A central goal of the PBF initiative is to improve the quality and coverage of health services, particularly in underserved rural and pastoral areas where access has traditionally been limited and service quality low. By shifting the focus from funding inputs to rewarding verifiable results, the government hopes to increase efficiency and ensure that resources generate greater value.

Ethiopia launched its PBF pilot program in 2015 as part of a broader healthcare reform effort. The pilot project began in the Borana Zone of the Oromia region with support from Cordaid, a Dutch NGO, and the Embassy of the Netherlands, to provide a direct response to the systemic weaknesses of the traditional input-based financing model that had dominated the sector.

The introduction of PBF into Ethiopia’s health system was driven by the need to enhance staff motivation through financial and non-financial incentives linked to performance. The approach was designed to counteract the lack of incentives in the previous structure, strengthen institutional capacity, and align the health system more closely with national development priorities.

Officials see PBF as a key mechanism for aligning health system goals by directly linking financial payments to high-priority areas such as maternal and child health. It has become an essential tool in Ethiopia’s broader strategy to achieve sustainable improvements and ensure that funding delivers measurable results for the population.

Dereje Duguma (MD), the state minister of Health tasked with overseeing health services and programs, was among the officials who attended the symposium. A graduate of the medical school at Mekelle University, Dereje joined the Ministry after completing a graduate program in international public health at Università degli Studi di Parma, Italy in 2013.

The State Minister contends that Ethiopia’s decade-long engagement in PBF has registered successful results. The Reporter’s Abraham Tekle caught up with Dereje to discuss Cordaid’s contribution to Ethiopia’s health sector, the benefits of the PBF project model, perspectives on changes in the global health ecosystem, the decline in financial aid and strategies to address the resulting gaps, among other key issues. EXCERPTS: 

The Reporter: The symposium’s theme was ‘From Local Change to Global Impact.’ What were its main objectives and what contributions have Cordaid and the government of the Netherlands made to the Ethiopian health sector?

Dereje Duguma (MD): Cordaid has been one of the longstanding partners supporting Ethiopia’s health sector for many years, as well as in other African countries and globally. During today’s event, the organization highlighted its decade-long contribution to improving healthcare services across various parts of Ethiopia.

As part of its broader project plan, Cordaid selects health institutions, provides financial support to help them deliver better services, and empowers healthcare workers to serve their communities more effectively. The main purpose of this support is to strengthen the health sector by ensuring equitable and improved services, particularly in remote areas, through better financing mechanisms by mobilizing resources from aid providers, communities, and governments to enhance healthcare delivery.

Our observations show that Cordaid’s initiatives have achieved notable results in the selected areas. Health professionals also have demonstrated increased motivation aligned with the benefits they receive. Moreover, data management systems have improved, reaching the family level within these communities. Their work has also contributed to reducing maternal and child mortality.

The PBF pilot project was one of the main discussion points. How has the Ethiopian health system benefited from the project model?

We’ve registered amazing achievements in terms of PBF in the landscape of the health sector over the past decade. The scale-up went from the Borena zone to many zones across different regions. Oromia, Amhara, Southern Ethiopia, Somali, and others have joined the scale-up. One of the things we have achieved is increasing the number of patients, especially outpatients, and I think this will be able to help the community in high-risk areas.

The second improvement has to do with the quality of the healthcare system. By quality, I mean availability and training, and we have especially motivated people in that specific area. The report received by the Ministry of Health is positive and there is an accountability framework, so it will be verified by a third party.

For example, maternal mortality has declined in areas where PBF is implemented. And also, communicable diseases have been presented in the controls in those areas. Another important thing that I’ve seen is the motivation of our healthcare workers, where staff retention has improved because they receive benefits and incentives through PBF.

There are also improvements in hospital income and primary healthcare system financing, with more support coming from both regional administrations and community contributions. Hospitals are using these resources to enhance service quality and infrastructure. In some hospitals and health centers, for example, new maternal blocks have been constructed using funds mobilized through performance-based financing. These developments show a significant impact on the ground.

How do you see the global health ecosystem changing? What role do development partners play now?

The current global financial landscape is not at a comfortable level for us. In terms of financial assistance, the last few years, especially the last three, were not a good time for us. I think we need an innovative financial approach to the health sector. One is to have innovative finance, like performance-based financing, where we can mobilize resources from the private sector, from CSOs and the community, through the upwards activity of PBF users. That is one important thing.

