This paper discusses the marriage of convenience that happened between economic neoliberalism and violent authoritarianism in Ethiopia. Relying on empirical data from the IMF, Ethiopia, and other credible sources, the paper argues that the current civil war in Ethiopia that has been raging for over five years has created a ground where national politics meets international economics. The shared interest between the government of Ethiopia and the IMF finally helped the latter get a deal in the summer of 2024 to finance what the former calls “homegrown” economic reform. The decision by the Bretton Woods institutions to fund economic structural reform in Ethiopia amidst civil war in a manner that appears to have ignored gross violations of human rights is feared to promote a culture of impunity worldwide.

Ethiopia transitions from developmental state to neoliberalism

The International Monetary Fund (IMF) chief,  Kristalina Georgieva, made a two-day visit to Ethiopia on 8 and 9 February 2025. On her X account, she praised the Ethiopian economy in what she described as “impressive economic performance” and “the signs of a vibrant private sector-led market economy” for which she was “delighted the IMF is a partner for the government’s homegrown reform agenda.” Prime Minister Abiy Ahmed, similarly, said on his X account “Ethiopia’s macroeconomic reform program, supported by one of the IMF’s largest financing programs, is based on a Home-Grown Vision and Reform Agenda that clearly articulates our growth and development aspirations. As such, we have strong ownership of the reforms and have been able to undertake bold, comprehensive, and historic measures to address long-standing macro challenges. The results of the program so far are positive and very encouraging.” The purpose of this piece is not to investigate whether the reform is really “homegrown” or constitutes neoliberal economic reform; but rather to examine what exactly got the Bretton Woods institutions and Abiy administration to the remarkable consensus amidst civil war that resulted in gross violations of human rights, some of which were determined international crimes.

Ethiopia pursued a socialist economy from 1974 up until 1990. Since 1991, it adopted some kind of mixed approach that combined state ownership of major means of production with free market economic principles. However, following the controversial 2005 election, Ethiopia turned its face to the East by adopting a “developmental state” economy mainly adopted from the Chinese and other “Asian Tiger” economies. The developmental state model came to an end in 2019 when the Washington Consensus institutions, mainly the IMF and World Bank, began to extend financial support and investment in Ethiopia. The discourse of developmentalism spearheaded the “political repression against opposition parties, the media, and civil society groups.” Despite democracy deficits, Ethiopia under the Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF) rule witnessed an authoritarian fastest-growing socio-economic development, particularly in education, health, and rural road construction sectors.         

Ethiopia under the rule of former Prime Minister Meles Zenawi firmly resisted the Bretton Woods neoliberal political-economy policy prescriptions, which are commonly referred to as Structural Adjustment Programs (SAPs). According to experts, SAPs usually include several basic components geared toward reducing inflation, promoting exports, meeting debt-payment schedules, decreasing budget deficits through reductions in government spending and employment, higher interest rates, currency devaluation, lower real wages, privatization of government enterprises, reduced tariffs, and liberalization of foreign investment regulations. This set of free market policy prescriptions, also known as the Washington Consensus (sponsored by the International Monetary Fund, World Bank, and United States Department of the Treasury), has been promoted for crisis-wracked developing countries. The current loan programs of the IMF are also seen as “SAPs in disguise” which are widely criticized for perpetuating poverty, inequality, and environmental degradation. Especially in sub-Saharan Africa, SAPs have a mixed legacy. 

Contrary to the long-standing EPRDF view of the Western market economy model, right after assuming premiership, Abiy Ahmed promised to liberalize both political and economic sectors declaring what he called “homegrown economic reform”, created his Prosperity Party, and received a Nobel Peace Prize. This impressive first-year move by the Abiy administration further attracted greater attention from Bretton Woods institutions–the IMF and World Bank. On December 20, 2019, the Executive Board of the IMF approved three-year arrangements under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) for Ethiopia to help the country to maintain macroeconomic stability and improve living standards. The World Bank Group began to support Ethiopia in providing various opportunities for government-led and private-sector investments in May 2019.  

Soon Ethiopia descended into a devastating civil war. The war in Oromia has already begun in the western (2018) and southern (2019) parts of the region. Though the war in Tigray, which broke out in 2020, has come to a halt in November 2022, the war in Oromia and Amhara (2022) continues to rage. For the second time, on 29 July 2024, the  IMF Executive Board approved a four-year US$3.4 billion ECF arrangement for Ethiopia. On the same day, Ethiopia saw a sharp currency devaluation, and the exchange rate has since been decided based on market forces. 

Economic Neoliberalism Embraces Violent Authoritarianism

Although the Abiy administration promised to liberalize Ethiopia's politics and economy in 2019, he dragged his feet and it took him five years to start undergoing SAPs, including the currency exchange devaluation of the Ethiopian Birr and the deregulation of the financial sector to allow foreign investment. The privatization plans of major government-owned corporations like telecoms, airlines, and others are still in process. The name of this neoliberal economics in Ethiopia is, ironically, translated to English as “homegrown economic reform.”

The delay in the implementation of this market economy might well be related to the crises created as a result of the civil war. The creation of the Prosperity Party as a political tool of centralization caused major conflicts to break out first in Oromia (October 2018) followed by a bloodier war in Tigray (November 2020). Though guns in Tigray have been silenced since 2 November 2022, a new war broken out in Amhara (November 2022) and the war in Oromia continues. This ongoing and intensifying civil war footing has caused a massive economic failure in the country. By some estimates, the Ethiopian government was spending 37 percent of its budget on the military or debt servicing from 2022 until 2023. It means the war in the country has already decimated the economy. Many of the rural areas of the country have gone out of state control. Public services in major regions of the country including health, road, education, justice, and administration have either collapsed entirely or are collapsing. According to the Fragile State Index 2024 report, Ethiopia sharply dropped from 23rd in 2019 to 12th (the lowest number indicates deterioration level) which is in the red alert stage indicating state failure out of 179 countries measured in the same year. 

Milkessa Gemechu is a visiting assistant professor of political science at Albion College, Michigan. He earned his PhD from the College of Law and Governance, Addis Ababa University in 2017. Milkessa is a former lecturer of political science and international relations at Dire Dawa University (Ethiopia) and Vice President for Academic Affairs of Oromia State University (Ethiopia). He also briefly served in Ethiopia’s Oromia Regional State Government leading different departments in the capacity of state cabinet from 2018 until 2020. In terms of scholarship, he is the author of three books. He has published nine research articles in peer-reviewed journals and twenty essays, Op-Eds and commentaries for magazines including Foreign Policy, Aljazeera, and Addis Standard on current political developments in Ethiopia. His teaching and research interests fall in international relations, comparative politics, African politics focusing on the Horn of Africa.