FGV 2025.2Questão 33de 60A FRAGILE REFORM 1. For the past couple of years much of Addis Ababa, Ethiopia’s capital, was reduced to rubble

A FRAGILE REFORM

1. For the past couple of years much of Addis Ababa, Ethiopia’s capital, was reduced to rubble [escombros] by demolitions. Now luxury apartments, parks, and cycle lanes are rising from the ruins. Abiy Ahmed, Ethiopia’s prime minister, believes the old city must make way for a cleaner, shinier one.
2. Mr Abiy is transforming not just Addis, but Ethiopia. Long [por muito tempo] one of Africa’s state-controlled economies, the east African country of 135 million people has recently begun to liberalize. A year ago, not only did it allow the value of its currency, the birr, to be determined primarily by market forces of supply and demand, but it also entered an International Monetary Fund (IMF) program worth US$3.4 billion (3% of GDP). A number of reforms, if successful, will radically alter its economic system. “What they are trying to do is comparable to the transition economies after the fall of the Soviet Union,” says Steven Dercon of Oxford University, who has advised several Ethiopian governments on economic policy. Ethiopia hopes to follow the path of countries such as Poland and become an economic power. Yet it may end up looking more like Russia, its transition derailed by corruption, conflict, and chaos.
3. Following decades of Communist dictatorship, the government began to allow some space for free markets in the 1990s. But it retained tight restrictions on private enterprise, growing through debt-fuelled state investment in infrastructure. Yet since a sovereign default [não pagamento da dívida interna ou externa] in 2023, following a devastating civil war, forced Ethiopia to ask the IMF for a bailout [socorro financeiro], it has opened up banking, retail, and other sectors to foreign competition, and relaxed restrictions on repatriating profits. On July 1st parliament approved a law allowing foreigners to own property. The country plans to privatize some stateowned firms. In January it opened a stock exchange.
4. Economic performance has been encouraging, according to official data. The IMF estimates that the economy grew by 7.2% in the year to July 2025. But this rosy picture may not be the whole story. The IMF relies on government data for its estimates, but has repeatedly complained about “the quality and availability of economic statistics” in Ethiopia. Less formal measures such as electricity demand indicate the economy is growing – but probably not as fast as official figures suggest.
5. Investors say that reforms have so far been superficial. A former executive at a multinational company says state-owned firms still enjoy unfair advantages. Others lament that Ethiopia’s economic system is still characterized by complex regulations, a bewildering bureaucracy, limited competition, and restricted imports. A good rule of thumb [regra informal mas prática], says one investor, is that anything not explicitly permitted is forbidden.
6. Moreover, corruption, which used to be relatively rare, seems to be increasing. In 2023 almost twothirds of Ethiopians felt it had increased in the past year, according to Afrobarometer, a public opinion research organization. Procedures such as applying for a passport have become impossible to complete without paying a bribe [suborno]. Some complain of having to grease official palms [subornar agentes do governo] just to pay tax.
7. Yet the most important barrier to investment in Ethiopia remains conflict: besides the insurgencies raging in the country’s two most populous regions, Oromia and Amhara, tensions with neighboring Eritrea continue to rise, in large part because Mr. Abiy has made no secret of his desire to grab that country’s Red Sea ports. Nothing deters investment like an imminent war.

Adapted from The Economist, July 19th-July 25th 2025

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