ByAshenafi Endale

GDP contracted by 25.9% because of the war in North Ethiopia

Three million people have fallen below the absolute poverty line in conflict-affected regions.

A report presented to the House of Peoples’ Representatives (HPR) by Ministry of Finance officials reveals that one-third of the total population in regional states is directly impacted by the war in northern Ethiopia.

Ethiopia’s GDP has decreased by 25.9 percent as a result of the war in northern Ethiopia.

War-related damages total USD 22 billion (20.4 percent of GDP), while economic losses total six billion dollars (5.5 percent of GDP), according to the report presented by the Minister.

In the upcoming weeks, the report, titled “Ethiopia’s Damage and Needs Assessment,” will be made available to the public.

On May 17, 2023, while presenting his nine-month report to the HPR, Minister of Finance Ahmed Shide informed the Budget and Finance Affairs Standing Committee that millions of people have fallen below the poverty line.

“Currently, a significant number of the population are internally displaced persons (IDPs),” he said.

Ahmed says that a second document titled “Ethiopia’s Resilient Recovery and Reconstruction Planning Framework” is also complete.

The framework, which will be implemented between 2023 and 2028, will require USD 20 billion to carry out the planned projects over the next five years. Already, the World Bank has contributed USD 300 million for the return of IDPs to their homes.

The prolonged conflict in several regions of the country has exacerbated poverty by compounding the effects of inflation, supply disruptions, climate change, COVID-19, and a growing informal economy.

According to Ethiopian Policy Studies Institute (PSI) reports from 2021, 68.7 percent of the population is multidimensionally poor, and 18.4 percent are at risk of becoming multidimensionally poor.

Despite halving to 19 percent over the past two decades, the poverty rate has risen in real terms. One major factor in Ethiopia’s worsening poverty situation is the suspension of pro-poor projects funded by Western development partners.

“Foreign development partners stopped budgetary support due to the war in Ethiopia. Some budget instruments are still on hold. We hope these projects will resume soon since peace and stability have been restored,” Finance Minister Ahmed said.

For the current fiscal year, the Ministry anticipates 7.7 billion birr in direct budget support from development partners. In contrast, performance over the past nine months has been nonexistent.

The government had also planned to collect USD 2.9 billion in grants and loans over the past nine months but only collected USD 1.8 billion (62.2 percent).

“Development partners are failing to deliver on their pledges due to the war that took place in the country,” Ahmed told parliamentarians.

To cover the budget deficit for the current fiscal year, the government has taken out a loan of 194.6 billion birr. The debt consists of direct advances from the central bank and Treasury bills.

Source: The Reporter