Why Ethiopias Liberalisation And Privatisation Agenda Is A Mistake

On December 17, 2024, Ethiopias parliament passed legislation enabling foreign banks to enter Ethiopias hitherto closed financial sector. The legislation, known as the Banking Business Proclamation, permits foreign banks to establish subsidiaries, open branches or representative offices, and acquire stakes in local banks.

The liberalisation of the financial sector which includes the operationalisation of a stock market is part of the Abiy Ahmed governments ongoing effort to liberalise and privatise the commanding heights of the Ethiopian economy.

Under its so-called Homegrown Economic Reform Agenda overseen and funded by the International Monetary Fund IMF and Word Bank the Abiy government has adopted a slew of precarious economic policies that have shifted Ethiopias economy away from the developmental state model that prioritised manufacturing and industrialisation in favour of neoliberalism.

In so doing, it is expediting the liberalisation of the economy and privatisation of its commanding heights while at the same time, allocating limited foreign exchange earnings toward tourism and mining.

Currently, the Abiy governments agenda extents to telecoms, banking, power, logistics, and transportation. There have also been discussions about selling shares in Ethiopian Airlines the countrys most profitable state-owned enterprise. Moreover, as a consequence of a new IMF structural adjustment program signed in July 2024, the Abiy government liberalised the exchange rate and floated the Ethiopian birr leading to a 170 depreciation of the currency, increasing poverty , and precipitating a cost-of-living crisis . Simultaneously, in recent months, the banking, retail, and real estate sectors have all been liberalised.