The Russo-Ukrainian War is deemed by many as the most severe geopolitical conflict since World War II. The effect this will have on the two warring countries, as well as on the rest of the world is bound to be profound and long-term. And Ethiopia, as a developing country with many trade ties around the world, is bound to feel the heat, on top of the already weakened economic activities caused by the country’s devastating internal conflict.
On one hand, we have skyrocketing oil prices as the sanction on Russia (the second-largest producer of oil) limits the fuel market to the Middle East and raises the prices there. Ethiopia is headed towards huge expenditures observing how oil accounts for 25% of the country’s imports. Ethiopia also imports the majority of its construction materials from Ukraine. With the latter in absolute turmoil, the high prices that we are seeing will lower Ethiopia’s imports, becoming a setback to the building industry that has been growing at an average rate of 11 percent per year.
Coffee exports are also bound to see a drop with Germany’s demand for raw coffee (accounting for 40% of Ethiopia’s coffee export) set on a path of decline with the loss of its processed coffee buyers in Russia. Similarly, the country’s flower export may soon lose buyers in Europe as the cost-of-living rises. It is worth noting as well that numerous Chinese-owned companies that benefit from African Growth and Opportunity Act (AGOA) duty-free exports to the United States have also stopped or lowered production as a result of the United States’ decision to end Ethiopia’s favorable treatment.
To try and relive some of the above effects, even though most economists remain skeptical about the comprehensiveness of the measures, the Ethiopian government decided to revise import tariffs on August 6, 2021 and strives to levy higher tariffs on comparable goods at a local level in order to make domestic manufacturers more competitive while simultaneously supporting local producers who import non-substitutable raw materials.
According to the National Bank of Ethiopia, Ethiopia’s imports from Ukraine account for 12.8 percent of total imports in 2020/21, while Russia accounts for 3.8 percent.
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