The second is that the government must also enhance more resource-intensive sectors from trade areas. That is what we are doing now. I think partners in this specific area have to align with the strategies of the government, especially in terms of still bringing flexible and sustainable funding to the health sector. For example, we have the Lusaka Initiative and partners like Global Funds, Gavi, the Global Financing Facility, all aligned with the strategies of the government.

We need more alignment, more harmonization, and prioritizing government policy. And our partners have to invest in local capacity enhancement. We have many international partners, but we prefer local CSOs to be empowered. Going forward, we must also support the local systems, especially the primary healthcare system, as it is the foundation of the health sector.

Philanthropists are now venturing into health because they are the ones who can really support different governments when aid is going down. We need more integration and alignment in this dwindling financial landscape.

What collaborative approaches does the Ministry of Health employ when working with organizations such as Cordaid and other health service partners?

In terms of financial assistance to the country’s health sector, most of the funding has traditionally come from co-partners and donor organizations. However, over the past ten years, their contribution has shown a decline as the government’s share has gradually increased through additional financing obtained from the health insurance initiative, which supports considerable financial sustainability.

Despite this, the Ministry continues to receive substantial financial support from various co-partners and aid organizations, particularly in efforts to combat communicable diseases such as tuberculosis, HIV/AIDS, and malaria. The collaboration involves regular discussions with partners at both ministerial and technical levels, held every three months, to review progress and align efforts in different program areas.

In this process, resources are pooled together, evaluations are conducted to assess achievements and identify gaps, and feedback is provided to partners as part of the reporting process. Therefore, the Ministry maintains strong and effective partnerships with all co-partners, resulting in impactful collaboration. According to aid organizations, Ethiopia’s partnership framework is considered stronger compared to that of many other African countries.

What measures is the Ministry taking to address the financial gaps resulting from the decline in external financial aid in recent years>

It is true that in the past five years, financial aid to the health sector has been steadily decreasing, and in some cases, it has stopped entirely due to various reasons. This trend is not unexpected, as global circumstances have increasingly affected the flow of aid to countries like Ethiopia. In response, the Ministry has been exploring alternative options to address the financial gaps and strengthen the country’s overall financial capacity.

One of the key solutions has been to increase the government’s financial contribution to the health sector. Over the past two years, the government has injected additional funding to support healthcare services. Another major initiative is the health insurance program, which currently benefits more than 63 million Ethiopians by providing access to essential health services.

Through this initiative, the country has collected close to 20 billion Birr, with plans to mobilize additional financial support from other stakeholders. Despite existing limitations, the Ministry has managed to handle the situation effectively. Compared to other African countries, Ethiopia’s position remains relatively stable in terms of managing the financial challenges in its health sector, as PBF contributes to the improvements of Ethiopian healthcare. 

Cordaid is celebrating one hundred years of work in health relief and development. Going forward, what would you like to see from the NGO in terms of its engagements in Ethiopia?

First of all, I would like to congratulate Cordaid for its achievement. At least with the journey that Cordaid has had in the Ethiopian health sector, we have seen remarkable support. As the government of Ethiopia, we are keen to work with Cordaid and see that Cordaid is supporting the whole health system by prioritizing the strategies of the government and priorities of the health sector. Here, I would like Cordaid to continue to work with us to mobilize more resources to bring different actors into the support mechanisms.

In settlements like the Kibbutz, dozens of residents were killed, and many others were abducted and taken captive into Gaza.

Among those abducted was Shoshan Haran (PhD), along with her daughter, son-in-law, grandchildren, sister-in-law, and niece. Her husband, Avshalom Haran, was killed during the attack. For fifty days, Shoshan and her family were held in Gaza before being released, except for her son-in-law, Tal Shoham, who remained in captivity for 505 days before his eventual release.

In the aftermath of the attack, Israel reported that around 250 people—including men, women, children, and the elderly—had been abducted and taken into Gaza.

For Haran, a humanitarian and agricultural scientist who had spent years supporting smallholder farmers in Africa, including in Ethiopia, captivity brought a sudden rupture to a life devoted to helping others. Her eventual release became a moment of relief, yet her story remained intertwined with the broader pain of those still waiting.

A leading seed expert, Haran’s outstanding career in plant science and agriculture spans more than three decades, pioneering Israel’s achievements in desert agriculture. She is also a Fulbright scholar, the founder and president of Fair Planet, and a member of the Advisory Board for Hostage Aid Worldwide.

