PM Abiy’s “Mommy Economy” – Awate.com

Recently, Ethiopia relaxed currency controls and restrictions on the advice of the IMF, which provided it with a generous credit line. In theory, this is a loan, although Prime Minister Abiy Ahmed suggests otherwise. He said that borrowing money from the IMF is like “borrowing money from your mother!” However, many countries, including Egypt and Kenya, are classic examples of the consequences of borrowing money from “Mom”!

The Ethiopian currency needs to be taken seriously because it is in trouble; the country cannot meet its external debt repayment obligations of about $28 billion. The government decided to let the birr float freely and said it has plans to mitigate the impact on the market.

Many countries have gone down this path but have achieved nothing, and their economies are still plagued by inflation and market instability. Will Ethiopia fare any better?

Subsidizing necessities may partially alleviate the crisis, but it will not solve the lingering problems; the Ethiopian crisis is multifaceted and deeper than it appears on the surface. A country accustomed to wasting the lives of its citizens will not hesitate to waste its limited financial resources. Does the government have enough self-discipline to manage these things properly?

The current ruler has neglected the rural economy while concentrating his efforts on the capital, which has become a classic example of Abiy’s extravagant lifestyle. Not only have rural areas been neglected, but they have also borne the brunt of his never-ending military adventures, stirring up conflicts between ethnic groups and undermining the existing law and order. Military spending has skyrocketed as his main focus has become building up various defense capabilities: drones, advanced communications equipment, artillery, and so on.

Addis Ababa has several palaces used by predecessors, but Abiy insisted on building his own brand new palace complex, dwarfing the presidential palaces of most wealthy countries. Large areas of the city were cleared of residents and homes to make way for lakes, parks and leisurely walking spaces. Taking a page from his mother, and possibly his father, Abiy sees himself as a modern-day Shah Jahan, and wants to build his own Taj Mahal on a hill surrounded by the Entoto hanging gardens.

War Economy

Abiy wants to supplement and increase state revenues, but the only means he knows is to start more wars. For years, he has been meddling with Eritreans and Somalis, interfering in the affairs of both countries, and launching Abyssinia’s original Red Sea covetousness attempt, which is still quietly continuing. If he had invested all the resources he wasted on starting wars and provoking neighbors and other Ethiopian ethnic groups, he could have found a lasting solution. The region could have found a peaceful, economically viable solution that would benefit Ethiopia and its neighbors. But Abyssinian rulers have a way of quickly turning into warlords – and any solution that does not shed blood is not worth pursuing. Such is the culture of violence, machismo.

His venture seemed to be a reaffirmation of the only heritage of Abyssinia and began a series of military adventures that resulted in the death, starvation, loss of homes and displacement of millions of Ethiopians. Many fertile lands were laid waste and livestock died. With few mothers able to lend money to their children, poverty spread like wildfire. The Caligula-like rule of the six-year-old Abiy has now manifested itself in rising inflation, unemployment and poverty.

Borrowing money from mom is emotionally appealing, and even better if it is coupled with a loan from dad. If a minor child oversees the spending of the loan, lives are lost and property destroyed. Investment in Ethiopia is at rock bottom, purchasing power is eroded, inflation crushes ordinary Ethiopians, and low-income workers are forced into a life of extreme poverty. Unless there is economic stability, which depends primarily on good governance and political stability, any momonomic economy is doomed to fail, and it will collapse before the eyes of men like Abiy.

If a person has equity in a property, he can borrow against the property and invest it in an income-generating business. Otherwise, both the property and the business lose money. Spending without generating an equal amount of income results in debt exceeding income. In this case, lenders (including mom) will chase you to collect the money. You can’t keep asking for bailouts or rescheduling the loan endlessly.

This should be sufficient reason to embark on reforming the entire economy; and this is mostly what mom and other lenders have suggested or instructed. Of course, it comes with conditions and directives: divestment through the sale of public assets, floating the currency exchange rate, stopping subsidies, increasing taxes, tariffs and duties, reducing public spending, and dealing with the petty bureaucracy – you may be forced to fire your officials and workers. And so on. This is similar to the age-old debate between Democrats and Republicans in the United States: small government versus big government.

Why weak countries hate loans

Most borrowing countries hate being told what to do, but they don’t mind commanding their own people or giving up control of their economy, what they call “sovereignty.”

Ethiopia is in debt to countries on all sides. Once promising projects like the Grand Ethiopian Renaissance Dam were supposed to sell energy to its neighbors, but they have yet to deliver energy to their neighbors as planned. In fact, Ethiopia may go to war with any of its neighbors, as well as itself, if they don’t find a reason to fire.

The same is true of the Djibouti-Addis Ababa railway, whose performance and revenues have fallen short of expectations, forcing Abiy’s government to come up with remedies. This explains his obsession with maritime exports, as ground and rail transport have failed to meet expected performance levels – but how could this be possible when six years of war and instability have roiled every corner of the country?

Land issues existed within and between federal territories long before Abiy came to power. Public discontent is strong, and the government’s “small fixes” are not enough to cure Ethiopia’s sick “mom economy.”

Welcome to a 20-birr sandwich in a country where most people earn less than 2,000 birr, 75% of which goes to rent for a studio apartment. When a kilogram of onions costs 120 birr, that wage is equivalent to the price of ten kilograms of onions or 30 kilograms of tomatoes.

Prices are rising and the value of the birr is expected to trend downward.

Why should Eritreans worry?

Ethiopia is controlled by determined politicians who all lead by example and train the people on how to deceive and extort unsuspecting civilians.

Ethiopia, Eritrea, Sudan and Somalia have all improved, albeit in different ways, but with the same results: violence, injustice and chaos. If the people, leaders and elites of the region do not learn how to deal with their lenders and funders, things are likely to get worse. If they do not, leaders and people will remain puppets, dancing to the ugly tunes played for them by their governments.

Money, whether it is a loan, grant or financing, is good if you know how to handle it. But if you are a novice in diplomacy, do not know how to manage an economy, or how it should work, if you are not frugal, humane and honest, you remain a clown trying to look smart by expanding your wardrobe space, like a fashion model.

Money, whether it is a loan, grant or financing, is good if you know how to handle it. But if you are a novice in diplomacy, do not know how to manage an economy, or how it should work, if you are not frugal, humane and honest, you will remain a clown trying to look smart by expanding your wardrobe space, like a fashion model.