Ethiopia’s bewildering economics

By Tesfu Telahoun Abebe – Third world economies frequently operate on what seems like a parallel level to established and emerging markets. This situation is frequently cited as being a major determining factor for why so few developing countries gain acceptance to the WTO.

Developing states may not have put the legal instruments in place and/or they lack monitorships and enforcement regimens. This fact also retards economic progress even as a given state expends large sums and resources on new initiatives and polices, projects and other measures. The plans always sound like the solution but have disastrous consequences during and after implementation.
Here are a few ‘living’ examples from Ethiopia’s bewildering economy.

Imagine a single mother raising four of her own children along with six of her deceased brother’s kids. In a good month, she earns about Etb. 2000-somewhere between USD 50-60 from a backbreaking work as a day laborer. She pays the rent, buys various household essentials, the electricity and water bills, school fees and maybe has a couple of birr left over for a few days worth of bus fare.

Usually a frugal and responsible parent, this month she decided to forego all of the above and buy the children and herself some badly needed shoes. She goes out and spends 2800 birr-taking out an 800 birr loan-on new shoes for the whole family.

How about the rent, the month’s foodstuffs and the school fees? This is crazy. No mother would do such a silly thing. This doesn’t make any sense at all!

Now, here’s the key to interpret this seeming nonsense.
Change ‘woman’ to Ethiopia: the ten children represent 100 million Ethiopians, the 2000 birr stands for USD 2 billion of Ethiopian exports and the 2800 birr stands for the USD 2.8 billion Ethiopia spent on fuel imports. Yes, really.

This past year we spent every penny earned from the export of literally three dozen types of commodities and then added some 40% more ($800 million) to buy diesel, benzine and other petroleum products.

Ethiopia is a net importer of fuel products and like any other nation its very existence revolves around fossil fuels. This means that a large fuel import bill is not common among developing countries. Yet, try as I might, I couldn’t find another instance of a country expending 140% of the value of annual exports on the importation of a single item.

But wait a second, I think I got one at last. This research website has data for 2007/2008 on a country which spent exactly 100% of its export earnings on petroleum imports. And the country is-Ethiopia! So, the difference between our 2007/2008 and 2018/2019 world records is that we have now perfected financial stupidity.

On too many levels and economic indicators, the Ethiopian economy is an anomaly wrapped in a mysterious shroud veiling opaque and bizarre practices and characteristics.

In any other economy, a bumper harvest is very good news, meaning as it does that food would of course cost the same or even less due to abundant supply.

Over the last quarter century Ethiopia has had several bumper harvest years but food prices but let alone stabilizing and/or lowering, prices of staple crops and other produce have increased sharply each and every year.

Regime spin doctors had for long blamed the illogical situation on the nation’s ‘explosive’ population growth and on the rising demand of a ‘prospering’ society. However, they fell silent and/or silenced people like yours truly who asked the following:

If agricultural production increases by 12% yearly (this was the regime’s favorite figure when alluding to its ‘success’ in agriculture) and population growth is at 2.8% per annum how could population growth account for the chronic food shortages and ever-increasing prices?

Another anomaly is the matter of the frequently devalued national currency. The regime claimed that a devalued birr would spur export trade as Ethiopian goods become cheaper and therefore more attractive on the world market. However, the value of Ethiopian exports has steadily dropped to its lowest level yet.

This year Ethiopia earned less than two billion dollars from international trade-the worst performance by virtually any nation except maybe for a few resource poor micro-states!

Let’s put this in perspective. Our good southern neighbor Kenya exported goods worth 5.9 billion USD in 2017/2018-NEARLY THREE TIMES HIGHER THAN ETHIOPIA earned this year.

My last example concerns the mountain of debt the nation owes the crafty Chinese for infrastructure and other projects which are generally poorly built and barely functional if at all.

Frankly, the Chinese have grossly scammed and are scamming Ethiopia-in collaboration with Ethiopian companies some established for the express purpose of grand embezzlement and mega fraud.

There are sufficient grounds for PM Abiy to lodge a formal complaint to the pertinent international authority in regard to the scandalous situation. Prior to this an impartial international panel of assessors should be hired to provide an accurate appraisal of the exact value of Ethiopia’s debt commitments to the Chinese dragon.

Compatriots! Let’s get our act together!