As a global NGO, Fair Planet helps smallholder farmers in Africa combat hunger and poverty by providing access to climate-resilient seeds and improved farming practices. Conversely, Hostage Aid Worldwide focuses on effective global measures to secure the safe return of all hostages and end this grave violation of human rights.

Haran also co-founded ReHome, a non-profit organization dedicated to providing innovative housing solutions and financial support to the Israeli families most deeply affected by the tragedy following the October 7 attack. 

From the laboratories of Jerusalem to the fields of Africa, her journey has been driven by science and a commitment to impact. She began in laboratory research, completing her PhD at the Hebrew University of Jerusalem, and continued with post-doctoral studies in the United States at Rutgers University.

Haran’s work in lab science laid the foundation for understanding the biological potential of seeds and their role in global agriculture. In a wide-ranging discussion with The Reporter‘s Abraham Tekle, she addressed several crucial subjects, including the primary reason for her recent trip to Ethiopia and the initial moments and emotional impact of her abduction. She also detailed the considerable, long-term changes her organization has brought to smallholder farmers in Ethiopia, discussed the lessons she passes on to Ethiopian farmers, and elaborated on whether her personal hostage experience will now shape her humanitarian identity and future advocacy for peace and aid. EXCERPTS:

The Reporter: What was the reason for your recent visit to Ethiopia?

Shoshan Haran (PhD): I was invited officially by the Israeli embassy to participate in the second anniversary commemoration of October the 7^th terroristic attacks on Israel. The reason the embassy invited me is because of my long-term connections and good connections with the Ethiopian people.

On October 7, you were abducted by Hamas and held hostage for 50 days. Can you walk us through the moment you realized you were being taken and the emotions you experienced while in captivity?

On the morning of October 7, I was at home with my husband. We had gathered to celebrate a Jewish holiday with our daughter, son-in-law, grandchildren, my husband’s sister, and her daughter. They had come to stay with us for the holiday.

In the early hours, armed men attacked our community. We began hearing gunfire, explosions, and shouting in Arabic. The attackers approached our home, broke through the door and windows, and attempted to enter our safe room. They fired several bullets that penetrated the door, but my husband and son-in-law managed to hold the handle from inside, preventing them from getting in.

Soon after, the attackers used a bulldozer and explosives against the house. They launched a grenade that damaged the wall and broke open the small window of the safe room. At that point, we had no choice but to surrender. My husband and son-in-law were taken out first. Moments later, my daughter, my grandchildren, and I were pulled through the window by the attackers. We were then taken by car into Gaza and handed over to another group who held us as hostages.

And what was very clear is that they were planning to kidnap the babies, and children, and women, and old people. It was actually the first time that a terror organization used mass hostage-taking as a weapon of war. And so, we were taken into Gaza. We did not know at the time how many other people were taken hostage, nor did we know how many people they murdered. I saw that six or seven people, my friends, were murdered next to my house.

After being taken into Gaza, we were placed in houses belonging to local families. We were used as human shields — they believed that keeping hostages with them would protect them from being attacked.

What kept you hopeful during your time in captivity, and how did that experience change your outlook on life afterward?

During those weeks in captivity, what kept me hopeful was the belief that Israel would insist on the release of women and children before making any concessions. I had learned from Holocaust survivors’ stories that it is important to remain strong and not show weakness while in captivity, and I tried to follow that.

I held on to faith that we would eventually be released. I told my daughter and my sister-in-law that every day we stayed alive was another day closer to our freedom.

Only after returning to Israel did I learn that my husband, my sister and her husband had been killed. The attackers murdered 102 people from our small community — and that, across the region, 1,200 people were killed that day.

Considering your long-term commitment to humanitarian service, including your early work in Ethiopia empowering smallholder farmers, can you describe the considerable changes you brought to those farmers? What are your basic project plans now, and what is your long-term vision?

I have been involved in humanitarian and agricultural development projects in Ethiopia for several years. Our work began in 2012, when my NGO established collaborations with ten of the world’s largest seed companies in the world, as well as with Ethiopia’s EIA Research Center in Melkasa.

Our first project took place in Butajira and Meskane, where we tested a wide range of vegetable seed varieties — including locally bred varieties and others from around the world — to determine which were best suited for local farmers. We focused on crops such as tomatoes, hot peppers, cabbage, onions, and later added broccoli, cauliflower, and potatoes.

After identifying the best varieties, we worked with local bureaus of agriculture and development agents to train farmers in improved farming techniques. This included guidance on precise irrigation, fertilization, and crop management, as well as strategies for understanding market cycles to maximize income from high-quality produce.

