Thursday, February 29, 2024
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Ethiopia : The Road to Slavery

By Kebour Ghenna

It’s no exaggeration to say that December 11, 2023, is a historic day for the Ethiopian economy. For the first time in its history, Ethiopia missed its debt interest payment of US$33 million coupon on its one-billion-dollar Eurobond, becoming the third African nation to default within a span of three years.

Virtually all the experts – economists, political leaders, priests and preachers – have unequivocally urged the government to honor its US$33 million interest payment on schedule, without any hesitation.

People’s sentiment: At most – at most – instead of purchasing 15-20 missiles why not consider allocating a portion of that budget toward debt repayment?

Why such insistence?

Because defaulting on the Eurobond would severely damage Ethiopia’s credibility within the international capital market. Doesn’t the minister of Finance know that… what about the National Bank Governor?

Shouldn’t these ministers know that bondholders will prioritize maximizing to the fullest their returns before any potential debt rescheduling takes place? Regrettably, our economy and finance officials stand as the architects of Ethiopia’s current misery. Their actions have not only devastated the country’s economy but also tarnished its reputation, making it exceedingly difficult to secure future loans. We are now living in a bankrupt country,

What happens next?

1. International debt acquisition will become unattainable for us in the global markets.

2. A severe depreciation of the currency could lead to aggressive inflation, possibly reaching around 100%.

3. Many national assets (telecom, airline, power etc) may have to be leased to those lenders.

4. Local businesses will face cash flow constraints, necessitating cash-based raw material imports, impacting business cycles and reducing activity.

5. To cover expenses, the government might resort to increased taxation, imposing heavier financial burdens on the populace.

6. Fear of profit repatriation constraints might prompt multinational corporations to exit their operations in Ethiopia.

7. Significant layoffs and job cuts will result.

8. As prices soar and incomes decline, social discontentment is expected to markedly rise.

9. Country will go for debt restructuring on the terms of lenders.

10. Government will have less funds for welfare programs meaning the poor will suffer the most.

In a nutshell. Things are going to get messy!

Editor’s note : the article was first published on the personal facebook page of Kebour Ghenna

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16 COMMENTS

  1. Sir, I have always admired your astute and rather unfortunately true predictions of where we are heading over a series of your articles. My fear though is that we are heading into an unimaginably deep abyss-beyond our direst expectations. Today we stand perched on a crumbling ledge over the chasm. God save Ethiopia.

  2. Aba hawas!
    $million is not big for Ethiopia to pay but there are things you don’t know.
    Kebur genna may be oriented with classical economics.
    He doesn’t know digital economics and new growth models.
    I advise him to read new economic growth models. Things are moving fast but he is behind a time.

    • Is being bankrupt good symptom in ne growth models? In any economic growth model bankruptcy is bankruptcy; a country is counted as failed state.
      By the way growth models are not true ways of escaping front poverty. You can check them empirically.

    • Dear Janna,

      I have found your comment to be very interesting. You’re that the world has been going through trends in both areas of politics and economics. I am an engineer by trade but I have read books dealing with economics over the years by the suggestions of friends. Can you name a book or two that deals with the new growth models and digital economics. I tied to google these two and was overwhelmed by the output. This is an honest question and I would appreciate it very much.

    • Google and you will see their difference.
      Classical economists and modern(digital) economists have different perspectives on how the economy works and how it should be managed. Classical economists, such as Adam Smith and David Ricardo, were prominent in the 18th and 19th centuries. They believed in the concept of laissez-faire, which advocates for minimal government intervention in the economy. They also emphasized the importance of free markets, self-interest, and the role of competition in driving economic growth. On the other hand, modern economists have built upon the ideas of classical economists and have introduced new theories and perspectives. Modern economists often focus on the role of government intervention in addressing market failures, income inequality, and externalities. They also incorporate behavioral economics, which considers psychological factors in economic decision-making. Overall, while classical economists emphasize free markets and minimal government intervention, modern economists take into account a wider range of factors and advocate for more active government involvement in the economy to address various issues.

  3. Aba hawas!
    $33 million is not big for Ethiopia to pay but there are things you don’t know.
    Kebur genna may be oriented with classical economics.
    He doesn’t know digital economics and new growth models.
    I advise him to read new economic growth models. Things are moving fast but he is behind a time.

    • What is this nonsense, Janna?

      So, Abiy Ahmed and his gang of idiots have a ‘cunning plan’ in defaulting, is that what you are saying?

