In today’s Ethiopia, numbers seem to offer a rare moment of optimism. Inflation, once soaring above 30%, has reportedly dropped to around 13%. And despite civil unrest, currency shortages, and a sovereign debt default, the government confidently projects economic growth at 6.4% for 2025.
On the surface, it feels like good news. But beneath the headlines lies a more complex reality—one that tells of an economy not transforming, but treading water.

That’s the view of Kebour Ghenna, a seasoned economist who has long observed Ethiopia’s economic dynamics with a critical but constructive lens. His recent reflections cast a thoughtful shadow on what many see as progress. For Kebour, the story isn’t just about numbers—it’s about how those numbers are achieved, who they serve, and whether they reflect real, inclusive development.

Inflation Falls, but Not for the Right Reasons

One of the more widely celebrated developments is the decline in inflation. Kebour acknowledges that inflation has indeed fallen, and credits this in part to a series of monetary and fiscal tightening measures. These included raising interest rates to 15%, imposing restrictions on commercial lending, and cutting government spending. The government also secured USD7 billion in support from international lenders like the IMF and World Bank.

However, he cautions that this drop in inflation has not been driven by an increase in production or supply-side improvements. Instead, he argues, it stems from a weakening in demand. Businesses are investing less, households are spending cautiously, and the credit market has tightened. In this sense, inflation has cooled not because of economic strength, but due to stagnation.

That said, he does note one positive development: tax revenue has improved, exceeding government targets. This, he argues, is a positive signal for fiscal sustainability, as it reduces the risk of the state resorting to inflationary money printing. Yet, this confidence remains fragile and highly dependent on continued reform and stability.

A Costly Fight Against Inflation

Kebour further argues that the tools used to curb inflation could have unintended consequences. High interest rates, while useful in slowing price increases, also raise the cost of government borrowing and discourage private investment. With Ethiopia already struggling to service external debt—including a default on its Eurobond—such measures may do more harm than good in the long run.

He warns that unless the current economic strategy is paired with broader reform and targeted investment, the relief from inflation may only be temporary. If tax revenues falter or donor funds dry up, Ethiopia could face another economic crisis, with little to show for its policy discipline.

Economic Growth Without a Foundation

Although the government continues to report GDP growth, Kebour questions the foundation of that growth. He points out that there is little evidence of significant gains in manufacturing, exports, or infrastructure investment. Lending to the private sector remains constrained, and the highly visible construction boom in Addis Ababa has often come at the expense of equity and social stability.

According to him, much of the reported growth may be driven by temporary factors: rising global prices for gold and coffee, a rebound effect from earlier downturns, and construction projects that displace more than they develop. In other words, the economy may be growing—but not in a way that creates jobs, boosts productivity, or reduces reliance on imports.

A Lack of Strategic Alignment

Kebour also questions the coherence of Ethiopia’s current economic management. While macroeconomic indicators suggest some degree of policy coordination—between tighter monetary policy and reduced government spending—he argues that true coordination requires a shared long-term development vision.
That vision, he suggests, remains absent. The government is still entangled in costly conflicts, while key sectors such as banking and telecommunications remain partially reformed or stuck in limbo. Many of the reforms underway appear to be driven more by external pressure from donors than by a homegrown strategic consensus.

What Needs to Change?

To shift course, Kebour believes Ethiopia needs to focus less on short-term macroeconomic targets and more on building a sustainable, inclusive development model. This includes investing in productive sectors like agro-processing and renewable energy, improving the business climate for domestic firms, and maintaining careful control over capital flows.

He also calls for a more equitable tax system that doesn’t rely so heavily on indirect taxes, which disproportionately affect low-income households. Above all, he emphasizes that political stability, rule of law, and public trust are essential prerequisites for economic progress.

A Warning Against Complacency

Kebour’s final warning is a simple but powerful one: don’t let impressive numbers fool you. Inflation may be falling, and GDP may be growing, but if these changes come from stagnation, foreign lifelines, or unproductive sectors, they offer little cause for long-term optimism.
Without a structural shift—rooted in national priorities rather than donor agendas—Ethiopia may be trading in one illusion of stability for another.