Ethiopia stands at a historic economic turning point. After years of fiscal strain and reliance on external borrowing, the country has taken bold steps to restore financial independence and stabilize its economy. Recent government figures reveal a dramatic reduction in Ethiopia’s foreign debt—from $23 billion to $4.5 billion—achieved through a successful debt rescheduling programme supported by international partners.
Prime Minister Abiy Ahmed announced that Ethiopia’s economy is now “growing without foreign loans,” signaling a strategic shift toward self-reliance, domestic productivity, and controlled fiscal expansion. Despite these promising reforms, however, ordinary Ethiopians continue to grapple with the persistent burden of high food and rent prices—a challenge that remains central to the nation’s socioeconomic recovery.
Ethiopia’s debt reduction represents one of the most significant fiscal turnarounds in Africa. The government’s debt rescheduling plan—negotiated with global creditors and supported by international financial institutions—has provided Ethiopia with breathing space to redirect resources from debt repayment to developmental priorities.
This restructuring has lowered the debt servicing burden, stabilized foreign exchange reserves, and strengthened investor confidence. For the first time in decades, the Ethiopian economy is experiencing sustainable growth without excessive dependence on foreign borrowing. The shift toward domestic financing, export diversification, and agricultural transformation underscores the government’s commitment to building a resilient economy driven by local innovation and productivity.
To sustain this momentum, the government invested 440 billion birr (about $7.6 billion) in an extensive inflation-control programme aimed at curbing price volatility and ensuring economic stability. These funds were directed toward boosting agricultural output, tightening monetary policy, and regulating speculative market activities that fuel price distortions.
The results have been impressive—inflation has fallen to 11.7%, marking its lowest level in years. This achievement reflects improved fiscal discipline, better control of money supply, and increased domestic production capacity. However, while the national inflation rate has decreased, many households have yet to feel relief in their day-to-day expenses.
Despite economic stabilization and reduced inflation, food and housing costs remain disproportionately high, particularly in urban centers such as Addis Ababa, Hawassa, Dire Dawa, and Bahir Dar. Analysts attribute this paradox to several interconnected structural and policy-related issues that continue to pressure household purchasing power.
The disruptions caused by regional conflicts, logistical constraints, and rising transportation costs have weakened Ethiopia’s supply chains. Farmers in rural areas face difficulties moving produce to city markets, leading to shortages that inflate food prices. Moreover, limited storage infrastructure causes post-harvest losses, further tightening supply.
Rapid urbanization has triggered a severe housing demand that far outpaces supply. Construction material costs have soared due to import dependency and currency depreciation, while bureaucratic hurdles in land allocation and permit approval have slowed new housing projects. Consequently, landlords have raised rents dramatically, leaving middle- and low-income households struggling.
Although foreign debt has fallen, the birr’s depreciation continues to affect the prices of imported goods, including essential commodities like wheat, edible oil, and fuel. Ethiopia’s partial dependence on imports for basic necessities exposes it to external price shocks, pushing up domestic prices.
Salaries in both public and private sectors have not increased at a rate that matches the rising cost of living. The gap between wages and expenses has widened, diminishing household purchasing power and contributing to a sense of economic stagnation among workers.
Unregulated price speculation and opportunistic hoarding by traders have aggravated market instability. In the absence of consistent enforcement mechanisms, speculative practices often lead to artificial price hikes that disproportionately affect low-income families.
While the government’s macroeconomic reforms have succeeded in stabilizing the national economy, addressing the microeconomic realities that affect citizens’ lives requires targeted and inclusive policy interventions.
Enhancing Agricultural Productivity
Expanding irrigation systems, introducing modern farming technologies, and improving rural infrastructure would strengthen local food production and stabilize prices. Encouraging cooperatives and value-chain integration can also reduce inefficiencies between farmers and consumers.
Reforming Urban Housing Policy
Public–private partnerships (PPPs) should be scaled up to support affordable housing initiatives. Reducing taxes on construction materials, expediting land approval processes, and offering incentives for low-cost housing developers will increase supply and moderate rental prices.
Encouraging Domestic Manufacturing
Reducing dependency on imported goods by investing in local manufacturing—particularly in food processing, textiles, and construction materials—will mitigate inflationary pressures and create employment opportunities.
Strengthening Market Regulation and Transparency
A robust regulatory framework is essential to curb speculative behavior and price manipulation. Empowering the Ethiopian Trade Competition and Consumer Protection Authority with greater monitoring capacity can ensure fair market practices.
Expanding Social Protection Measures
Introducing food voucher programs, targeted subsidies, and conditional cash transfers for vulnerable groups will provide temporary relief and safeguard households from price shocks.
Boosting Wage and Employment Policies
Periodic wage reviews and the promotion of labor-intensive industries will help align income levels with living costs, improving purchasing power and consumer confidence.
Ethiopia’s remarkable reduction in foreign debt and its progress in controlling inflation are clear indicators of a nation reclaiming control over its economic destiny. These achievements reflect disciplined fiscal management, stronger domestic production, and a new ethos of self-reliance. Yet, the persistence of high food and rent prices reveals that macroeconomic success does not automatically translate into household well-being.
The challenge now lies in bridging the gap between national stability and everyday affordability. This requires policies that not only stimulate growth but also ensure equitable access to its benefits—through fair wages, affordable housing, and efficient food systems. If Ethiopia can successfully balance these priorities, it will not only sustain its economic renaissance but also lay the foundation for a truly inclusive, resilient, and self-sufficient future.
Mohamed Hassan Mohamed (Xareed), an MBA graduate of distinguished merit, is a seasoned academic and lecturer whose expertise spans scientific economic management, business information systems, human development, and a range of interdisciplinary domains. His intellectual contributions—marked by a fusion of advanced scholarly inquiry and strategic analysis—primarily explore the intricate dynamics of geoeconomic competition and regional conflict across the Horn of Africa. He can be reached at:Xareedmo45@gmail.com
