Investors flee as sources of finance collapse in Africa

Ethiopia has long enjoyed supportive financial relationships with Western nations, China, and emerging powers, significantly impacting its economic development. In 2004, a notable event occurred when Western and multilateral creditors collectively wrote off over $3 billion of the country’s debts, reducing its financial burdens. The country further bolstered its international standing by borrowing from China more than any other African nation, with the exception of Angola, since 2000. In 2014, Ethiopia marked its first foray into international capital markets, reinforcing its emerging economic profile. The establishment of industrial parks attracted Asian manufacturers, eager to take advantage of Ethiopia’s unique duty-free access to Western markets. However, this economic momentum faced challenges due to the civil war in Tigray, which prompted the West to halt some financial relations with the country. Despite these setbacks, in 2024, a shift occurred as the International Monetary Fund (IMF) and the World Bank announced the resumption of loan provisions, reflecting a reset in financial diplomacy. Recently, Ethiopia has received substantial investments from the United Arab Emirates, amounting to billions of dollars. This influx of foreign capital is significant in the face of declining sources of finance from traditional partners. The investment aims to create a robust economic environment, yet the underlying issues, including civil unrest and altered international relationships, pose significant hurdles to sustainable growth. As of early 2025, the overall investment climate in Ethiopia remains critical, as both external financial dependencies and domestic challenges intertwine. The complexities faced by the nation in balancing these aspects remain pivotal as it strives for economic stability and growth, particularly in light of its recent historical relationships with major creditor bodies and foreign investors.