Ethiopia Breaking News

Ethiopia tightens economic pressure on Tigray region; bank accounts of 34 subsidiaries of EFFORT frozen

Ethiopia’s government ratcheted up economic pressure on the rebel Tigray state in a bid to cow it into submission after two weeks of fighting that’s triggered a humanitarian crisis in Africa’s second-most populous nation.

The Attorney General’s Office said it’s frozen the bank accounts of 34 subsidiaries of the Endowment Fund for the Rehabilitation of Tigray, which is administered by the region’s ruling Tigray People’s Liberation Front.

The authorities acted because the companies are allegedly “participating in financing ethnic-based violence, acts of terrorism, connection with the TPLF, which seeks to overthrow the constitutional order,” the office said in a statement on Facebook.

The clampdown on the fund, known as EFFORT, follows conflict in which hundreds of people have died and tens of thousands have been forced to flee their homes. Ethiopian army forces began an incursion on Nov. 4, after months of tension between the federal and regional governments.

Last month, Ethiopia’s government froze budget subsidies to Tigray’s government and said it would instead allocate the funds directly to local authorities. The region had been set to receive 10.4 billion birr ($272 million) from the government this fiscal year.

Founded in 1995 with assets acquired during a 17-year armed rebellion, EFFORT controls some of Ethiopia’s biggest businesses. It has interests in at least 13 companies involved in food production — the mainstay of Tigray’s economy — construction, pharmaceutical manufacturing and mining.

Tigray President Debretsion Gebremichael slammed the attorney general’s announcement.

“It is an act of daytime robbery on Tigray’s interests,” he said by mobile-phone text message. “This is part of their plan to damage and weaken the economy of Tigray.”

Ethiopia’s $107 billion economy expanded more than 9% a year over the past decade as investment flooded in, making it one of the world’s top performers. Prior to the hostilities, the International Monetary Fund forecast that the fallout from the coronavirus would slow to 1.9% this year — a projection that’s likely to prove overly optimistic.

Economic Liberalisation

Besides derailing one of the world’s fastest growing tourism industries, the violence could distract the government from implementing plans to open telecommunications and other state-dominated industries to outside investors.

MTN Group Ltd., Africa’s biggest wireless carrier, echoed growing concerns among investors about Ethiopia’s investment climate when Chief Executive Officer Ralph Mupita said Wednesday the country is looking “materially less attractive.”

Vodacom Ltd., South Africa’s biggest mobile operator, said earlier this week it’s monitoring the crisis before a planned investment decision, while KCB Group, Kenya’s largest bank, has postponed plans to expand into the northern neighbor.

Mounting concerns that the crisis could be a protracted one and spread to other parts of Ethiopia or beyond its borders are evident in the financial markets. Yields on the nation’s $1 billion of Eurobonds maturing in 2024 have risen 200 basis points since the conflict erupted and traded at 8.25% in London on Wednesday.

The United Nations Office for the Coordination of Humanitarian Affairs estimates an additional 1.1 million people in Tigray and two neighboring regions are expected to need aid as a result of the conflict. Insecurity, a lack of fuel and a communication blackout have hampered efforts to accurately assess what supplies are needed and deliver them, it said in its latest bulletin.

About 4,000 people are crossing from Tigray into Sudan daily, with more than 30,000 having made the trip by Nov. 18 , according to the UN.

Via Bloomberg by Samuel Gebre and Simon Marks

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