Ethiopia has experienced significant economic setbacks following the suspension of the African Growth and Opportunity Act (AGOA) in January 2022, with approximately 18 foreign companies exiting the country and industrial parks losing an estimated $45 million in revenue, according to the African Development Bank Group’s (AfDB) Country Focus Report 2025 Ethiopia released on June 23.
AGOA had previously allowed Ethiopia duty-free access to the U.S. market for a wide range of products, fostering export growth and job creation. However, the suspension disrupted established market linkages and supply chains, leading to a 24% decline in exports from Ethiopia’s industrial parks in 2023. The Hawassa Industrial Park, one of the country’s largest, alone saw over 1,000 jobs lost due to these disruptions.
The report highlights that the suspension has compounded broader geopolitical and economic challenges, adversely affecting Ethiopia’s annual budget and threatening critical public services. Key donor countries are also scaling back aid: Germany plans to reduce its aid budget by 1 billion euros in 2025, while the UK intends to cut aid spending through 2027. Furthermore, following a U.S. government “work stoppage” on foreign aid programs, Ethiopia’s Health Ministry was forced to lay off 5,000 health workers previously supported by USAID and the CDC.
Food aid delivery has also been hampered. The AfDB report notes that 34,880 metric tons of essential food supplies—enough for 2.1 million people for one month—remain stranded at the port of Djibouti due to insufficient funds for transportation to Ethiopia.
The suspension has particularly hit Ethiopia’s textile, leather, and apparel sectors, which relied heavily on AGOA’s preferential access. The National Bank of Ethiopia reported that the suspension put approximately 11,500 jobs at risk across industrial parks, with Hawassa, Mekelle, and Bole Lemi among the hardest hit. Major investors, including PVH (parent company of Calvin Klein and Tommy Hilfiger), withdrew operations, causing supply chain disruptions and leaving many industrial park facilities idle.
The report stresses the urgent need for Ethiopia to diversify its export markets to reduce vulnerability to such shocks. While some companies have shifted focus to domestic markets, the loss of AGOA privileges has exposed the fragility of Ethiopia’s export-oriented manufacturing base.
The AfDB report also draws attention to illicit financial flows (IFF) as a significant challenge to Ethiopia’s economy. Mis-invoicing in trade documents—such as import over-invoicing and export under-invoicing—is estimated to account for between 55% and 80% of illicit money leaving the country, representing 6% to 23% of Ethiopia’s total business value. The International Monetary Fund (IMF) estimates that these illicit flows could reduce Ethiopia’s average annual GDP growth by 2.2% and cause a loss of 10% to 30% of government revenues.
While the Ethiopian government has enacted legislation to combat money laundering and terrorism financing, including the Prevention and Control of Money Laundering and Terrorism Financing Proclamation No. 780/2013, the report notes difficulties in effective enforcement.
The suspension of AGOA has had far-reaching consequences for Ethiopia’s economy, from job losses and declining exports to strained public services and aid delivery. Coupled with challenges such as illicit financial flows and reduced foreign aid, the country faces a complex landscape requiring strategic reforms. The AfDB report underscores the need for market diversification, enhanced governance, and stronger international cooperation to restore economic stability and growth.
