Ethiopia's recent economic reforms have led to a remarkable surge in gold exports, with earnings skyrocketing by 540% to $488 million in the first quarter of the fiscal year 2024/25. This surge is attributed to the economic reforms initiated in June 2024 under the Home-grown Economic Reform Plan, which aimed to stabilize the economy following the currency liberalization that began in July [82b44b75]. Prime Minister Abiy Ahmed has noted the successful rollout of these policies, which have begun to yield positive results for the country's economy [82b44b75].
The National Bank of Ethiopia (NBE) reintroduced a market-based foreign exchange regime on June 29, 2024, which effectively collapsed the parallel market and reduced the disparity in the dollar cost to less than 3%. This shift has not only stabilized the currency but has also led to a significant increase in remittance inflows, which rose by 145% [82b44b75]. In September 2024, gold exports grew by 153% compared to the same month in 2023, generating nearly double last year's total of $255 million [82b44b75].
However, amidst these positive indicators, concerns have emerged regarding the Ethiopian government's approach to attracting diaspora investment. Mamo Esmelealem Mihretu, the NBE Governor, along with commercial bank presidents, is currently in Washington DC to encourage diaspora investment in Ethiopia. Critics argue that this initiative may be a deceptive attempt to extract funds from the diaspora, as the Ethiopian government is reportedly desperate for US dollars [c423761a].
The article highlights that export earnings for 2023/24 are 54% below target, and gold exports have plummeted from 12 metric tons in 2011/12 to just 4.2 metric tons in 2023/24. Foreign investment is also declining, with reports of foreign firms withdrawing and over 11,000 layoffs occurring in recent months [c423761a]. Furthermore, foreign aid has significantly decreased since Prime Minister Abiy Ahmed took office, raising questions about the viability of investing in Ethiopia when even foreign investors are leaving [c423761a].
The government has been accused of manipulating interest rates to transfer wealth, and the poor returns on investments in Ethiopia compared to the US, along with rising taxes and inflation, are eroding the value of potential investments. Critics warn that the diaspora may face increasing losses if they choose to invest under these conditions [c423761a].
As Ethiopia navigates the complexities of these economic changes, the government faces the challenge of balancing immediate economic hardships with the potential for sustainable growth. The success of these reforms will depend on effective policy implementation and the ability to foster an environment conducive to investment and economic recovery [9e841f55]. The ongoing situation in the Tigray region remains a concern, as residents continue to grapple with the repercussions of both conflict and economic instability [a1f13ae6].