A year later, we expanded our efforts in collaboration with Haramaya University, implementing similar projects in Dire Dawa, Haramaya, and Harar. Through this program, more than 200 villagers across Ethiopia received training, and by 2020, over 75,000 farmers had adopted high-quality seeds — a number that has since more than doubled. The food produced by these farmers now has the potential to feed approximately eight million people with fresh, high-quality vegetables.

The overarching goal of these initiatives has been to bridge the gap between the best seeds in the world and local Ethiopian farmers. Today, more seed companies and seed varieties are accessible in the country. Regional partners report significant improvements: in Butajira and Meskane, the Meki area as well as in Haramayaa and surrounding areas, farmers have achieved greater economic independence and higher incomes.

During my stay here in Ethiopia last week, my contact and local partner at Haramaya University highlighted that farmers are economically independent and reducing overproduction of staple crops and diversifying into vegetables, achieving the mission they set out on when the collaboration began. The results demonstrate tangible economic and social benefits, transforming communities and livelihoods across Ethiopia.

Given your focus on empowering farmers with seeds, tools, and knowledge to build sustainable agricultural systems, what are the most considerable, long-term changes you’ve brought to the farmers in the places where you work?

The results are very evident. We had big research by the University to evaluate the outcomes of our project. And they interviewed many farmers in all the regions that we are doing the intervention. And on average, farmers have tripled their yield.

They have tripled their yield per unit of land, but this is a result of academic research. A big survey that was done in 2021, and the results are very impressive because not only have the farmers increased their yield count, but the research found that the nutrition of the families had  improved dramatically, and many more farmers’ households are able to send their children to school because they have better income and they don’t need the help of their children in the field and so on.

So, the impact is much wider than just getting more yield and more money from farming, the impact is really changing the livelihood of the family and helping them to look at a better future.

Ang again, during my stay here in Ethiopia, I learned that the impact is continuing to grow because now the farmers realize that there are things that have changed and the seed companies are competing now on prices and services to their farmers. I also met a manager of Joytech nursery, one of the biggest nurseries of vegetables in Ethiopia. And he told me that many, many, many farmers are buying from the nursery because they want to have the best seeds and seedlings to start their season and their growth production. Like I said earlier, I was very impressed by the results.

How do you measure the impact of your humanitarian aid efforts in Ethiopia?

We hired university researchers who created a big survey in Ethiopia before we started and after we finished a specific project. We were also able to get support from the Dutch government, which is also active in Ethiopia. The support allowed us not only to work on a much larger scale in East Ethiopia, but also, we measured the impact in an academic way. We did independent academic research, so now we are very sure that the impact is dramatic, positive, and long-term.

Given your background in long-term humanitarian engagement, what lessons or philosophies from your experience can you pass to Ethiopian farmers?

I think that giving farmers the freedom and choice to select the best crops and seeds for their land is paramount. This choice is enabled through objective testing, allowing them to confidently choose the right varieties to grow. Secondly, we greatly expanded our training efforts. We developed a unique on-farm training system—based on a model pioneered in Israel—which allows us to demonstrate the benefits of high-quality seeds and improved land maintenance directly on the farmers’ own fields, rather than just in demonstration plots.

I would encourage the Ethiopian government to utilize the knowledge and manuals we have developed to expand the project’s reach. Because we were working only in the west and the east, I believe this proven system should be implemented in the north and the south of Ethiopia as well.

Among the smallholder farmers you have worked with in Ethiopia, is there a particular story of transformation that stands out to you, and why did it resonate so deeply?

There are many, but farmers in Butajira have achieved the most. The impact has been remarkable. In one specific case, a farmer who was interviewed reported almost eight times more yield and a significantly higher income from his tomato field. But there are many similar stories. On average, more than 100,000 farmers have increased their yield by about three times compared to before.

This improvement is very significant, mainly because the quality of the produce is much higher than that of the old local varieties. As a result, the farmers earned much better incomes. Each one used the additional income differently. For example, a farmer in Butajira named Taji used her earnings to buy cows for milk production. Now, her main source of income is selling milk in Butajira. Each family chose its own path—some expanded their vegetable farms, while others diversified into different income-generating activities.

Looking ahead, do you believe your personal experiences will become part of your humanitarian identity? And if so, how do you intend to channel this incredible experience into your future work advocating for peace and aid?

