Ethiopia's alarming gamble: launching a securities exchange after 50 years

Ethiopia has taken a significant step towards enhancing its financial landscape by relaunching the Ethiopian Securities Exchange on a Friday, marking its return after 50 years. Prime Minister Abiy Ahmed heralded the event as a historic milestone, emphasizing the exchange's potential in attracting both local and foreign investments. The government has initiated this domestic stock market with Ethio Telecom as the primary focus for public offerings. Additionally, Wegagen Bank has become the first company to list on this newly established exchange. Other founding members include major state enterprises like the Ethiopian Insurance Corporation and Ethiopian Shipping and Logistics Services Enterprise, although they are not currently listed. This move comes at a crucial time for Ethiopia, which has experienced significant economic reforms and challenges in recent years. The country's economy leans heavily on agriculture, primarily relying on exports like coffee and flowers. In 2021, the formation of the Ethiopian Capital Market Authority illustrated the government's intent to create a stable environment for securities trading. However, this market transition is not without its complications, as the government has struggled with rising inflation and the impacts of currency policy changes, which recently drove up fuel prices and cost of living. Ethiopian officials and economists underscored the need for a robust regulatory framework to foster investor confidence and ensure the exchange aligns with the nation's broader development aspirations. The ongoing security concerns in regions such as Amhara and Oromia also pose challenges to attracting foreign investors, highlighting the necessity of peace for economic growth. The government, underlines the potential of the Ethiopian economy, boosted by infrastructure projects and significant enterprises, seeks to present its stock exchange as a promising opportunity for local and international investors. In summary, the relaunch of the Ethiopian Securities Exchange has placed the nation at a pivotal point in its economic journey. While there are numerous opportunities for growth, addressing the concerns regarding security and establishing a transparent regulatory landscape will be vital for the exchange's success and the country's overall economic stability.