Ethiopia

Ethiopia is Evolving and Changing

In 2023, the BRICS group expanded to include Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE. Ethiopia, an unlikely BRICS candidate, sought to join the group relentlessly, despite its poor economy and internal strife. Previously, Ethiopia was a favorite of the US and the West for its fight against terrorism in Somalia. However, it remained isolated due to the ongoing war in Tigray, associated with its old enemy, Eritrea.

The failure of US policy to restrict the war, human rights concerns, and lack of solution led to Ethiopia being suspended from using the benefits of the American Growth and Opportunities Act (AGOA) in January 2022. Despite this, Ethiopia leveraged FDI and expanded manufacturing exports through special industrial zones. In 2020, half of Ethiopia’s US$525 million exports to the US were duty-free under AGOA, including garments, leather footwear, flowers, and vegetable products. The expansion of BRICS raised Ethiopia’s stature from a poor country with an underperforming economy and internal strife.

Ethiopia’s demand to join the BRICS group, viewed as a Chinese-Russian-backed group by the West, signaled to its Western friends that it had other options. South Africa supported Ethiopia’s final leap to membership, while Nigeria and Kenya were considered better candidates for BRICS. Ethiopian PM Abiy Ahmed, who flew to South Africa at the invitation of President Ramaphosa, insisted on Ethiopia’s inclusion instead of waiting for the criteria-based approach. BRICS accepted the invitation but agreed to admit six countries, with Argentina declining and Saudi Arabia’s enthusiasm diminished.

Despite gaining a BRICS membership, Ethiopia faces economic challenges, becoming Africa’s third defaulting country in December 2023. The country’s financial weakness due to the pandemic and long civil war has left it in poor economic health. Ethiopia joined Zambia and Ghana in a G20 common framework restructuring in 2021, seeking relief under the G20 debt initiative.
Ethiopia has reached debt service suspension agreements with creditors, including China and India, due to reduced foreign exchange reserves and high inflation, with $28.2 billion in external debts.

The African Development Bank predicts Ethiopia’s GDP to grow at 5.8% in 2023 and 6.2% in 2024, mainly based on industry, consumption, and investment. Inflation was 34% in 2022, and due to high defense expenditure and diminished revenue collections, the fiscal deficit was 4.2% of GDP in 2022. Ethiopia’s sovereign rating was downgraded to CCC, which was not what BRICS was originally looking for in its members.

Ethiopia’s internal strife has led to a temporary peace agreement between Tigray and Addis Ababa, but it has not yielded any economic benefits. The Oromos, the largest ethnic group in Ethiopia, are up in arms, and peace talks between the Oromo Liberation Army and the Ethiopian government have been ineffective. The Amhara, another dominant ethnic group, is also restless, with the three main groups contesting Ethiopia’s progress.

BRICS chose to ignore both the economic mess and internal civil wars in Ethiopia while admitting it. Ethiopia was once an ally in curtailing Al Shabab radical and terrorist groups in Somalia, with Ethiopia and Kenya providing troops under the African Union Mission to Somalia (AMISOM). Once these countries patched up, they attempted to reorder the geopolitics of the Horn of Africa, diminishing the role of Kenya and Djibouti and the Somali government in Mogadishu.

A new Ethiopia-Eritrea-Sudan access did not last long due to Sudan’s disarray. The most stable parts of the region are Kenya, Djibouti, and Uganda, but Ethiopia is pushing harder for altering the region’s geopolitics.

Ethiopia was in BRICS before their default, setting out a new ambition of aggressively acquiring access to the Red Sea. Since Eritrea seceded from Ethiopia in 1993, Ethiopia became a large landlocked country, with Eritrea’s ports being used for economic reasons. However, the 1998 war between Ethiopia and Eritrea ended Ethiopia’s access to Assab and Massawa ports. Over 20 years, Ethiopia invested heavily in Djibouti, improving its port status and receiving significant investments from the UAE and China.

Ethiopia, along with Emirati multinational logistics company DP World, had a Memorandum of Understanding (MoU) for investing in the port of Berbera in Somaliland. However, the partnership may lack strategic depth and Ethiopia now seeks an alternative to Djibouti to the south. Ethiopia has announced an agreement with Somaliland to invest in Berbera and offer Somaliland a stake in Ethiopia’s profit-making Ethiopian Airlines as compensation.

However, the port and access cannot be developed by Ethiopia alone. Somaliland maintains links with Taiwan, not China, and has obtained a guarantee from Addis Ababa that Ethiopia will recognize Somaliland as an independent entity. Mogadishu rejects Ethiopia’s recognition of Somaliland, citing its ambition to reorder regional geopolitics and focus on internal issues. Ethiopia’s dependence on Djibouti and depreciation of relations with Somalia raises questions.

In its current situation, Ethiopia needs development support, debt relief, and FDI. BRICS countries may help Ethiopia secure support from the New Development Bank, China, Russia, India, the UAE, and Saudi Arabia, allowing Washington to provide flexibility, restore AGOA benefits, and increase developmental assistance.