      It seems you haven’t been reading Economics, neither classical or new economic models.

      What you have been reading seems to be about Baldrick and his cunning plans.

      Abiy Ahmed is, as Blackadder was saying about Baldrick; the stupidest man in the world, I might add the craziest, too.

      “Blackadder : Baldrick, I have a very, very, very cunning plan.

      Baldrick : Is it as cunning as a fox what used to be Professor of Cunning at Oxford University but has moved on and is now working for the U.N. at the High Commission of International Cunning Planning?

      Blackadder : Yes it is.

      Baldrick : Hmm… that’s cunning.”

      Blackadder : Oh god. I’m going to spend the rest of my life in a small wooden room with two toilets and the stupidest man in the world.

      Baldrick : Wait my lord, do not despair. For I have a cunning plan.

      Blackadder : Can I say I’m not optimistic Baldrick?

      Baldrick : To be quite frank my lord, neither am I. My family have never been very good at plans.

      Blackadder : So. With suitably low expectations, what is your plan to get us home? “

  4. Is being bankrupt good symptom for growth? In any economic growth model bankruptcy is bankruptcy; a country is counted as failed state.
    By the way growth models are not true ways of escaping front poverty. You can check them empirically.

  5. Regrettably very sad. When immature’s and politically appointed economic experts are taking the driver sit of the countries big economic sector and policy strategic leads, such a big messy decision expected. The big problem still the sad part, they still not admitted and learning from their big mistakes and come up and work on the solution side. The more economic inflation, countries reputations in the international economic sector and banking relationships unrecoverable. What is next? who will be accountable? what is the role of private banking sectors?

    Sad!

  6. The Ethiopian knows that the EU is after getting it’s own interests. They are always discriminating against the African Countries because they demand very high interest rates and they preferentially demand nothing from European borrowers.

  7. Ethiopia chose the maniacs to rule them be it, let them suffocates the economy and the people of Ethiopia. They’re are cursed and blinded of hate towards Tigrayans they deserve what they have now. Pray Tigrayans us out of mess and have they own country great Tigray.

    • I believe Tigrayans had in control all the asset, the power, the decision-making apparatus, but abused it beyond comprehension. They did not even use their leadership for their poor back in Tigre countryside. Ethiopians loved them, but they mismanaged it with too much pride and looting. May be few of them, but too much pride and the pride destroyed them. Leadership requires discipline, ethics, humbleness, and they lacked it, especially after Melese passed away. They destroyed themselves in their own hands.

      • The Tigrayans were able to defeat the Derg in 1991 because some Amharas remained neutral, while others joined the war as members of EPDM, led by Tamirat Laynie, a partner to TPLF’s Meles Zenawi. During the war with the Derg, the TPLF fighters did not interfere with the local Amhara population and gained their support in the fighting area. However, in the war with Abiy Ahmed, the TPLF targeted innocent civilians, killing urban and rural people indiscriminately, raping women and underage girls, destroying Amhara factories and infrastructure, and robbing money from banks. This is in sharp contrast to the behavior displayed by Fanos, who were cordial and disciplined. Getachew Reda and Tsadikan Weldetinsae even went as far as saying they would take revenge against Amhara elites, when in fact the war was waged against them by Abiy Ahmed. Seventeen of the 19 generals deployed in the Tigray war were Oromo. The Amharas fought back harder, which led to the collapse of Tigrayan forces. The Tigrayans’ general political stand is based on hatred for Amhara, and because of this, they will never succeed. Tigrayans managed to go to the rest of Ethiopia because of Amharas. If Amhara shut their borders, Tigray is going to be a prison for Tigrayans.

  8. Aby Ahmed,immoral,stupid, hitler, of Africa .at the end he will take Ethiopia to hell, may God save Ethiopia, and forgive him. Time will teach Aby followers,Aby in the path of Evil,he is destroying horn of Africa working with CIA,BUT AT THE END HE WILL BE IN THE BASKET OF DEVIL.THE FIRE HE IS IGNITING WILL TAKE HIM TO THE DEVIL CARGO.

  9. Tigraweti said, “They’re are cursed and blinded of hate towards Tigrayans they deserve what they have now.” You are amazing creatures. You have invaded Amhara and Afar three times, and now you are playing the victim? TPLF killed innocent Amhara civilians, raped women and underage girls, looted billions of dollars, and destroyed Amhara infrastructure and companies. What a tragic mindset!

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