It sure will. [I am] working with an American NGO that focuses on combating hostage-taking. We are very active in monitoring such incidents worldwide, as well as lobbying and advocating against hostage-taking and the financing of terrorism. Our goal is to help eliminate this horrific weapon of war. In addition, I’m assisting families in Israel who are recovering from the trauma of hostage situations. I founded an NGO that supports families who were severely affected, helping them rebuild their lives and regain stability. That is the focus of much of my current work.

Do you have any future plans or projects you intend to launch in Ethiopia?

We will assess whether further involvement is necessary, especially in light of the results I heard last week. The encouraging news is that the activity continues even without our direct participation — which was our greatest hope from the start. So, we will remain in contact with the Israeli Embassy, and if needed, we will provide additional support in the form of knowledge, experience, and training. For now, it appears that the impact is sustainable, but we will continue to monitor the situation and assist when necessary.

One of the major companies operating under the Tigray Endowment Fund for Rehabilitation (EFFORT), Mesfin Metals and Engineering, announced a major rebranding at the end of September 2025, thirty-two years after it was established as a legal entity.

‎Engaged in the production of industrial and construction materials, energy supply components, metal fabrication, electromechanical engineering, and vehicle assembly, the company is currently led by its Managing Director, Colonel Tessema Gidey.

‎Tessema earned his undergraduate degree in mechanical engineering technology from the Defense Engineering University, under Addis Ababa University. He later completed a graduate program in business administration at Indira Gandhi National Open University in India, where he also focused on operational management.

Before taking the helm at Mesfin Metals and Engineering in January 2021, Tessema held senior posts at other defense-affiliated enterprises, including former Metals and Engineering Corporation (MetEC) subsidiary Hibret Manufacturing Industry and Gafat Armament Industry. He was promoted to Director-General from his post as head of Production Planning and Control at Mesfin Engineering.

‎In this interview with The Reporter’s Nardos Yoseph, Tessema reflects on Mesfin’s current operations, its recent rebranding, the company’s status during and after the northern Ethiopia war, structural reforms, EFFORT’s finances, the conditions of the company’s workforce, and its challenges in accessing forex and raw materials, among other issues. EXCERPTS:

‎‎The Reporter: Mesfin Metals and Engineering is one of the better-known companies both in Tigray Regional State and across Ethiopia. However, apart from being recognized as one of the enterprises under the Endowment Fund for Rehabilitation of Tigray (EFFORT), little is known about its independent identity. Could you briefly explain Mesfin’s history — from its founding to its current status?

Colonel Tessema Gidey: The name ‘Mesfin’ carries a deeply historic significance. It was named after a brave fighter — an engineer and political figure — who lost his life in a machinery accident during the armed struggle.

The company’s roots go back to the Bereha, to the desert where the TPLF operated during the struggle against the Derg regime. During that time, there was an engineering structure known as Zero-55 or 055, which was part of the fighters’ operations. This structure provided engineering solutions, produced and repaired tools, and supported logistics — everything from agricultural implements to vehicle maintenance. Using the skill, knowledge, and practical ingenuity available at the time, 055 developed solutions critical for the fighters’ survival and mobility.

Mesfin emerged from that wartime engineering effort. After the struggle, in 1991, the leadership recognized that the technical capacity built in the field needed to be preserved and institutionalized. Discussions began on how to transition the engineering knowledge and human capital from 055 into a formal organization.

In 1994, the engineering team was legally registered as Mesfin Industrial Engineering, ensuring that the skills and structures developed in 055 could contribute to regional and national industrialization. From then on, Mesfin became widely known — both for its technical work and its historic legacy — participating in major national engineering projects until around 2020.

By that time, global and local circumstances were changing, and the company needed to reassess the vision and strategy that had guided it since its inception. Given its large human capital — engineers, technicians, and accumulated expertise — Mesfin began exploring new sectors and ways to expand beyond its traditional focus on metal work and machinery, while preserving the innovative and resilient spirit that had defined it since its origins in the struggle.‎

‎What new developments took place around 2020?

‎‎What was done then was essentially transforming Mesfin from a company focused on a single field into one diversified across multiple sectors, with a restructured corporate framework. The main idea was that the institution must focus its work on addressing public challenges and bottlenecks — that it should evolve into a corporate structure aligned with national needs. When we say the structure was improved, we mean the mission and the scope of work expanded. The goal was for Mesfin to participate more broadly in areas like energy, transportation — both public and private — agricultural machinery, and mining. The concept was that the machinery and machine parts needed to utilize the country’s natural resources should be locally manufactured; the technology should be introduced and developed here; and instead of merely acting as a merchant in one quiet corner of the economy, the company should build the capacity to create capacities — to become a producer of tools and technologies that empower others to operate at higher levels. Because, being an engineering firm, Mesfin’s philosophy was to build its own capacity and contribute to the capacity of others.

