The war underway in the northern part of Ethiopia, its impingement on the economy

The Ethiopian Defense Force has made the punitive action against the terrorist TPLF in Tigray that is lasted for over 8 months so far. As per it was disclosed by the Prime Minister recently, the law enforcement campaign costed the nation over 100 billion Birr.

However, after the withdrawal of the defense force from Tigray region, the terrorist group escalated its military aggression in the neighboring Amhara and Afar regions and to date, more than half a million people are displaced internally because of the war. More than 500 educational institutions and religious sites have also been demolished.

The terrorist group has prolonged the war towards different zones of the aforementioned regions from time to time aiming to capture strategic locations and main routs of the country such as Addis Ababa Djibouti road to control the main economic gateway. Doing so, it strived to impose pressure against the government though couldn’t succeeded because of strong response from the heroic Ethiopians. It is known that, the nation’s economy is already suffering from the COVID 19 repercussion, foreign debt and inflation due to various reasons. Hence, it is worrisome that the ongoing war further exacerbates the situation. Therefore, unless comes to an end soon, it may put the nation in the precarious situation.

While making an interview with the local media, Amin Abdella, an economic analyst, said that let alone the war is going on, the anxiety of war by itself incurs economic pressure among the public. But in order to assess the economic impact of the war on the nation’s economy, two things must be considered. One is for how long the war is going on and what is its economic influence on the areas where the war is taking place. It is obvious that the war that lasts for shorter period of time has different implications when compared to that lasted for longer time. The areas where the battle is taking place should also be considered whether it is a high productive zone, the center for export or whether manufacturing industries are located there or not. In addition to these, the intensity of the war, it’s financial, human causalities and death toll must put in to consideration.

During the war time, consumers are coerced to purchase more goods due to anxiety of shortage of products might happen or the traders might hoard basic items. On the other hand, merchants may also purchase goods excessively, accumulate and store in fear of the interruption of value chain. Inflation is also exacerbated at this time and such situation put pressure on the low income community sects than other segments of the community.

According to Amin, as Ethiopia’s economy is agrarian based in which 80 percent of the population earns its living from this sector, the agricultural products are not directly subjected to the foreign economy influence.

Therefore, logically the sector is not vulnerable to war induced pressure though the current situation in Ethiopia is different in which the terrorist TPLF is killing farm animals and cows and destroying farm lands intentionally. It is the urban economy which is directly affected by the war. The war induced crises manifested itself by inflation; degraded economic growth and aggravated poverty for the possible reason that the money that should have been allocated to poverty reduction might be spent on war relate expenses. The resource that might be invested for job creation might be allocated to support the war machine and instead of investing on value addition, the money might be used for purchasing armaments.

To evaluate the current war impact on the economy, looking the location of manufacturing and other sectors is vital. For example, 55 percent of the nation’s manufacturing industries are located in Addis Ababa and its outskirt. 33 percent of are located in the Oromia region and 13 percent in the northern part of the country which is currently victimized by the war. The late ones are highly vulnerable to the war and hardly become productive.

Agriculture also contributes the lion’s share to the nation’s Gross Domestic Production (GDP). Hence, looking the sector in this regard enables to assess the impact of the war towards the sector. The impact could also be seen in the service sector but as to Amin, looking the large picture of the economy, the war can be said does bring enormous impact on the economy.

If the war outcome brings a lasting solution for the problems that induced the conflict, it can bring a good opportunity to revive the economy. But if it is reignited again, it might put the nation in the vicious circle of economic misery and human carnage. Hence, all stake holders must look the matters in depth and forward a durable peace.

To overcome the impact of the war on the economy, the government should formulate remedial policy and implement it. It must also revise the economic policies introduced before the war broke out and some of the budgets should be allocated to restore the demolished infrastructures and to rehabilitate the displaced people. In addition to this, shifting the budget allocation from one sector to another must be taken as an option.

Currently, the western world is developing bad attitude towards Ethiopia because of the miss information disseminated by the terrorist TPLF activists and lobbyists against the government and appeal to the westerners to impose economic sanction on Ethiopia. Asked whether the westerners take economic embargo or not if the war is prolonged, Amin said that if the government subdues the terrorist’s fighters by changing the balance of power, the westerners might change their attitudes toward Ethiopia and refrain to take embargo. In addition, if it brings peace as soon as possible, the economy might recover by itself.

In line with this, when the macro economy faces some disturbances, the government must take measures to reverse the situation to the better and in this regard, it has to be flexible.

It is understood that, the terrorist group waged war against Ethiopia not only in the military front but also on the economic sector. One of the mechanisms utilized by the terrorist is to sabotage the economy via exacerbating black market to dwindle the nation’s hard currency reserve. After amassing the Dollar obtained by illegal means the junta’s cliques send the money to the neighboring countries to purchase arms and smuggle to Tigray by clandestine means. Hence, the Ethiopian diaspora, when sending money to their families, they better use the formal channel through legally registered money transfer institutions.

State Minister of Finance Eyob Tekalign (PhD) said in this regard that Ethiopians should be conscious that their money that inflows illegally should not serve to kill children in the war front forcefully recruited by the terrorist group. Because as mentioned above, the Dollar sent through black market funds its way to supply weapon to the junta.

He further said that, unless they quit sending money in illegal means, promoting “Ethiopian identity” simply become rhetoric. Therefore, they must prefer the formal channel and support the Ethiopian renaissance


The Ethiopian Herald  12  September  2021

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