Issue No. 245

Storm of Change: Exploring Unrest in Ethiopia and Bangladesh

Today's editorial in The Ethiopian Cable is written by Muktar Ismail.
 
We would like to extend an invitation to others who may wish to contribute to the Ethiopian Cable in the future. We appreciate insightful perspectives on topics concerning Ethiopia crafted as editorials.

Please contact us for more information if interested.
 

---

Last Monday, Ethiopia's Central Bank permitted the Ethiopian Birr (ETB) to float on a market-determined foreign exchange rate. The move was a key stipulation by the International Monetary Fund (IMF) as part of reforms that will unlock USD billions in economic support packages by the institution and the World Bank. And, as widely expected, it has triggered an unprecedented depreciation of the national currency-- falling by a staggering 80% in a week. On the parallel market, it has plummeted to 100 per USD, compared to 578 per USD just a week ago.

This swift devaluation is expected to result in immediate rises in the prices of imported goods, with essential items such as food, fuel, and medical supplies expected to see significant price hikes that disproportionately affect lower-income groups. Such volatility will likely contribute to an already heightened inflationary environment, further driving up the cost of living for many Ethiopians. Dozens of businesses in Addis and elsewhere have already been shuttered by the federal government after being accused of hiking prices on everyday items. Attempts to limit the economic pain, including the decision to declare massive pay raises for civil servants, will only have a limited impact, however. And with discontent already bubbling across much of the country, it is feared that spiking inflation could trigger renewed protests and communities finding greater sympathy with anti-government armed movements.

Once hailed as a model of success in Africa, Ethiopia's economy has been beset by significant instability and disruption for several years. Inflation rates have surged to historically high levels and stayed there, officially exceeding 80% in recent weeks. This economic turmoil results from a confluence of factors, including global supply chain disruptions, the lingering effects of the COVID-19 pandemic, and ongoing political conflicts, particularly the destructive war in Tigray, and the ongoing insurgencies Amhara and Oromia. The Tigray conflict devastated agricultural production—a cornerstone of Ethiopia's economy—and led to the displacement of millions, exacerbating poverty and intensifying food insecurity. The systematic destruction of the economy of much of northern Ethiopia cannot be undone overnight, particularly with major parts of the Pretoria agreement remaining unfulfilled.

The floating of the Birr is also expected to substantially impact Ethiopia's political settlement. The controlling of the country's exchange rate and access to foreign currency allowed Addis to dispense patronage at whim. Subsequently, the transition to a market-oriented system removes a critical patronage avenue, with significant implications for the Abiy government's ability to sustain its loyalists. Other IMF-necessitated reforms are also expected to tighten the patronage belt further, including reduced government spending and domestic credit controls. How the Abiy government balances this remains to be seen, but we can expect a further contraction of the expenditure in the country's peripheries. Already, spending on Addis, which makes up just 6% of the country's population, absorbs a quarter of the federal government's national budget. Several opposition parties have raised concerns that the international and domestic 'medicine' to Ethiopia's economic ills will only compound the growing inequality plaguing the country.

Ethiopia is far from the only country experiencing widespread political and economic upheaval, however. Yesterday, 5 August, Bangladesh's long-serving ruler Sheikh Hasina Wazed resigned and fled the country after weeks of enormous protests that initially demanded the abolition of quotas in government jobs and morphed into a broader anti-regime movement. Despite their contrasting socio-political contexts, both Ethiopia and Bangladesh reveal strikingly similar patterns in how economic crises and inequality can ignite widespread dissent. And in both nations, citizens are mobilising to hold their governments accountable for failing to address vital issues related to socio-economic development and democratic governance.

Unlike Ethiopia's primarily agriculture-based economy, Bangladesh has historically anchored its development in the garment export industry. Hasina's government presided over enormous economic growth in the 2010s, with millions lifted out of poverty and vast infrastructure projects undertaken. However, the pandemic particularly badly impacted the garment industry, with global lockdowns creating chaos in production and supply chains, leading to substantial layoffs and rising bankruptcy rates. Coupled with rampant inflation—driven partially by soaring fuel prices and fluctuations in international commodities—public discontent escalated dramatically.

In turn, the economic turmoil helped drive the unprecedented protests against the now-collapsed Prime Minister Sheikh Hasina's government. Protests surged as citizens took to the streets in record numbers, voicing their grievances against a political elite disconnected from the struggles of everyday life. The military's killing of hundreds of protestors only added fuel to the fire until yesterday, when Hasina departed for India.

Though they have not reached the heights of the 'Qeerroo' Oromo movement in the mid-2010s that helped topple the former Ethiopian Prime Minister Hailemariam Desalegn, intermittent protests have taken place since 2020, characterised by demands for enhanced political representation and accountability. The government's responses often involve heavy-handed repression, including violent crackdowns and detention of key leaders. This reaction has only perpetuated a cycle of violence and mistrust, exacerbating the gulf between the government and its citizens.

As state authorities respond with repression in Bangladesh or Ethiopia—arbitrarily detaining protestors and stifling opposition—the risk of increasing polarisation becomes apparent. While authoritarian measures to quash dissent may provide fleeting relief for ruling elites, the malaise runs much deeper in Ethiopia, and the social contract between the public and government is being irrevocably broken in parts of the country. The cyclical attempts to maintain control through violence or repression ironically only further erode the government's standing and presence.

Ethiopia's and Bangladesh's trajectories provide compelling case studies in the nexus of economic crises, political upheaval, and social mobilisation. And much like Bangladesh, the most influential economic and political elite that form the core of the Abiy government will be largely insulated from the fresh bout of economic pain hitting the country. The tight security in Addis, controlled by the loyalist Republican Guards, as well as a fractured opposition, may mean that we do not see the large-scale public demonstrations of several years ago. That does not mean that all is well in Ethiopia following imminent injections of monetary support, loans and grants from international financial institutions-- rather the exact opposite. From Tigray to Southern Ethiopia, the country is badly adrift, and the Birr's collapse will only compound this as teff, fuel, and medicine prices begin to spiral out of control.
 

---

Muktar Ismail is a regional analyst, a former humanitarian and development advisor to the Somali region's president, and a former UN staff member.