For instance, a company like Messebo Cement can generate millions in revenue per hour of operation, but if its production stops even for one hour, the loss is equally huge. Therefore, if Mesfin develops the capacity that ensures Messebo’s continuous operation — or if it uses its own strength to support Messebo — then beyond that, Mesfin can help similar institutions that generate vast amounts of wealth for the country but often lose billions due to minor or major technical problems that halt production for months. The new corporate restructuring aimed to focus on building capacities and producing technologies and machinery that prevent such breakdowns — to avoid waiting for three or six months for foreign suppliers while industries stand still. The new structure was designed so Mesfin could hold broader responsibilities and offer practical solutions across many sectors.

‎‎We undertook the restructuring; the war broke out just months later. Since then, there have been enormous challenges. After the war, when we tried to resume operations, what we found were collapsed institutions — many of them destroyed — and we lost a great deal.

Reports indicate that Mesfin’s facilities sustained varying levels of destruction at various stages of the conflict. Were you able to assess the extent of the damage? Have you managed to resume operations in full?

We have a five-year strategic plan in place. It lays out in detail what we aim to accomplish each year and how we will move forward. Essentially, the strategy charts a five-year path to rebuild from the setbacks and disruptions we experienced — to rise above our previous challenges and reposition ourselves as a competitive and leading engineering institution, not only in Ethiopia but also across Africa. It is about restoring both our capacity and our credibility. We are confident that we will reach the operational capacity that allows us to achieve all of this. Of course, what we cannot control — such as another war or an unforeseen national crisis — could again disrupt progress. But barring such circumstances, and provided that the peace we have today remains stable, we believe we will reach our targets. For now, our immediate focus for the first year or two is to ensure the institutional survival of Mesfin — to keep the corporation functioning and prevent closure. That is our first priority. We are concentrating our efforts on stabilizing operations, evaluating performance, and reinforcing continuity. Once that is secured, we will move into the growth phase. Within two to three years, we expect to fully return to our pre-war level of performance. Beyond that, we aim to create new capacities, diversify production lines, expand our market share, and, by the fifth year, become a strong, competitive corporation capable of consistently providing high-quality, sustainable solutions to all kinds of challenges.

‎Many businesses in Tigray say that war-related issues with debt and accumulated interest have made it extremely difficult for them to resume operations, even after peace. How does Mesfin’s situation compare in that regard?

‎‎That is indeed one of our most pressing issues. The damage Mesfin sustained was enormous. The company’s image suffered greatly — and restoring it has been one of our biggest undertakings. Part of the reason is that the corporation had long been presented as one entangled in politics, which made it vulnerable. During the war, Mesfin was openly targeted. Our facilities were attacked with deliberate intent to destroy everything we had built. The damage affected both tangible and intangible assets. In physical terms, we lost machinery, equipment, materials, and cash — assets worth billions of Birr, some looted, some burned, and others completely ruined. But the invisible loss was even greater: the psychological toll. People’s morale, their confidence, their faith in the company’s future — all took a deep blow. Measuring that loss is almost impossible. At present, our biggest operational challenge is the shortage of working capital. Much of what we had was wiped out during the war. To sustain the company and revive production, we need loans, we need assistance, and we need meaningful financial support. Despite these hardships, we are doing everything within our capacity to keep Mesfin afloat — to maintain operations at the minimum viable level. However, so far, we have not been able to access bridge financing or recovery loans. For a corporation of Mesfin’s size, sufficient working capital is absolutely essential. Still, through our own efforts, we continue to operate — and even under such strain, we remain among the country’s largest taxpayers. Last year, Mesfin was one of Ethiopia’s top tax contributors. Mesfin is a development enterprise. As government policy recognizes manufacturing as a strategic sector, it is crucial that post-war recovery programs also prioritize industrial enterprises like ours. Access to credit is vital, especially for companies rebuilding after conflict. To be frank, there is hardly anyone in Ethiopia who does not know Mesfin’s name. Yet even with that legacy, our biggest challenge right now is still financial — the shortage of working capital. So our current focus is on survival: finding ways, through careful planning and internal restructuring, to ensure the company’s continued existence and sustainability.

