War in Tigray is shattering the country’s economy

Ethiopia’s months’ war was full of terror and consisted of huge losses. Thousands of people have lost their lives, many people have displaced, and still many need assistance. 

But this is not the only loss that happened with Africa’s second most populous nation. The war has lead to substantial economic losses, which will take years to recover.

The monthly expenses of the people of Egypt have doubled. And the prominent reason for the increase in expenses is due to the covid-19 pandemic and due to war. 

According to the official stats, the costs of groceries and other essential goods have increased quarterly. The increase is quarterly than the price of last year. 

Also Read: A crisis in Ethiopia by Tigray Region

The fall due to war

The dollar exchange in the country is also getting worse with the situation. Earlier last year, the $1 was equivalent to 35 birrs, but now it has increased to 45 birrs. 

Spending on war is really worsening Ethiopia’s capacity of accessing dollars. Thus the exchange rate is declining.

It has not yet calculated that how much does it cost in war. But according to the estimation, it reached up to $460m last year. Then it will reach up to $502m this year. 

According to the UN secretary, the conflict has cost billions of dollars from the country’s vault. 

Before the pandemic and the war, the Ethiopian economy was the fastest growing economy in the region. According to World Bank, it was expanding with an average of 10% every year during the decade of 2019. 

Earlier, the mentioned rate in the article is the official rate in banks. But in reality, the birr has fallen more in the informal markets. It now costs 61 birrs per dollar. 

The prominent reason for the drop in the birr’s value is that many people are withdrawing their cash. And taking it to the money traders on the border.

Impact on Mobile Phone Auction

At the global level, the war is hitting a hard strike on the reputation of Ethiopia to invest in.

If the consumers face the problem of the high inflation rate. Then there will be no chance of increasing consumer growth. The growth which we majorly observe in the US and Eurozone. 

And this causes foreign investment to increase the growth. And this is in real danger because of the strike on reputation.  

The recent liberalization of the telecom sector in Ethiopia is the noting point. This telecom sector generally attracts several providers, including South Africans also. 

Earlier, the new license rules dampened investors’ minds, but now the Tigray war also weighed a little to change it. 

Pressure for ending the war

From 6% to 2% in the year 2020-2021, the economic growth rate of Ethiopia is forecasting very low. According to IMF, it is the lowest in the two decades. 

The country is currently importing goods of a value of $14bn, whereas it exports a total of $3.4bn. 

One more matter of concern for the Ethiopians is the national debt on them. The nation debt on Ethiopia is around up to $60bn this year, i.e. 70% of their GDP. And this is the rough calculation of the debt. The military can spend a lot more than it. 

The US has regulated some visa regulations on the Ethiopians who were part of the war. More than a quarter of the population is living below the poverty line. The average yearly income is only $850 per person. 

The Biden administration puts equal pressure on Mr. Abiy to end the war as soon as possible. And the war should end without isolating Ethiopia completely. 

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