This November marks the fourth anniversary of Ethiopia’s transition into a war economy. The war between the federal government and TPLF ended with unspeakable human and economic losses, and was quickly followed by another round of armed conflict in the Amhara Regional State.
As with the ‘law enforcement operation’ in Tigray, the government does not call the latter a ‘war’, instead referring to the fighting using varying terminology. Regardless, these conflicts have cost Ethiopia an arm and a leg and resulted in immense human and material destruction.
The situation in parts of the Oromia Regional State remains equally dire.
In addition to their ineffable human cost, the conflicts have been an immense financial burden. There is not much in the way of official data to indicate how much has been spent over the last four years, and what little information is available indicates underreported expenditures, particularly relating to military hardware.
Drones and heavy artillery have been widely used in both conflicts.
War economies globally and historically redirect resources and supply chains toward defense priorities at the cost of things like healthcare, education, and infrastructure projects. And while war can sometimes stimulate economic growth, experts argue that is certainly not happening in Ethiopia today.
Teshome Abebe is a laureate professor teaching economics at Eastern Illinois University in the United States. He argues that even the notion of the ‘Iron Law of War’, which suggests that wars can stimulate economic growth in certain sectors such as manufacturing and job creation, does not apply to developing countries.
“Arguably, wars in developing countries, including Ethiopia, cost beyond 100 billion dollars each year,” he said.
The past four years have seen both human and material resources from all over Ethiopia diverted from other priorities to manage the armed conflict, involving both government forces and opposition groups. Civilians have also been drawn into the conflict, either willingly or unwillingly.
Today, tens of millions of students have no access to education due to the closure of thousands of schools, some of which have been converted into military camps and makeshift shelters. Low-income individuals have been disproportionately affected, and many middle-class families have fallen into poverty.
Investment and job creation have declined dramatically, leading to a sharp decline in people’s purchasing power. Law and order remain elusive in many parts of the country. This has hindered progress towards achieving Sustainable Development Goals.
The free mobility of people and goods has been severely restricted for the past four years. Farming has been disrupted in large swathes of the Amhara region, which contributes approximately 35 percent of the nation’s crop production.
In southern Ethiopia, government structures have repeatedly failed to pay civil servants’ salaries for months. Recently, teachers’ union representatives expressed frustration over the delayed and often reduced salaries borne by teachers across the country.
Professor Teshome highlighted findings emphasizing the devastating economic consequences of conflict.
“Wars lead to GDP growing about 2.2 percentage points less than in peacetime; have resulted in negative growth in government revenue; negative growth in spending in education and health; have resulted in the reduction of welfare by another 18 percent of GDP; could leave a country 15 percent poorer; and could result in 30 percent or more of people living in absolute poverty,” he said.
Global Firepower.com ranks Ethiopia 49th out of 145 countries in terms of military strength, whereas its rank in terms of military expenditure is 93rd out of 145 nations. Yet, its spending has been increasing in folds.
While official data may not always reflect the true extent of military spending, the 2024 military balance report by the International Institute for Strategic Studies (IISS) estimates Ethiopia’s defense budget at a peak of USD 1.54 billion in 2023. It is likely that actual spending was higher, considering unreported purchases and operations.
In 2022 alone, the Ethiopian military budget increased by 111.42 percent.
“A harbinger of the difficulties facing the country is indicated in these numbers,” Teshome asserts. “This number is about one percent of GDP. No need to mention here the increases in external indebtedness! Yes, indeed. The current Ethiopian economy is a war economy.”
Cruel Realities
A photograph shared recently on social media by US Ambassador Ervin Massinga invoked the ire of many pro-government critics. The photo was a selfie, which the Ambassador took in a typical, less-than-aesthetic Addis Ababa neighborhood.
They questioned his choice of location, suggesting it was not a fitting representation of the country. Some accused Massinga, whose statements have put him at odds with the government in the past, of having ulterior motives. They argued he should have taken the selfie near one of the landmarks that have popped up as part of the government’s Corridor Project instead.
Unfortunately, the reality on the ground is quite different from the idealized image portrayed by Massinga’s critics.
The Multidimensional Poverty Index (MPI) report, compiled by the United Nations Development Program (UNDP) and the Oxford Poverty and Human Development Initiative (OPHD), paints a bleak picture of worsening poverty in Ethiopia.
The report places Ethiopia at the very top (or bottom) of the list for the proportion of population living in poverty at 72 percent or roughly 86 million people. While the exact percentage may be debatable due to differing population estimates, the report clearly indicates that Ethiopia’s poverty situation is not getting any better.
The Multidimensional Poverty Index aims to capture a broader spectrum of poverty, measuring poverty beyond income. It considers factors such as education, healthcare, and basic infrastructure.
Professor Teshome and Arega Shumetie (PhD), a researcher at the Ethiopian Economics Association, are among those who argue that the MPI provides a more comprehensive measure of poverty than traditional income-based approaches.
Teshome says the MPI’s ability to assess poverty at the individual level makes it an invaluable tool.
“It is about the citizen and in that regard, I would label it a ‘citizen’s index’,” he noted. “It is more useful for targeted intervention as it helps reveal to policymakers where their focus should be.”
Ethiopia’s MPI score has worsened since the previous assessment, with the ongoing conflict exacerbating poverty levels. For Arega, Ethiopia’s high poverty ranking is not surprising, given the devastating impact of recent conflicts on the country.