‎‎If you are facing a shortage of working capital and have no access to loans, what alternative mechanisms are you currently using to keep the company running?

‎The issue of finance affects everything from the ground up — it influences every stage of our operations. Without adequate cash flow, we cannot purchase raw materials. We cannot take advantage of opportunities to import the inputs we need by ourselves. As a result, we hand over the market opportunities we have secured in our own sector to other entities that have cash, allowing them to benefit instead. In return, we work with them to obtain raw materials through partnership or shared production contracts. In some cases, this means giving up our rightful market share or profits just to stay alive — to preserve our existence as an institution. To put it simply, even if Mesfin’s annual sales reach one billion Birr, our actual profit margin would barely reach five to seven percent. The reason is that we purchase most of our inputs through intermediaries. When we collaborate with others, it’s often on credit or through advance payments, or we buy finished products locally from private importers who bring in materials themselves and resell to us. So the inability to directly import essential raw materials has cost us dearly. The loss of that opportunity — the margin we could have gained — is substantial. Now, with such a severe shortage of working capital, we must ask ourselves: how can we make the most of our internal capacity? How can we economize? How do we restructure to adapt? These are the questions we constantly face. We are always reorganizing our structure to adjust to changing conditions. When circumstances demand flexibility, we operate flexibly; when expansion is impossible, we shift to preservation and apply temporary solutions of every kind. For instance, when we talk about cost control — say, vehicle operations — we’ve reduced vehicle use by eighty percent, using only twenty percent of our previous fleet to save on fuel and maintenance. Across all departments, we’ve taken similar cost-cutting measures. Slowly but steadily, these are the steps we’re taking to navigate through this financial crisis.

‎‎How would you describe Mesfin’s working relationships with other businesses after the war?

Beyond financial challenges, a big problem is that Mesfin still faces the same kind of post-war stigma—as if we’re not supposed to operate freely in the market, not supposed to enter it, not supposed to sell or buy as we wish. There’s a kind of invisible pressure that limits our operational freedom. That old wartime suspicion still lingers.

‎Because of that, anyone —whether a foreign or local partner— who wishes to work with Mesfin does so with hesitation and fear. They hold back. There is still a perception that working with Mesfin is somehow dangerous or politically sensitive. Some even go as far as to say, ‘If you work with them, you must be on their side,’ or, ‘there is no guarantee whether or not you won’t align yourself with war again.’

‎‎This is something completely outside the institution’s own true intentions or outlook. Yet it becomes our problem when it shapes how others view and engage with us. Mesfin is a company governed by law and corporate procedure.

‎If there’s any concern, the right thing to do is to ask, verify, and investigate—to understand what exactly is happening, how it’s being managed, and why. That is the fair and lawful way. Above all, this mindset and perception must change.

‎‎But this perception is politically charged, and that makes it difficult to change overnight—especially for large institutions like ours. The challenge is greater for us because Mesfin has always been a large industrial operation with significant facilities and a wide range of activities.

‎‎When production slows or stops, the company’s market value declines. Everything then becomes a burden the company carries on its own shoulders.

‎‎For example, even when our facilities are underutilized, we still pay for electricity, land ownership tax, and maintenance as if we were operating at full capacity. We pay workers, we maintain machines, we cover every expense—but we don’t generate enough income to balance it.

‎‎So these pressures are heavy. When we talk about working capital, it’s not even possible to start discussing foreign currency—we are far from that level. These are the real, concrete difficulties we face today.

‎‎Still, we must keep looking for solutions—continuously and without interruption. That’s the only way forward. And that’s exactly what we’re doing.

Mesfin’s affiliation with the Endowment Fund for Rehabilitation of Tigray (EFFORT) often raises questions about financial transparency. Is Mesfin’s financial activity conducted in a transparent and lawful manner?

‎‎Mesfin operates its own financial system transparently and lawfully. It is true that our financial operations are subject to the EFFORT audit reports, and—like any other institution—we conduct both internal and external audits. Not only Mesfin, but all EFFORT-affiliated companies follow strict legal and procedural frameworks. I can say with confidence that there is not a single instance, even a fraction, where any of these institutions operate outside the law, established procedures, or regulations. The system is very transparent.

‎As far as Mesfin specifically is concerned, which is my area of responsibility, there can be performance-related challenges that arise during work—just like in any organization anywhere. When such issues occur, accountability follows based on the nature and extent of the problem. Apart from that, our commercial operations are carried out within a highly regulated and lawful system.

