Ethiopian optimism dented by political and security crisis | Analyst Picks| RiskMap 2021
Ethiopian optimism dented by political and Patricia Rodrigues | Analyst
With an ongoing security crisis in its northern Tigray regional state, it is unsurprising that optimism about Ethiopia’s economic and political growth trajectory in 2021 has taken a hit. Prime Minister Abiy Ahmed, appointed in April 2018, had brought rapid change to Ethiopia. However, in the coming year, several key issues will determine the political and economic outlook for the country. The military victory declared by the federal government against the Tigray People’s Liberation Front (TPLF) in Tigray will work to discourage other ethno-nationalist groups from taking up arms against the government. However, it is also not likely to end the Tigray conflict entirely: the region is likely to become a fertile recruitment ground for secessionist or otherwise anti-government ethnic militias.
As the government looks to hold the delayed elections by mid-2021, ideological divides will fuel political unrest across the country. The Tigray conflict may have its origins in battles for political influence, but it also speaks to a deeper rift over Ethiopia’s system of governance. The TPLF was the primary architect of the current system, in which regional states are delineated along ethnic lines and have substantial autonomy. By contrast, Abiy is pushing for a more centralised state in which ethnicity – at least formally – plays a far less prominent role. While Abiy has some support for this more centralist position, he will face fierce resistance from ethnic-based political parties who view this as an attempt to curtail their autonomy.
These domestic political concerns do not bode well for Abiy’s economic reform agenda. Deadlines for the flagship liberalisation of the telecoms sector will slip amid political infighting. Reform progress to reorient the economy away from state-directed investment towards more market-friendly policies will proceed but at a slower pace. COVID-19 has also severely affected government revenues, forcing Ethiopia to renegotiate some of its external debt and seek relief through multilateral lenders’ COVID-19 support schemes. Although 2021 will see the federal government continue to push for more foreign investment in the country, strict foreign exchange controls remain in place. These issues, combined with genuine concerns about the security environment, will mean that Ethiopia continues to operate below its considerable potential.