Controversial Corridor Project
Despite facing numerous challenges, the administration seems more focused on maintaining a positive image than addressing pressing issues. The prioritization of projects like the ‘Corridor Development Project’, while neglecting other crucial political economy matters, highlights this tendency.
This project has captured significant attention, with the Prime Minister actively involved in its implementation.
Over the past 10 months, it has transformed Addis Ababa’s main thoroughfares, creating a more attractive environment with its improved roads and sidewalks. However, the project’s economic value remains a puzzle to many. Despite this, the government continues to prioritize the project, investing billions of birr and expanding its scope beyond the initial four corridors.
Initially estimated at 33 billion Birr for four corridors, the project’s scope and projected cost have since expanded to include regional cities and towns. However, the source of the substantial funding for this expanded project remains unclear. While many acknowledge the project’s aesthetic appeal, questions remain about its economic viability. Is the significant expenditure justified?
Experts who spoke to The Reporter Magazine struggled to find a compelling justification for the project.
A senior urban planner, who requested anonymity, observed that urban renewal projects can sometimes stimulate economic activity. However, he says he does not see the Corridor Project aligning with this goal.
He highlights the limited competition in the massive infrastructure project.
“I believe the project can involve at least 200 consultants and 600 contractors. Guess how many are now involved? Just two. It was awarded to just two companies in a monopoly and without any competition,” said the expert.
Professor Teshome agrees with the theoretical notion that such projects can stimulate economic activity. He cites the example of the United States, which emerged from the Great Depression through related government-led job creation initiatives.
“Most American national parks were built during that period. So were city streets paved with bricks, and other national projects, just to mention a few” he noted.
However, he finds it difficult to compare his example to current developments in Ethiopia.
What is different, however, with this corridor project, is the displacement it has caused, the unjust nature of its implementation, and the casual disregard for humanity. I believe, besides just homelessness, that the actions of policymakers will help worsen the elements in the MPI measurement tool,” said Teshome.
Although data is hard to come by, the project has led to a significant number of job losses as countless small and medium businesses saw their premises demolished overnight.
“The project has demonstrated the government’s ability to efficiently complete projects, a stark contrast to the lengthy timelines of previous infrastructure projects. That’s all,” noted the senior urban planner. “This energy should have been directed towards more urgent and critical areas.”
Despite the criticism, the project is expanding to regional cities and towns.
The Prime Minister recently reaffirmed his administration’s ‘commitment’ to the corridor project and its intention to ‘continue to demolish and build.’ Mayor Adanech Abiebie echoed the sentiment during a recent meeting with city residents.
Working Against the Master Plan
Urban planners argue that the project, among other things, undermines the principles outlined in the city’s structural plan (colloquially referred to as the ‘Master Plan’), a factor that played a significant role in the protests against former Prime Minister Hailemariam Desalegn’s administration.
Gentrification
The displacement of residents is among the most controversial and sensitive aspects of the citywide infrastructure project. The Structural Plan emphasized the importance of incorporating local residents into the renewed neighborhoods. While a small-scale project in Aware, to the northeast of the Office of the Prime Minister, aimed to achieve this, larger-scale projects, such as those in Piassa, Arat Kilo, and Kazanchis, have resulted in mass evictions.
These practices further fuel skepticism about the project and lend credence to claims of deliberate gentrification.
Unjust Implementation
“Another major concern is that displaced residents have received compensation based on book value, rather than market value, which is significantly lower,” said the urban planner.
He believes that the corridor project was initiated hastily and without adequate planning.
“According to the original structural plan, separate institutions were supposed to be established to oversee the project. However, due to rushed implementation, serious mistakes have occurred,” he told The Reporter Magazine.
“Unfortunately, on the National Theater-Mexico corridor for instance, the underground utility line project, despite being initially launched, was not properly executed and now requires significant rework. This is a disappointing setback,” he said.
Commitment to Misplaced Focus
While its economic viability remains elusive, the corridor project continues to expand, with significant investments being made. Many remain puzzled about how Addis Ababa, let alone urban centers in regions mired in conflict and instability, can afford to make the investment.
The skepticism from experts is further justified by the actions of the Bahir Dar City Administration, which has initiated a similar corridor project despite being a well-planned city and facing significant political instability.
However, the city administration has issued a tender for the corridor project with an unusual condition: the winning bidder must waive its right to payment for three years. This requirement highlights the financial constraints faced by the administration and casts doubt on the project’s feasibility.
“Instead of focusing on vanity projects like the corridor, the government should prioritize addressing the pressing needs of the people and the serious problems that are facing the country’s existence,” Arega emphasized.
The urban planner concurs.
“There are more serious and urgent assignments than trying to beautify an already attractive city,” he said.
Economic theorists often refer to the allocation of resources between military spending and civilian goods as the ‘Guns vs. Butter’ model. In Ethiopia, the administration appears to be tilting towards a ‘Guns and Corridors’ approach, prioritizing military spending and white elephant projects over social welfare and meaningful investments.
“Ending the armed conflict and restoring law and order across Ethiopia is a crucial step towards economic recovery,” Arega noted. “Inflation, although slightly reduced, continues to impact household budgets and pose a significant threat to countless households.”
