Wedi Beshashs keeps blundering. The only reason he accepted to be screwed by IMF is because he is absolutely broke
Posted: 02 Aug 2024, 22:13
Remember that a few months back, Ethiopia defaulted on loan payments of only $33 million, That was a clear indication that the country is broke. Sensing that they had him in a tight corner, international donors and lenders refused to bail him out unless he was ready to be screwed. Faced with ruin, he chose to bend over. The country is in shambles. Tigray is devastated. Amhara is following. Large swathes of Oromia are war zones. Which means the government has lost over 50% of its tax base. If you add to that the devastating wars in Amhara and Oromia, which must consume enormous financial resources, you can understand why Abiy agreed to cave in. It was either that or total immediate collapse of his government.
But will his desperate policy now save him? I doubt it. People with large birr holding read the situation better than the rest of us. Ethiopia is on the verge of disintegration and no one who can is going to wait until doomsday arrives to get rid of their birr. That is, there will be a high demand for dollars. And the government does not have the means to buy back the birr and thus stabilize the currency market. Abiy will get only $1 billion this year. But that is not enough. So, the squeeze is on. Expect a free fall of the birr as large holders clamour to get rid of their birr. Panic will set in and what follows may be Armageddon. God forbid!
But will his desperate policy now save him? I doubt it. People with large birr holding read the situation better than the rest of us. Ethiopia is on the verge of disintegration and no one who can is going to wait until doomsday arrives to get rid of their birr. That is, there will be a high demand for dollars. And the government does not have the means to buy back the birr and thus stabilize the currency market. Abiy will get only $1 billion this year. But that is not enough. So, the squeeze is on. Expect a free fall of the birr as large holders clamour to get rid of their birr. Panic will set in and what follows may be Armageddon. God forbid!