Teshome Abebe
Prime Minister Abiy Ahmed’s macroeconomic reforms in Ethiopia, backed by the International Monetary Fund (IMF) and the World Bank (WB), have aimed to address long standing economic challenges such as foreign exchange shortages, high inflation, and unsustainable debt. These reforms, notably the shift to a market-determined exchange rate and the liberalization of monetary policy, were formalized with a $3.4 billion IMF extended credit Facility (ECF) approved in July 2024, alongside additional WB support totaling around $10.7 billion in external financing. While these measures are designed to stimulate private sector-led growth and stabilize the economy, their implementation and broader political context have raised serious concerns about the marginalization of Ethiopia’s northern regions, Amhara and Tigray.
The reforms, part of Abiy’s “homegrown economic reform” (HGER) agenda, prioritize macroeconomic stability and debt sustainability, often necessitating tough fiscal adjustments. However, their arguably abrupt rollout has coincided with ongoing conflicts and political tensions in both Amhara and Tigray, regions that have historically been at odds with the central government. Critics argue that the economic policies, while not explicitly targeting these regions, have sidelined them by failing to address their specific postwar recovery needs and by exacerbating existing grievances through a focus on centralized control and resource allocation that appears to favor other areas.
In Tigrai, the aftermath of the 2020-2022 war with the federal government has left the region economically devastated, with destroyed infrastructure, a collapsed agricultural sector, and widespread humanitarian needs. The flawed Pretoria Agreement of November 2022 ended active fighting, but Tigrayan leaders and residents contend that federal efforts, including those tied to IMF-backed reforms, have not prioritized reconstruction or humanitarian aid delivery. For instance, despite the IMF’s emphasis on expanding social safety nets to mitigate reform impacts on vulnerable populations, Tigrayans argue that their input has been insufficiently considered in the reform process, and aid remains blocked or inadequate, with reports of famine conditions persisting into 2025. The focus on market liberalization—such as floating the birr, which lost nearly half of its value in 2024—has also driven up costs for imports like food and fuel, disproportionately affecting war-ravaged Tigray, where local production capacity is minimal.
Similarly, the Amhara region, once a key ally of Abiy during the Tigrai war and helped save his regime, has faced its own marginalization as well as destruction. Since 2023, significant clashes between federal forces and Amhara’s Patriotic Fano forces—sparked by the government’s attempt to disarm regional forces and cynically marginalize the region—have led to an unwinnable war in the region. This regional war has disrupted transport and economic activity, undermining the potential benefits of macroeconomic reforms. The IMF and WB support aims to boost private sector investment, but Amhara’s insecurity deters such activity, leaving the region economically isolated—a condition favored by the government as it serves its long-term interest in weakening Amhara. Moreover, Amhara nationalists, who supported Abiy in reclaiming disputed territories like Wolkait (referred to as Western Tigray circa 1991 by TPLFites) feel betrayed by his opportunistic pivot to Oromo nationalism and centralized governance, which they see as diluting whatever influence and economic prospects they may have had under the reform agenda.
The sidelining of these regions is not necessarily a direct intent of the reforms but rather a consequence of their uniform application across a fractured nation. The IMF and WB have praised Ethiopia’s ‘progress’, with IMF managing director Kristalina Georgieva embarrassingly noting in February 2025, in Addis Ababa, that the reforms are fostering a “vibrant private sector-led market economy” without having stepped out of the City State. Yet, this vision appears disconnected from the realities of Amhara and Tigrai, where conflict and distrust limit economic integration. Aiby’s administration has also been accused of using the reforms to consolidate power, prioritizing fiscal discipline and debt restructuring over regional reconciliation, which critics say perpetuates a cycle of exclusion.
Furthermore, the reforms’ reliance on external financing and debt relief—projected to save Ethiopia around $5 billion—has shifted accountability toward international lenders, potentially reducing the government’s incentive to address northern grievances. In Tigrai, the lack of a robust transitional justice framework, despite IMF-supported reform rhetoric, fuels perceptions that the government is sweeping wartime atrocities under the rug. The fact that there is currently more dysfunction within the governance structure in Tigrai and the continued fracture of its regional political structure has made the situation even more concerning. In Amhara, the focus on tax mobilization and state-owned enterprise reform offers little immediate relief to a region engulfed in war and grappling with extreme insurgency and unprecedented displacement.
In essence, then, while Abiy’s macroeconomic reforms, bolstered by the IMF and WB support both financially and in personnel, aim to modernize Ethiopia’s economy, they have inadvertently sidelined two important regional states—Amhara and Tigrai—by neglecting their unique postwar challenges and prioritizing a centralized, ‘market-driven’ approach over regional equity. The disconnect between national policy and northern realities suggests that economic stabilization may come at the cost of deepening regional divides, challenging the inclusivity that these reforms claim to champion.
Teshome Abebe, PH.D. is Professor of Economics and a Former Provost.
Editor’s Note : Views in the article do not necessarily reflect the views of borkena.com
__
Subscribe: https://borkena.com/subscribe-borkena/
Join our Telegram Channel : t.me/borkena
Like borkena on Facebook
Add your business to Ethiopian Business Listing / Ethiopian Business Directory
Join the conversation. Follow us on X (Formerly Twitter) @zborkena to get the latest Ethiopian News updates regularly. Subscribe to YouTube channel To share information or for submission, send e-mail to info@borkena.com