PM Abiy’s Mama Economy
Recently, Ethiopia relaxed currency controls and restrictions as per the recommendations of the IMF, which provided it with a generous credit line. Theoretically, it’s a loan even if Abiy Ahmed, the prime minister, insinuates otherwise. He said that borrowing from the IMF is like “borrowing from your mother!” However, many countries, including Egypt and Kenya, are good examples of the consequences of borrowing from “the mother”!
The Ethiopian currency needed serious treatment because it was facing hardships; the country was unable to honor its external debt payment obligation of about $28 billion. The government decided to float the birr and stated it has plans for ameliorating any impact on the market.
Many countries have walked through that path and miserably failed to achieve much, and their economies are still suffering from runaway inflation and market instability. Would Ethiopia fare any better?
Providing subsidies for essential goods may partly alleviate the crisis but it will not solve the lingering problems; Ethiopian crisis is varied and deeper than appears on the surface. A nation used to squandering the lives of its citizens would not hesitate to squander its limited financial resources. Is the government disciplined enough to do manage that properly?
The current ruler neglected rural economy and concentrated on the capital city, which became a showcase of Abiy’s extravagance. Rural areas were not only neglected, but they also bore the brunt of his never-ending military adventure, pitting ethnic groups against each other, and destroying the little law and order that was in place. Military spending skyrocketed as his main concern became building defense forces of all kinds: drones, sophisticated communication equipment, artillery and the like.
Addis Ababa had a handful of palaces that his predecessors used, but Abiy insisted on building his own brand-new palace, a palace complex that dwarfs the presidential palaces of most wealthy countries. Large city portions were cleared of its residents and dwellings to make way for lakes, parks, and leisure walking spaces. Borrowing from his mother, and probably from his father as well, Abiy thought of himself the modern-day Shah Jahan and wanted to have his own version of the Taj Mahal on a hill, surrounded by the hanging gardens of Entoto.
War Economy
Abiy wanted to supplement and increase national revenues, but the only means he knew was to wage more wars. For years he has been pocking Eritreans and Somalis, by interfering in the affairs of the two countries and kicking off the primordial Abyssinian Red Sea coveting attempt, which is stealthily continuing. If he had directed all the resources, he wasted on igniting wars, provoking his neighbors, other Ethiopian ethnic groups, he could have found a lasting solution. The region could have found a peaceful, economically viable solution, mutually beneficial for Ethiopia and its neighbors. But Abyssinian rulers have a way of quickly turning into warlords—any solution that doesn’t spill blood is not worth pursuing. It’s the violent, macho culture.
His adventure seemed like a reassertion of the only Abyssinian legacy and embarked on a cycle of military adventure that left millions of Ethiopians dead, famished, lost their homes, and displaced. Much of the fertile lands became fallow and livestock perished. With very few mothers able to lend money to their children, poverty spread like wildfire. That six-year-old Abiy’s Caligula type rule has now manifested itself in spiraling inflation, joblessness and destitution.
Borrowing from mama is emotionally attractive, better yet, if Papa loan is added to it. And if a juvenile child oversees the spending of the loan, lives will be lost, and properties destroyed. Ethiopia’s investment is at its lowest, purchasing power is crippled, inflation is breaking the backs of the common Ethiopians, and low-income workers are condemned to a life of utter poverty. Unless there is economic stability, which mainly depends on good governance and political stability, any Mama Economy is doomed, it collapses under the watch of the likes of Abiy.
If one has equity in a house, he may borrow against it and invest it in a revenue generating business. Otherwise, both the home and the business will be lost. Spending without generating equal revenue leads to a point where obligation outweigh revenues. In that case, the lenders (including mama) chase after you to collect. And you can’t plead for a bailout or reschedule loans endlessly.
That should be enough reason to embark on the task of overhauling the entire economy; and that is mostly what mama and other lenders recommend or dictate. Of course, it comes with conditions and directives: divest by selling public assets, float your currency, stop subsidies, increase taxes, tariffs, and duties, decrease public spending, and do with small bureaucracy—You might be forced to fire your officials and workers. The list goes on. And that is akin to the age-old debates between the Democratic and Republican parties of the USA: small governments vs big government.
What weak countries abhor about loans
Most borrowing countries abhor being dictated to, but they do not mind dictating their own people, and they do not want to surrender control of the economy, “sovereignty,” as they call it.
Ethiopia is indebted to countries on the four directions of the wind. The once-promising projects like the Renaissance dam, which by now should have been selling energy to its neighbors, is yet to be able to supply its neighbors as planned. In fact, it might start a war with any of its neighbors and with itself—that is, if the neighbors didn’t find a reason to fire the first bullet.
The same goes for the Djibouti-Addis Ababa railway, whose performance and revenues are unsatisfactory, forcing Abiy’s government to think of a patch-up remedy. That explains his obsession with a sea outlet because ground and rail transport failed to deliver the expected level of performance–but how can it be when for six-years, there has been a continuous war and instability on every corner of the country?
Land issues are prevalent within and among federal territories even before Abiy came to power. Public grievances are overwhelming, and the government’s cosmetic remedies is not enough to cure the sick mama economy of Ethiopia.
Welcome to 20-birr sandwich bread at breakfast inns, in a country where most earn less than Eb 2000, 75% of that spent on rent for a one-room studio. When a kilo of onions cost EB120, the salary is equivalent to the cost of ten- kilograms of onions or 30 kilograms of tomatoes.
Prices are hiking and the value of the Birr is expected to follow a downward trajectory.
Why should Eritreans be concerned?
Stalwarts control Ethiopia, all of them teaching by example, and training the people on how to swindle and extort from unsuspecting commoners.
Ethiopia, Eritrea, Sudan, and Somalia are all changed for good, through different means but leading to the same result: violence, injustice, and chaos. It may get worse if the region’s people, their leaders, and the elite do not learn how to deal with the lenders and funders. If they don’t, the leaders and the people will remain marionettes, dancing to the tune of the ugly songs the governments play for them.
Money, in any form, be it a loan, grant, or financing, is good if you know how to handle it. But if you are a novice in diplomacy and have no clue with how to manage the economy, or how it is supposed to function, if you are not thrifty enough, human enough, and honest enough, you remain a clown trying hard to look intelligent by expanding your wardrobe space, like a fashion model.
Money, in any form, be it a loan, grant, or financing, is good if you know how to handle it. But if you are a novice in diplomacy and have no clue how to manage the economy or how it is supposed to function, if you are not thrifty enough, human enough, and honest enough, you remain a clown trying hard to look intelligent by expanding your wardrobe space, like a fashion model.
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