assets from several state-dominated sectors, including airline Ethiopian Airlines and telephony giant Ethio Telecom. Mines, industrial parks, hotels and real estate, all open to foreign capital, will also be on the board, with a total value of 150 billion dollars (about 138 billion euros), according to Mamo Mihretu.

Read also In Ethiopia, economic transformation put to the test by instability

According to the latter, who held the post of economic adviser to Abiy Ahmed until his appointment, EIH will be “the most important sovereign wealth fund in Africa”. Further proof, according to the authorities, that Ethiopia, which is not a member of the World Trade Organization (WTO), is gradually opening up to the private sector.

But it will probably take more to convince. “They announce a lot but reform very little”, says, on condition of anonymity, a long-time Western investor in Ethiopia. Witnesses to this indecisive policy: the partial privatizations of Ethio Telecom and Ethiopian Airlines, often announced and almost systematically postponed; or, more recently, the opening of the banking sector, launched by Abiy Ahmed on February 22 but the details of which are still not known.

A centralized and interventionist model

The Prime Minister, who wanted to see Ethiopia break free from the centralized and interventionist model inspired by Asian countries and which he inherited from previous administrations, has to deal with a battered economy. Inflation reached 33.6% in February, according to Ethiopia’s Central Statistical Agency, and the climate of uncertainty is such that the International Monetary Fund (IMF) has decided not to publish growth estimates for the country in 2022.

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