Ethiopia is an east African country of 135m people. Its prime minister is Abiy Ahmed. The country is grappling with multiple ethnic insurgencies.
Its government has issued "diaspora bonds" to raise money from émigrés for infrastructure projects, part of a broader pattern of African emigration as economic strategy. Earlier in 2025 Ethiopia wrote to Norway and other European countries offering to export nurses. Ethiopian Airlines is the African carrier with the most extensive network. Ethiopia's capital hosts the African Union.
Ethiopia was once touted as the "China of Africa" on account of its commitment to export-oriented industrialisation, but manufacturing as a share of GDP fell from a recent peak of 6% in 2017 to 4.4% in 2024.
Long one of Africa's most state-controlled economies, Ethiopia has begun to liberalise. Following decades of communist dictatorship, the government allowed some space for free markets in the 1990s but retained tight restrictions on private enterprise, growing through debt-fuelled state investment in infrastructure. A sovereign default in 2023, following a devastating civil war, forced the country to ask the IMF for a bailout.
In 2024 Ethiopia floated its currency, the birr, and entered an IMF programme worth $3.4bn (3% of GDP). It has opened banking, retail and other sectors to foreign competition and relaxed restrictions on repatriating profits. On July 1st 2025 parliament approved a law allowing foreigners to own property. In January 2025 the country opened a stock exchange. It plans to privatise some state-owned firms.
The birr has lost more than half its value against the dollar. Ethiopia's central bank says annual inflation fell to 14.4% in May 2025, from 23% the previous year. The fiscal deficit has shrunk to 1.5% of GDP, down from 4.2% in 2022, according to the IMF. The cheaper birr has boosted exports, particularly coffee and gold. On July 2nd 2025 Ethiopia reached a deal with external creditors, including China, to restructure some $3.5bn of debt, 11% of the total. The next day the World Bank agreed to $1bn in grants and concessional loans. The IMF estimates the economy grew by 7.2% in the year to July.
Stefan Dercon of Oxford University, who has advised several Ethiopian governments, compared the reforms to the transition economies after the fall of the Soviet Union. Yet the IMF relies on government data for its estimates and has repeatedly complained about "the quality and availability of economic statistics". The World Bank said in July 2025 that it could not estimate Ethiopia's national income for the current fiscal year.
Fiscal belt-tightening has resulted in savage cuts to social spending. Food and cash transfers to poor households were slashed by a third last year. At least 8m children are thought to be out of school. The country's doctors launched a month-long, nationwide strike in May 2025 after seeing their salaries fall by roughly two-thirds in real terms over six years. At the same time Abiy has continued to spend billions of dollars on vanity projects, such as an opulent new palace, a planned $10bn airport near Bishoftu to be Africa's largest, and the demolition and rebuilding of large parts of Addis Ababa with luxury apartments, parks and cycle lanes.
An initial public offering for Ethiotelecom, the state telecoms firm, managed to sell just 11% of the shares on offer in April 2025. The IMF said foreign direct investment had been "weaker than anticipated", at 3.2% of GDP compared with a peak of more than 5% in 2017. The IMF has warned that Ethiopia's banks are too busy lending to the state to support local businesses. Investors say reforms have been skin-deep: state-owned firms still enjoy unfair advantages and the country remains a licence raj. Corruption, which used to be relatively rare, seems to be worsening. In 2023 almost two-thirds of Ethiopians felt it had increased, according to Afrobarometer. Abiy has conceded that corruption has become "normalised" but maintains it is limited to petty graft.
Abiy Ahmed initially released dozens of jailed journalists and lifted bans on independent outlets. By 2026 scores of journalists had been arrested, beaten or forced into exile, and many foreign reporters expelled. In February 2026 the government revoked the licence of the Addis Standard, one of the few remaining critical local outlets, and in April masked men abducted its managing editor, Million Beyene. A media regulator official said fighting the outlet was a matter of "national survival". Ethiopia is preparing for a general election in June 2026, but many opposition figures are in jail or exile and opposition parties have been co-opted or banned.
Since late 2025 the Rapid Support Forces from Sudan have maintained a military footprint in Ethiopia's far west near Kurmuk, allegedly including a training camp for thousands of fighters. Satellite imagery analysed by Yale University's Humanitarian Research Lab points to the presence of RSF vehicles at an Ethiopian army base. In March 2026 the RSF captured Kurmuk, a town in south-eastern Sudan on the border with Ethiopia, staging the offensive from deep within Ethiopian territory—the first time the RSF is known to have done so. The Ethiopian government did not respond to the allegations.
