Middle East Crisis Could Cut Ethiopian Household Income by 4.3% as Food and Transport Costs Rise

EBR_News Apr 15, 2026

By Betegbar Yaregal

A prolonged Middle East conflict could reduce Ethiopian household income by an average of 1.5 to 4.3 percent, driven by rising food and transport prices and a potential decline in remittances from Gulf states, according to the World Bank’s Africa Economic Update released in April 2026.

Ethiopian households are particularly exposed to the crisis due to high food expenditure and widespread reliance on public transportation. The report notes that Ethiopian households allocate 58.5 percent of total expenditure to food, with even rural households partially exposed to market prices through food purchases. About 48 percent of households use public transport, rising to 62 percent among urban households, making them vulnerable to fuel-driven fare increases.

Remittances from the Middle East are a major source of external income for Ethiopia, accounting for about 5 percent of gross domestic product and exceeding $6 billion in 2024. An estimated 750,000 Ethiopians reside in Saudi Arabia alone. A decline in remittances could further erode household incomes and purchasing power.

The report warns that if the crisis persists into 2026 and Ethiopia’s headline inflation rises by an additional 3 to 8 percentage points, the resulting welfare losses would be relatively uniform across the income distribution but more pronounced for urban households.

The share of Africa’s population living just above the poverty line has grown from 29 percent in 2000 to 43 percent in 2022. Limited job creation and persistently high informality heighten household vulnerability, leaving many exposed to cost-of-living shocks. As of 2022, only 11 percent of Africans lived on more than $8.30 per day, up modestly from 8 percent in 2000, compared to an increase from 32 to 59 percent in the rest of the world.

The World Bank suggests that targeted policy measures can help mitigate risks. In Ethiopia, increasing benefits to social safety net recipients in line with inflation trends could offset a substantial share of potential welfare losses. Continued attention to spending efficiency and sound public financial management will be essential to ensure that expanded social support remains fiscally sustainable.