Economy

Ethiopia’s economy struggles as war reignites in Tigray

Published

2 years ago

September 13, 2022

Traders sell sheep in Sholla Market, the day before the Ethiopian New Year, in Addis Ababa, on Sept. 10.The Associated Press

Once home to one of Africa’s fastest-growing economies, Ethiopia is struggling as the war in its Tigray region has reignited and weary citizens far from the front are pleading for peace.

Ethiopians are experiencing the highest inflation in a decade, foreign exchange restrictions and mounting debt amid reports of massive government spending on the war effort. Parliament early this year reportedly approved an additional $1.7 billion budget for defence.

On Tuesday morning, a drone strike hit a university campus in Tigray’s capital, Mekele, causing an unknown number of injuries, according to a media worker there who spoke on condition of anonymity because he didn’t have authorization to speak to other outlets. He said another drone strike also destroyed the station of regional broadcaster Dimtsi Woyane.

Ethiopian officials continue to paint a rosy picture for the country of well over 110 million people. “Our economy has continued to grow amid natural and man-made problems,” the planning and development minister, Fitsum Assefa, said earlier this month.

But the Ethiopian Economic Association’s meeting this month made clear the country is hurting, while international mediators urgently seek progress on talks to end the fighting.

Because of internal conflicts, the destruction of infrastructure and uncontrolled spending are hurting the economy while ordinary Ethiopians face weakening incomes and rising poverty, economist Alemayehu Seyoum told the meeting.

Ethiopia once seared into the global consciousness with a devastating famine in the 1980s. The country has since transformed its economy with mega-projects like the Grand Ethiopian Renaissance Dam, the largest in Africa, and large-scale construction projects in Addis Ababa, Africa’s diplomatic capital.

The economy grew at an average of 11% over the past decade.

But the war in the northern Tigray region, which began in late 2020, has caused immense disruption. In June, the International Monetary Fund said growth likely fell to 3.8% for 2021-2022 because of the war and a “sharp fall in donor financing,” among other factors.

The finance ministry has declined to approve the financing of three industrial parks, symbols of Ethiopia’s China-like development, citing “budgetary pressure.”

Instead, the economy has shifted to a war focus.

The finance ministry now pleads with the public and Ethiopia’s large diaspora to contribute to a “national cause” for war reconstruction and aid. Ethiopia’s National Bank introduced changes to give the government all possible access to foreign currency, including requiring foreign residents to convert all in their possession upon entry.

Certain development works continue, including Prime Minister Abiy Ahmed’s flagship projects like the beautification of the capital.

But some critics such as the spokesman for the outlawed Oromo Liberation Army, Odaa Tarbii, say “vanity projects” are not necessary now.

Anything seen as criticism of the war can be stifled. Last week, authorities blocked 31 local civil society groups from organizing a media briefing calling for peace.

Following criticism that its financial support was enabling the government’s war efforts, the World Bank last week said it will continue its partnership but expressed concern.

Some state-run sectors of Ethiopia’s economy continue to open to investors, as Abiy promised after taking office. The cabinet this month approved the entry of foreign banks, a significant step.

Ethiopia’s ambassador to the United States, Seleshi Bekele, said the “international community should support this initiative by helping to disarm the hostile (Tigray forces).”

U.S. special envoy Mike Hammer was again in Ethiopia last week to “discuss the urgency of immediate cessation of hostilities,” according to the State Department, which said “the Ethiopian people have suffered tremendously from this conflict.”

Ethiopia’s government was unsettled when the U.S. last year removed it from a preferential trade program over its failure to end the war in Tigray that the U.S. said led to “gross violations” of human rights. Addis Ababa is lobbying for a reversal.

Since then, global companies like PVH Corp have left Ethiopia, citing security reasons, and others are laying off thousands of employees.

Ethiopian Airlines, the largest aviation group in Africa, remains one of the country’s few profitable companies but has been accused by Tigray forces of transporting troops and weapons to the war front. The airline has denied it.

Inside Tigray, millions of residents are still largely cut off from the world. Communications and banking services are severed, and their restoration has been a key demand in mediation efforts.

An agricultural survey conducted in several accessible parts of Tigray last month by Mekele University personnel, shared with The Associated Press, found many crops were failing because of the lack of fertilizer. Even travelling had become “tiresome” because of the lack of fuel, the survey said.

Other shortages are deadly. In an email to the AP, the head of the Tigray health bureau said vaccines for children ran out more than a year ago, and women don’t have family planning supplies. Humanitarian deliveries have stopped because of the renewed fighting.

“The list is very long. I just don’t want to bore you with the details,” Amanuel Haile wrote. “The above are just enough.”

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Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

Published

2 days ago

September 10, 2024

Anne Joseph

VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.

Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.

Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”

The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.

Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.

“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”

Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.

Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.

Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.

B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.

The election is expected to be called on Sept. 21, with the vote set for Oct. 19.

“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”

Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.

Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.

The premier said that now is not the time to reduce supports and services for people.

Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.

Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.

This report by The Canadian Press was first published Sept. 10, 2024.

Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.

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Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

Published

2 days ago

September 10, 2024

Anne Joseph

NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.

But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.

He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.

Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.

Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.

Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.

This report by The Canadian Press was first published Sept. 10, 2024.

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Economy

Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa

Published

2 days ago

September 10, 2024

Anne Joseph

HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.

Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.

The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.

Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”

Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.

Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.

This report by The Canadian Press was first published Sept. 10, 2024.

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