ETHIOPIA

RISK RATING
High
Default High Risk Score 7.50
Normal Average 6.10
Weighted Average 6.20
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

As a result of a military offensive in the northern region of Tigray, a weakened Ethiopia will now have to deal with a Tigray insurgency that has capability to stage attacks in Addis Ababa, and emboldened neighbours in its various regional disputes where international support has ebbed from Ethiopia. Beyond the immediate political, diplomatic, and security implications, Ethiopia has suffered substantial damage to its economy and investor reputation. The hydropower GERD project, the privatisation of state monopoly Ethio Telecom, and national carrier Ethiopian Airlines are some of Ethiopia’s most poignant symbols and most important strategic projects, which have all been affected negatively by the Tigray conflict. The stalling of these projects has left the country’s foreign exchange reserves at a precarious level of import cover and in need of USD 7.5 billion to complete ongoing infrastructural projects.

  • Rapid political and economic change in Africa‚Äôs second most-populous country has led to a upsurge in violent conflict and the fragmentation of regional states. Delays to elections and the centralisation of political authority by the federal government have triggered insurgencies in the norther Tigray state, as well as frequent unrest in Oromia and other parts of the fractured country. The real threat to political stability is no longer derived from the economy, but the prospect of the governing PP party splintering as it fails to accommodate regional grievances. It also needs to refocus his attention on the stalled negotiations over the Grand Ethiopia Renaissance Dam (GERD) with Egypt and Sudan. The development of GERD is paramount to Ethiopia‚Äôs development plans as it is expected to double the country‚Äôs electricity generation capacity and earn as much as a billion dollars annually from energy exports.
  • Ethnic, sectarian, and political violence pose a broad threat towards the supremacy of the federal coalition. Central to the population displacement are the myriad multi-layered conflicts in the Gambella, Benishangul Gumuz, Oromia, and Somali regions, as well as conflagrations across the Tigray and Afar regions. The Tigray war in 2020 has ebbed Ethiopia‚Äôs diplomatic standing and supremacy in regional disputes. Ethnicity in the country of over 80 different groups is but one layer of the conflicts. They are also underlined by socio-economic factors. And within these conflicts, there are more minute intra-ethnic, clan-based rivalries which contribute to the elevated instability in many parts of the country.
  • New inflows of foreign exchange are desperately needed and were meant to be channelled through privatisations of state-owned entities like Ethio Telecom. The Ethiopian economy, which has been hit hard by the global pandemic, faces increased inflationary pressures. This follows increased printing of currency to finance the country‚Äôs budget deficit. Both the World Bank and IMF have now downgraded the country‚Äôs forecasted annual growth. The economy may even fall into recession in 2021. The IMF warns that weak performance of goods exports and ongoing foreign exchange shortages have driven down growth forecasts. Persistent insecurity, political instability, and delays to market reforms, as well as external pressures, have also undermined Ethiopia‚Äôs economic trajectory.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
7.0
Expropriation, Nationalisation, Confiscation & Deprivation
5.0
Contract Frustration & Breach
6.0
Taxation
4.0
Bribery & Corruption
5.0
Regulatory Burden
6.0
Strikes, Riots & Civil Commotion
7.5
Security
7.5
Sovereign Default
6.5
Economic Volatiliy
6.5

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