Prime Minister Abiy Ahmed’s Prosperity Party (PP) won 410 out of the 436 contested seats in Ethiopia's parliamentary election held on 21 June, according to results announced by the National Election Board of Ethiopia (NEBE) on Saturday. The remaining vote was split among a fragmented opposition consisting of over 40 registered parties and numerous independent candidates, with the National Movement of Amhara winning 5 seats, the Ethiopian Citizens For Social Justice Party winning 4, the Gedeo People's Democratic Party winning 2 seats, and the remainder going to independents.
The vote had been delayed in the remaining 111 constituencies due to logistical and security problems, with many of these expected to go to the polls on 6 September instead, but no date has been announced for elections in the embattled province of Tigray. Despite a reported turnout of around 90% in the constituencies that voted, the boycott of the election by several opposition parties, including the Oromo Liberation Front (OLF) and the Oromo Federalist Congress (OFC), and deregistration of the Tigray People’s Liberation Front (TPLF) by the NEBE, may undermine the credibility of the elections in the eyes of many Ethiopians.
The vote was largely peaceful, though the NEBE noted various irregularities ranging from voter intimidation to shortages of ballot papers, citing complaints lodged by 30 parties and candidates across 160 constituencies. While the Ethiopian Human Rights Commission (EHRC) said that its observers noted "no serious or widespread human rights violations," a lack of independent outside observers will contribute to questions about the legitimacy of the vote. A new government headed by PM Abiy is expected to be formed in October but, as a result, is unlikely to have a strong mandate.
No end in sight to the conflict in Tigray
While the elections proceeded relatively smoothly, all things considered, the conflict in Tigray has continued to simmer throughout the election process, and has recently gathered pace. Rebels from the Tigray Defence Force (TDF) have made major gains in recent weeks, capturing the regional capital of Mekelle after federal troops withdrew on 28 June. While the federal government declared a unilateral ceasefire at the time, reportedly to allow for a successful harvest and distribution of aid, the TPLF gave several conditions, including the withdrawal of Eritrean forces, which the government has promised since April but failed to deliver, before the ceasefire would be accepted.
In the meantime, the TDF has continued to make major territorial gains in the region, with spokesman Getachew Reda saying that "We have to make sure that every inch of our territory is returned to us, the rightful owners." He added that the TDF will continue pushing until it has retaken the fertile fields of western and southern Tigray, which neighbouring Amarha claims was stolen from them after the 1995 constitution placed it within Tigray's borders, and which they have consequently occupied with the help of federal and Eritrean troops. Getachew added that "We want to degrade as many enemy capabilities as possible," even if it requires going all the way to the Eritrean capital of Asmara. This prompted Abiy to acknowledge the failure of the ceasefire yesterday, raising the prospect that troops will be redeployed to the region and that ethnic violence will spiral further out of control, and even spread across international borders.
The UN Human Rights Council adopted a resolution this week urging the withdrawal of Eritrean troops from the region and expressed concern over reports of serious human rights violations on all sides of the conflict. The World Food Programme (WFP) has also highlighted ongoing disruptions to aid deliveries, saying that four million people need emergency food assistance in the region, but that its convoys are being delayed by numerous checkpoints and that it has only been able to deliver enough food so far this month to cover 200,000 people for a week. With the conflict breaking out during harvest season, ReliefWeb estimates that over 90% of the harvest was lost and that, if recovery efforts are not accelerated, the window for planting could close for another 18 months. The food crisis has also exacerbated inflation, with food prices rising 28.7% yoy in June and pushing the headline inflation rate to 24.5% yoy.
While Ethiopia's Ministry of Foreign Affairs described the UN statement as "politically motivated," news on the ground continues to be grim. At least 1,500 sexual assault survivors have reportedly been registered across four centres in Tigray, while an airstrike by federal troops the days after the election reportedly killed 64 people and injured at least 180. The Ethiopian military said the strike was aimed at rebels, but it pulled international attention from what Abiy had hoped would be a symbolically important election and instead attracted further international condemnation. Meanwhile, police have reportedly arrested and detained hundreds of ethnic Tigrayans in the capital, Addis Ababa, raising ethnic tensions even further.
At the same time, tensions with Egypt and Sudan have continued to spiral, with Ethiopia embarking on the second phase of filling the Grand Ethiopian Renaissance Dam (GERD) despite opposition from Egypt and Sudan. The UN Security Council addressed the issue on 8 July, but the meeting again ended without any concrete resolutions, with Egypt and Sudan continuing to insist that the filling process should be managed via a tripartite agreement while Ethiopia insists that it is an internal matter (and in any case, the filling will happen with or without action from Ethiopia due to the onset of rainy season).
This raises the spectre of international conflict if an agreement cannot ultimately be reached, and also, alongside the worsening conflict in Tigray, raises the risk of further sanctions. While the US International Development Finance Corporation (DFC) was granted a special waiver from the sanctions, allowing it to provide the US$500mn to the Global Partnership for Ethiopia to fund part of its US$850m telecom license purchase, the DFC announced this week that acts of violence against citizens could affect the release of funding. Further sanctions could also delay or derail an already complex debt restructuring process and undermine Ethiopia’s efforts to get its IMF programme back on track.
With Ethiopia facing huge challenges from both a political and economic perspective, a worsening of the conflict in Tigray could send it down an even darker path if it is not urgently contained. For now, we retain our Hold recommendation on Ethiopia's 2024 eurobond at US$91.63 ( 9.56% yield) on a mid basis as of cob on 14 July on Bloomberg.
Ethiopia: Debt sustainability analysis paints mixed picture, February 2021
Ethiopia: Conflicting reports on the state of the conflict, December 2020
Ethiopia on the brink of civil war, November 2020
Conversation with the National Bank of Ethiopia, October 2020
Ethiopia: Vast potential but growth model adjustment needed, September 2020