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Updated Feb 11, 2020

In December 2019, Ethiopia received pledges of financial support to the value of US$9 billion from the World Bank, International Monetary Fund and Western donors. For Prime Minister Abiy Ahmed, this money is the fruit of his efforts to make the country more appealing to Western investors and reduce his nation’s economic dependence on China.

Abiy is seen by the West as a reliable partner for peace and stability, necessary precursors to greater investment in his country. Being awarded the 2019 Nobel Peace Prize in recognition of his efforts to achieve peace and international cooperation—including helping to resolve the border conflict with neighboring Eritrea and mediating in the Sudan–South Sudan crisis—helped to solidify his image as an agent of change. It looks like his tenure is built on overhauling the Ethiopian economy and following through on promises of reform. 

Abiy has appointed young technocrats with international experience whose primary task is to build up the private capital of Africa’s second-most populous country. Reducing Ethiopia’s model of state-directed investments has won approval from economists, Ethiopian-born or otherwise, throughout the Western world, as these types of reforms reduce risk for multinational companies investing in a foreign country’s economy. Privatizing state-owned enterprises, particularly in the telecommunications sector, is also part of Abiy’s economic overhaul plan.

Although China is still Ethiopia’s largest trading partner, the new aid package comes at a time when Chinese investments have begun to taper off as big-ticket infrastructure projects such as the US$3.4 billion Addis Ababa–Djibouti Railway, in which the Export–Import Bank of China invested US$2.9 billion, have failed to generate sufficient revenue. Abiy’s senior policy adviser and chief trade negotiator, Mamo Mihretu, said to Politico that China and Ethiopia still maintain “robust trade and investment relations”, and that China is still a vital partner for Ethiopia, but World Bank and IMF funding has the benefit of being a long-term, stable, and predictable concession, making it a dependable financing option going forward.

 

https://www.politico.com/news/2020/02/07/ethiopia-china-west-power-competition-110766

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