Aliko Dangote, Africa's richest man, announced a $2.5bn fertiliser project in Ethiopia in 2025.
China has trained Ethiopia's security forces and Chinese firms have provided surveillance and internet-censorship systems. Ethiopia has become more heavily monitored and repressive with the help of this assistance, yet it is teetering on the edge of chaos, with insurgencies raging in its two most populous regions.
In April 2024 a 188-seat passenger ferry arrived at the port of Djibouti and was hauled overland to Abiy Ahmed's resort at Lake Tana—a journey that involved dragging it across a desert and through rebel-infested mountains—illustrating both the scarcity of modern boats on African waterways and Abiy's fondness for prestige projects. An insurgency around Lake Tana since 2023 has kept the ferry's seats empty.
The Grand Ethiopian Renaissance Dam (GERD) on the Blue Nile is Africa's largest hydropower project. First conceived by Emperor Haile Selassie more than half a century ago and built over 15 years, it was officially opened on September 9th 2025. Its 13 turbines can produce more than 5,000 megawatts of electricity. After international institutions refused to finance the project, Meles Zenawi, a former prime minister, called on ordinary Ethiopians to fund it through low-denomination bonds. Contributions were not always voluntary, but the collective effort produced an enduring sense of national pride; even Abiy Ahmed's most vehement critics hailed the dam as a triumph.
Just over 22% of Ethiopia's population is connected to the electricity grid. The GERD could supply millions more with power, both domestically and through exports. Ethiopia already earns some $100m a year selling electricity to Sudan, Kenya and Djibouti. Abiy claims the dam will eventually generate $1bn a year in revenue. Yet the country lacks transmission infrastructure: at the current pace, just 27% of households will have grid connections by 2030, far off the national target of 96%. Most surplus power is consumed by crypto-mining firms that have built their own power lines.
The dam has long caused rancour with downstream Egypt and, to a lesser extent, Sudan. Years of negotiations have failed to produce agreement on sharing Nile water, particularly in times of drought; the last round broke down in 2023. Egypt fears the dam could choke off its water supply and has described it as "a matter of life and death". Since the breakdown in talks, Egypt has stepped up efforts to support the Fano, an Ethiopian rebel movement, and has strengthened ties with Eritrea.
Ethiopia banned the sale of internal-combustion-engine vehicles, not as a green measure but to cut spending on imported fossil fuels and save foreign currency. By 2025 some 60% of new cars sold in the country were battery-powered, fuelled by a wave of cheap Chinese-made EVs.
In March 2025 one faction of the TPLF, backed by its armed forces, forcibly removed Tigray's interim president—a politician deemed too conciliatory towards Abiy—and installed a general in his place. That prompted a group of disaffected Tigrayan soldiers to decamp to the neighbouring Afar region, where they formed an anti-TPLF militia with the covert support of Ethiopia's government. They have frequently skirmished with their former comrades in Tigray.
Tensions with neighbouring Eritrea continue to rise, in large part because Abiy has made no secret of his desire to grab its Red Sea ports. On September 27th 2025 the Ethiopian army declared it would "pay any sacrifice" to win back the port of Assab. In July 2025 one of Abiy's circle called for the two countries to be joined in a "supranational union". He has been equipping his army with fighter jets, missiles and drones. An invasion would be fiercely resisted: Eritrea would probably get support from Egypt, the Sudanese Armed Forces, and the TPLF, with which Isaias Afwerki has struck up a tactical alliance against Abiy.
Abiy's principal foreign ally is the United Arab Emirates. Egypt, which backs the Sudanese Armed Forces and is feuding with Ethiopia over the mega-dam on the Nile, has strengthened ties with Eritrea and is alleged to have sent weapons to some of Abiy's opponents.
The concept of "Greater Tigray"—uniting the Ethiopian region of Tigray with Eritrea—has been revived. The violence Abiy unleashed in Tigray led many there to demand secession. Some influential Tigrayans see every reason for "a serious reconfiguration" of the colonial-era border.
