Impact of Ethiopia’s Currency Devaluation on Tigray

Ethiopia’s recent policy shift to allow the Ethiopian birr (ETB) to float freely against the US dollar (USD) has precipitated a profound economic crisis, with particularly devastating effects on the Tigray region. As of August 3, 2024, the ETB has experienced a sharp depreciation, with the USD rising from approximately 57 ETB to between 91 and 100 ETB—a staggering 58% decline. This sudden shift has driven up inflation rates, significantly impacting the cost of living and economic stability, especially in Tigray.

Severe Economic Consequences for Tigray

The devaluation of the ETB has had an immediate and severe impact on the cost of essential goods. In Tigray, where the economic situation was already precarious due to ongoing instability and genocidal war, the effects are particularly harsh. Prices for everyday items such as food, fuel, and construction materials have surged. These price hikes have put a tremendous strain on the purchasing power of residents, who are already grappling with limited resources.

According to Salsay Weyane Tigray, “The Ethiopian government’s recent introduction of national currency devaluation measures as part of a macroeconomic reform policy is causing severe hardship for the people of Tigray. While these liberalization measures may hold long-term benefits, their immediate impact on Tigray is devastating.” This statement encapsulates the acute difficulties faced by the region as it adjusts to the new economic reality.

Impact on Civil Servants

One of the most urgent issues highlighted is the plight of Tigrayan civil servants. Many of these workers have been deprived of their salaries for up to two years. This unpaid compensation, combined with the inflationary effects of the currency devaluation, has severely diminished their purchasing power. Salsay Weyane Tigray notes, “In particular, hundreds of thousands of Tigrayan civil servants, who have been deprived of up to two years’ salary, are now facing the brunt of the sharp inflation worsened by the devaluation. This denial of their rightful earnings, compounded by the government’s failure to implement measures to mitigate the effects of devaluation, is adding insult to injury. In just the past few days, the purchasing power of their unpaid salaries has been halved.” This situation highlights a critical financial crisis for civil servants, who are now facing an erosion of their economic stability.

Broader Regional Challenges

The broader context of Tigray’s economic challenges exacerbates the impact of the devaluation. The region, which has been severely affected by genocidal war, is already struggling with a lack of infrastructure, investment, and resources necessary for economic recovery. The press release from Salsay Weyane Tigray underscores this point: “Moreover, these measures are being implemented against the backdrop of a region ravaged by genocide and robbed of assets essential for investment and competition. Without a level playing field, the people of Tigray continue to face insurmountable challenges.” This context reveals that the economic reforms, while potentially beneficial in the long term, are worsening existing vulnerabilities in Tigray.

Calls for Government Action

In light of the severe economic impact, there are pressing calls for the Ethiopian government to address the situation in Tigray more effectively. The press release stresses the need for targeted interventions: “To create equal opportunities, the Ethiopian government must take immediate steps to bring Tigray’s economic conditions in line with the rest of the country.” This appeal emphasizes the necessity of addressing the specific needs of Tigray to ensure that the region can recover and thrive in the wake of the economic reforms.

International Support and Advocacy

The press release also calls for international intervention to support Tigray. It urges the Ethiopian government to prioritize the release of withheld salaries and to allocate resources for the region’s reconstruction. “We reiterate our demand for the immediate release of the withheld salaries owed to hundreds of thousands of Tigrayan civil servants. We also call upon the international community, especially lending institutions, to pressure the government to prioritize the allocation of sufficient funds for the rehabilitation of war-torn Tigray.” This call for international support highlights the importance of global pressure and assistance in addressing the economic crisis in Tigray.

Ongoing Advocacy for Civil Servants

Additionally, Salsay Weyane Tigray encourages Tigrayan civil servants and other professionals to continue their advocacy efforts. The press release states: “Finally, we urge Tigrayan civil servants, including teachers, physicians, legal professionals, and others working in federal institutions, to intensify their peaceful struggle for their denied rights.” This call to action underscores the need for sustained advocacy and pressure to secure fair treatment and compensation for those affected by the economic reforms.

Conclusion

In summary, Ethiopia’s currency devaluation has led to significant economic disruptions, with severe consequences for the Tigray region. The sharp decline in the ETB’s value has driven up prices and exacerbated the financial difficulties faced by residents, particularly civil servants. The broader context of Tigray’s post-genocide recovery challenges further complicates the situation. Addressing these issues requires a concerted effort from both the Ethiopian government and the international community to ensure that Tigray receives the necessary support and resources to stabilize and recover. Implementing targeted policies and providing adequate assistance are crucial for mitigating the adverse effects of the economic reforms and fostering a more equitable and stable economic environment.