The Economic Effect of the Ethiopian Peace Deal

 by Deborah Tesfamichael

The Ethiopian Civil War has been the talk of my house for months.Since the war began in 2020, I have been quite interested in its progress, and with the signing of a new peace agreement in Pretoria, South Africa, it appears that the war is finally coming to an end.

 Having heard many debates and reading many articles, I’ll simply explain a couple of crucial economic impacts this will have on Ethiopia.

First off,  the actual supply of labour during the war suffered greatly, with 1 million people fleeing from the Tigray region alone and as many as 600,000 dead.Additionally, , occupational immobility skyrocketed as educational services halted in areas of the conflict. The peace deal means guns will be silenced and hostilities will be ceased, allowing many people trapped in the violence to have a job once again. This will increase GDP as more goods and services are produced as well as consumers simply having the means of purchasing  goods/services with wages, leading to greater aggregate demand and overall growth of Ethiopia’s economy.

Secondly, the Ethiopian government created a man made famine to wear down the Tigray region, they achieved this by stopping 300,000 famers from cultivating their land as well as preventing any humanitarian aid from reaching the Tigray region. The peace deal not only means that basic rights, like access to food and hospitals will be available again, but it also means that Ethiopian trade will increase/ return to its original level before the war. Let me explain, due to concerns about humanitarian issues, many countries  reduced or stopped trade with Ethiopia. The US, for example, prohibited duty-free imports into Ethiopia. This is important since Ethiopia shipped $242 million worth of goods to the US in 2020 through AGOA (African Growth and Opportunity Act), which was a significant portion of their $3.5 billion exports. Therefore the peace deal will allow for trade to increase as countries see the improvement of humanitarian aid, helping to  boost Ethiopia's economy into being one of the fastest growing economies again.

These are just a few examples of how the peace deal will impact Ethiopia economically. However  since the agreement's implementation hasn't yet taken place, there is still a chance for scepticism to develop.