Neither Ethiopia nor Nigeria—Africa's two most populous countries—has carried out a national census in nearly 20 years. This makes measuring the human cost of conflicts extremely difficult. The war in Tigray (2020-22) illustrates the problem: ACLED, an America-registered conflict monitor, counted 5,325 fatalities based on specific incident reports; the most commonly cited death toll of 600,000 was based on a claim by Olusegun Obasanjo, then the African Union's envoy; and a study by researchers at the London School of Hygiene and Tropical Medicine put the number, including war-induced hunger and disease, at closer to 102,000. All tallies exclude fatalities outside Tigray. Ethiopia's government switched off the internet in Tigray for months to prevent word of wartime casualties from getting out.
Since 2023 the government has been fighting the Fano, a loose coalition of rebel groups claiming to represent the Amhara, Ethiopia's second-largest ethnic group. The conflict follows the devastating war in Tigray (2020-22), in which hundreds of thousands of people were probably killed. The TPLF dominated Ethiopian politics for nearly three decades before Abiy took office in 2018. In the summer of 2021 Tigrayan rebels marched to the gates of Addis Ababa, but the government had built up a large arsenal of drones from Turkey, Iran and the UAE, which it used to wreak havoc on Tigrayan supply lines and beat back the offensive—a turning-point in the war. Drones have been less effective against rebels in the mountainous Amhara region. Abiy's strategy of arming local militias to fight insurgents has tended to backfire: the Fano themselves were government allies during the Tigray war before turning against it. In Oromia the government relies on multiple Oromo militias to fight the Oromo Liberation Army, another ethno-nationalist rebel group.
In a surprise offensive in late September 2025, the Fano routed government forces in eastern Amhara. The scale of the offensive "sent shock waves through Addis," according to a former Ethiopian official. The Fano probably had help from Eritrea and the TPLF. Commanders from Tigray and Amhara, as well as Eritreans and rebels from Oromia, recently met in Sudan to discuss joint military planning against the federal government.
Evidence of army atrocities against civilians has mounted. In March 2025 soldiers massacred dozens of civilians in Birakat, in the Amhara region, after clashing with local militias. In January 2024 troops summarily executed dozens of civilians in the town of Merawi, according to Human Rights Watch. In May 2025 the African Union's human-rights body held a hearing accusing the army of extrajudicial killings, torture and sexual violence in Tigray.
On January 29th 2026, following clashes between the Ethiopian army and TPLF forces, the government suspended all flights into and out of Tigray. Two days later government drones struck targets deep in central Tigray. Tadesse Werede, Tigray's interim president, described the fighting as "something resembling an all-out war" but said his forces had withdrawn from some areas, stressing that "disagreements...can be resolved through dialogue." Flights resumed on February 3rd. The clashes began when TPLF forces crossed the Tekeze river into Tselemti, reportedly to remonstrate about the mistreatment of returning Tigrayans, though some speculate their real goal was to occupy strategic locations. In a speech to parliament on February 3rd Abiy Ahmed called the TPLF "traitors" working to "dismantle Ethiopia." The African Union offered to mediate; Ethiopia replied privately that the AU should stop meddling in its internal affairs.
During the Tigray war, Amhara militias—allied with Abiy Ahmed and Eritrea—seized Western Tigray, claiming it had been stolen from their people by the TPLF, which largely ran the country before Abiy came to power in 2018. The militias expelled some 750,000 Tigrayans, raping, murdering and torturing countless others. A peace deal signed in November 2022 ended the worst of the fighting but did not resolve the status of Western Tigray, which remains occupied by Amhara militias backed by the Ethiopian army.
The region has some of Ethiopia's most fertile land, including lucrative sesame fields, and has descended into low-level anarchy as several armed groups fight over its riches. Tigrayans are prohibited from owning land. Militiamen take their property and set them to work in the fields in conditions bordering on serfdom. Murder, rape and forced marriage are common. The government bars journalists from visiting, aid workers are rarely granted access, and the army blocks all roads in; the area's only airport has been shut down.
Army 70, an armed group in Sudan formed of exiled Tigrayans, recently helped Sudan's army retake Khartoum. Supplied with Sudanese weapons and newly battle-hardened, they have vowed to return and fight for Western Tigray. The TPLF has also pledged to ensure refugees can return to their homes and seems willing to use force to do so.
I can resist anything but temptation.