World Economy

Ethiopia Risks Economic Collapse

Ethiopia Risks Economic CollapseEthiopia Risks Economic Collapse

The Ethiopian government’s increasing reliance on foreign loans is posing a serious risk of economic collapse, a renowned economist has revealed.

“Take for instance China, which has loaned over $17 billion to the Ethiopian government for infrastructure projects. Our total investment is 40% of the GDP. Our saving is between 10-20% of the GDP, AllAfrica reported.

“We import $13 billion and export $3 billion. They are the ones who are filling all these deficit gaps,” said Alemayehu Geda.

The Addis Ababa and London universities don was presenting his paper on foreign direct investment in Ethiopia and credit financing.

“What will happen if they stopped such financing tomorrow? What if, for instance, the Chinese government tomorrow says sell for me Ethio Telecom or sell to me Ethiopian Airlines or give me some share or buy my airplanes, or I will stop such credit financing? The country will collapse, I guarantee you,” he said.

Alemayehu went on: “About 77% of our imports are strategic items. Fuel only has 25% share of the total import. As a result, even if we want to reduce these imports, we can’t. Ethiopia needs to minimize strategic vulnerability.”

The don elaborated giving the example of how the South Koreans mitigated against such dependency risks when they used to source 75% of their imports from the US some decades ago.

Alemayehu presented his paper in Addis Ababa at the launch of a two-year 12 series of public dialogue by the Forum for Social Studies—a local civil society, partially financed by the UK’s Department for International Development.