Ethiopia becomes BRICS member amid economic crisis

Shortly before the new year, the US-based rating agency Fitch marked Ethiopia down to "restricted default" after the government in Addis Ababa failed to pay a Eurobond redemption installment.

Ethiopia is in the process of negotiating an aid package with the  International Monetary Fund (IMF) to boost the country's ailing economy.

Joining the BRICS alliance of emerging economies with four other countries this year provided a glimmer of hope in Africa. Finance Minister Ahmed Shide told Chinese state broadcaster CGTN that the move was an important diplomatic gain for his country.

"Ethiopia will continue to cooperate with its traditional partners," he stressed. "But Ethiopia will also significantly improve its relations with new partners, such as the BRICS countries, whose economies are growing quickly."

Ethiopia on the brink of insolvency

Last year, the decision of the BRICS group of major emerging economies — Brazil, Russia, India, China and South Africa — to accept Ethiopia, along with Egypt, as a new member came as a surprise. Analysts had expected that Africa's largest economy, Nigeria, and Algeria, the largest African country by area, would get the nod.

Susanne Stollreiter, head of the Friedrich Ebert Foundation (FES) in Addis Ababa, which has close links to the governing German Social Democrats, said other factors played a more decisive role: "Ethiopia is very important from a geopolitical point of view. Owing to its large population, its economy has the potential to grow strongly in the future." 

For the BRICS group to benefit from such a development, Ethiopia must first solve its economic problems. The country is on the brink of insolvency. "It is being squeezed by heavy foreign debt, but also by the lack of foreign currency and, above all, by rampant inflation. The latter is hurting the population," Stollreiter explained.

A flagging international economy, the after-effects of the COVID-19 pandemic, climate change and the wars in Ukraine and the Middle East are also not helping Ethiopia.

Tigray conflict another major problem

Ethiopia's economic woes stem in part from its own two-year war in the northern province of Tigray, where rebel formations like the TPLF, supported by regional governments, fought against the troops of Addis Ababa and Eritrea, in a conflict that killed hundreds of thousands and displaced many more. Addis Ababa put the costs of reconstruction at $20 billion (€18 billion).

The war also changed the perception the West had of the 2019 Nobel Peace Prize winner, Prime Minister Abiy Ahmed, according to Lukas Kupfernagel, head of the Ethiopia office of the Konrad Adenauer Foundation (KAS), which is close to the conservative German opposition Christian Democratic Union.

"Among other things, the USA have cut direct development cooperation to a minimum. Germany did not follow suit and continued to support Addis Ababa, which was greatly appreciated by Ethiopia. But the civil war has led to a shortage of trade routes," Kupfernagel told DW. A year after the war ended, it has become clear "that a lot has been destroyed, especially in the agricultural sector."

Famine now threatens Tigray and its neighbor Amhara.

Another potential for conflict arose on New Year's Day, when Abiy and the president of the autonomous Somali region of Somaliland, Muse Bihi Abdi, announced that Ethiopia would gain access to the seaport of Berbera and be the first country to recognize Somaliland's independence. An outraged Somalia made it clear that it would not accept such a pact.

Ethiopia can rely on the support of its ally, the United Arab Emirates, on this geopolitical matter. The latter also joined the BRICS in January. But analyst Stollreiter stressed that Ethiopia's push for a connection to the world's oceans is primarily aimed at getting the economy back on track by expanding trade, thereby attracting more trade partnerships and investments.

Financial support from BRICS

One of the founding ideas of the BRICS was to counter Western dominance in international financial policy. Almost 10 years ago, they began setting up the New Development Bank (NDB) as an answer to the World Bank and the IMF. Once the NDB is fully functional, Ethiopia could benefit from new forms of financing.

According to expert Kupfernagel, this could free Ethiopia from being dependent on meeting conditions imposed by the West to obtain credit from the IMF. "That would change the situation completely," Kupefernagel said. But the time has not yet come.

Seife Tadelle Kidane from the South African University of Johannesburg also believes that the NDB is a concept liable to move the BRICS forward. With its financial support, countries could build up infrastructure to promote growth and stability. But he warned: "There is no generosity as such in international politics and economics. Every country is looking out for itself." Ethiopia, being vulnerable, should remain flexible, he added.

Eshete Bekele contributed to this article

This article was translated from German