The IMF’s bailout of Ethiopia’s government will only make matters worse

On a recent day in July, travelers along one of the busier roads in Ethiopia — the highway between the capital of Addis Ababa and Debark in the northern highlands — fell prey to the newest scourge in a country beset by years of civil war: kidnapping.

According to a report in The Economist, armed gangs in the region are kidnapping bus drivers and their passengers, then demanding as much as the equivalent of $17,500 in ransom. “We’re too poor to pay,” one relative said, as some family members were warned they might never see their loved ones again.

The kidnappings, on the rise in several regions of an African nation where fighting between rebel militias and government troops occurs frequently, are just one of many problems that Ethiopia’s embattled prime minister, Abiy Ahmed, hoped to sweep under the rug as he sought to convince international bankers and developers that his cash-depleted country is a good investment. His regime is waging civil war against popular militias in Amhara and Oromia, facing a potential famine in the parched northern region, struggling to pay its civil servants and plagued by youth unemployment.

The deteriorating situation in Africa’s second-most populous nation makes it all the more shocking that leaders of the International Monetary Fund (IMF) just approved a four-year, $3.4 billion relief package for the Abiy government, which is expected to leverage billions of dollars in additional aid.

For months, those working for real democratic reforms in Ethiopia have been pleading with the world bankers to hold off on any bailout until the regime agrees to respect human rights and end its attacks on civilians, journalists, historic sites and food supplies in the most strife-torn regions.

Instead, the IMF extended a lifeline to the Abiy government after it agreed to a major monetary reform — floating its currency, the birr — which caused the birr to immediately lose 30 percent of its value against the U.S. dollar. Critics say the economic shock of Ethiopia’s weakened currency is likely to fall the hardest in the short run on poor and working-class families by triggering a spike in inflation.

Few of the government’s critics in the global Ethiopian diaspora take much stock in the regime’s empty promises that the money will go to pay raises for cash-strapped civil servants or for development projects that will help everyday citizens. Instead, the IMF bailout package — on top of a recent $1.5 billion infrastructure package from its sister outfit, the World Bank — has been justly criticized by humanitarian groups because it’s likely to mean more money for the military and fresh attacks in Amhara and Oromia regions.

The U.S. government — which in recent years has provided more economic aid to Ethiopia than any other nation in the world — is both a major source of funding for the IMF and the World Bank and those organizations’ chief influencer. American taxpayers should be outraged that their dollars are now propping up the shaky rule of an African strongman who will use these funds to continue drone strikes against his own citizens, and boost a military linked to brutal door-to-door massacres in villages in the Amhara Region and elsewhere.

The incoherence of America and the West in dealing with Ethiopia’s overlapping crises could be heard in a recent plea from the top U.S. official in Addis Ababa. “Recent and frequent kidnappings in Oromia and Amhara regions show how prolonged conflict emboldens criminals and weakens rule of law,” stated the U.S. ambassador to Ethiopia, Ervin Massinga. “Abduction of civilians and students for financial gain must stop.”

And yet now that Abiy’s pleas for a Western rescue package have been answered, the Biden administration has willfully surrendered its best leverage for pushing the Ethiopian government to finally end years of often senseless ethnic strife and civil war, halt massive corruption — such as the $10 billion palace now being erected for the prime minister — and restore basic civil liberties, such as a free press.

A tragic irony is that while IMF aid — including an immediate influx of roughly $1 billion — will replenish the nearly depleted state coffers in Addis Ababa, the recent experience of international bailouts and their aftermath in other African nations has often meant economic hardships for everyday people already struggling under a corrupt regime.

In Kenya, for example, the government’s proposed tax hikes to deal with stringent economic conditions for IMF aid provoked violent street protests this spring, with demonstrators carrying signs like: “IMF, World Bank, Stop the Modern-Day Slavery.”

Nigeria and other key African nations have also struggled mightily under the austerity demands of the IMF, which have necessitated tax increases, cuts in critical social services or other measures creating misery for the millions who struggle to make ends meet.

In just the week since Ethiopia agreed to these conditions from the IMF, shopkeepers and their customers are already complaining of higher prices. The reality is that new financial pain is likely to lead to more regional unrest and civil war, which will be met with a wave of repression from an Abiy government with a new lease on life.

Indeed, the condition-free bailout of this corrupt regime in the critical Horn of Africa should trigger a broader discussion about continued American support for the IMF and the World Bank when we see, again and again, that intervention by these global bankers in the Global South has benefitted elites at the expense of the poor.

American voters should ask this fall’s candidates for Congress and the White House why our hard-earned dollars, instead of ending violent instability, are being spent on backwards-looking agendas that foster it. A so-called rescue package that exacerbates Ethiopia’s civil war and extreme poverty is no rescue at all.

Mesfin Tegenu is executive chairman of the American Ethiopian Public Affairs Committee.