Ethiopia made history in January 2025 by opening its first modern stock exchange, a milestone that speaks to just how far the country's economic transformation has come under Prime Minister Abiy Ahmed. Since taking office in 2018, Abiy has steadily opened up sectors that were long dominated by the state, including telecommunications, banking and retail. In July 2024, the government introduced a market-determined exchange rate for the birr, a bold move that helped secure a combined financing package of around $10.7 billion from the International Monetary Fund and the World Bank.
But that momentum is now under serious pressure. Fighting between the Tigray People's Liberation Front and Ethiopian federal forces intensified sharply in early September, with the TPLF, now aligned with six other armed groups, openly pursuing the goal of overthrowing Abiy. On 23 September, rebel forces seized three airports in Tigray and pushed into the neighbouring states of Amhara and Afar. By 5 October, government-aligned forces had retaken the Tigrayan capital of Mekelle and installed an interim government there, but the situation remains volatile.
The roots of this crisis go back further. A war in Tigray erupted in 2020, with Eritrea initially fighting alongside Ethiopia against the TPLF. After that conflict ended in 2022, relations between Addis Ababa and Asmara soured, partly over Abiy's push to regain access to the Red Sea port of Assab, which Ethiopia lost when Eritrea became independent in 1993. Asmara has since moved closer to the TPLF, and the Ethiopian government has accused it of providing financial, military and logistical support to a TPLF faction. On 7 October, locals reported dozens of Eritrean soldiers moving through the Tigrayan town of Adigrat. International Crisis Group warned in late September of a looming regional war.
The human cost is already being felt. WHO Director-General Tedros Adhanom Ghebreyesus described reports of attacks on civilians in Amhara and Tigray, including fatal incidents at the Jaari 2 displacement camp and in Rama, as deeply disturbing. He warned that the violence is pushing an already fragile health system closer to collapse. With so much reform progress on the line and regional tensions rising, the question now is whether Ethiopia's economic story can survive the conflict threatening to swallow it.
Originally published by African Business.