‎However, I concede that it is true that audit reports have been delayed.

‎‎Why have they been delayed?

‎The audit work we are doing now covers a four-year period. During those years, the companies were not operational. We are conducting audits that go back four years, and naturally, that cannot be completed in a single day. At present, most EFFORT companies have completed their 2023 audit and are now working on the 2024 audit, gradually catching up with the current year.

‎‎However, carrying out the audit has been very challenging. Many of our documents were lost, looted or destroyed during the war. The systems we had in place for years were either damaged or completely erased. There are many records we simply couldn’t retrieve.

‎‎Additionally, these institutions are not limited to Tigray alone. For instance, Mesfin has branches in Addis Ababa as well. All of this is being audited after a period of four to five years of inactivity, which makes the process even more complex.

During that time, while EFFORT and its companies were struggling to recover, administrative control was temporarily handled by other bodies, which created further complications. Therefore, it is not that there is no financial transparency—rather; the challenge lies in the difficulty of recollecting what was lost.

‎‎The issue isn’t a lack of understanding, but rather that some of the responsible institutions are unwilling to understand the context. That, I would say, is the main source of the pressure we face.

‎‎Can you elaborate on the delays in the completion of the audit reports, especially regarding the institutions most affected?

‎‎The factors that delayed the audit reports are mainly related to documentation issues within each company. Essential records needed for the process are often missing. For instance, in the case of Almeda [Textile Factory], there are no documents at all to account for its machinery or assets. Nothing. If you look at Humera Agricultural Mechanization Center in the west, nothing remains there either.

‎‎All these are EFFORT-owned companies, and since they are presented collectively under the same umbrella, their audit results are interlinked. This has created difficulties. However, not all are in the same condition—some have been inactive for years and no longer meet audit standards. Others are completely defunct. Yet, on paper, they still exist under EFFORT.

‎‎When auditing EFFORT, one company affects another, delaying the entire process. In reality, these are legally independent commercial entities—each with its own business license and legal personality. Those still operational are making serious efforts to finalize their audits.

‎‎But under the law, because they are collectively regarded as EFFORT companies, a challenge or debt in one affects the others. Since there are shared ownership stakes between them, even minor cross-holdings can create significant complications and collective burdens in terms of results and accountability. That’s where the bottleneck lies.

‎‎Once this issue is properly understood and addressed, it can be easily resolved. But if there’s no willingness for coordination, the problem will persist.

‎‎As one of EFFORT’s major subsidiaries, are you saying these challenges are limited to audit-related issues, or do they also extend to financial operations in general?

‎‎They’re not limited to audit matters. Let me give you one example from our experience. We once applied for a large loan from a major bank. The process took over a year, as we were repeatedly asked to fulfill requirements—prepare this, bring that, complete this, submit that.

‎‎After more than a year of back-and-forth bureaucracy, when we finally submitted asset documentation and valuations, we were shocked to see our factory facilities valued lower than some private workshops. For instance, a factory worth one billion Birr was valued at only one hundred million.

‎‎This was beyond our control, but we had to continue working within those constraints. Completing property valuations by itself is highly costly—it can cost between two and three million Birr, depending on the scope.

‎‎After all that effort, the final response we received was: ‘Since EFFORT companies are interlinked, and there are unsettled transactions or unpaid debts among them, we cannot approve the loan.’

‎‎So, even when we provide collateral assets, this collective treatment of EFFORT companies becomes a permanent obstacle. The refusal is never final, but the problem remains unresolved.

‎‎Whether it’s due to a lack of support or a deliberate delay, the outcome is the same. We share both the struggles and the frustrations together. Everyone knows who is performing and who isn’t, but these institutions have no legal alternative route beyond the formal process.

‎‎That’s why, although some progress has been made, many of these companies are not yet fully operational—they remain in limbo until a clear decision is reached.

‎‎When will the non-functioning companies you mentioned undergo auditing?

Almeda Textile is no longer operational. Sheba Leather Industry is no longer functioning. Same goes for Saba Dimensional Stone. These are among the EFFORT-owned enterprises that are not in operation.

‎‎I cannot say exactly why they ceased to operate, as I was not directly involved in their management. The issue may be administrative or otherwise, but to this day, the full picture has not been made clear to me.

‎However, these companies are still considered to be under EFFORT’s umbrella. Moreover, many of them hold cross-shareholdings with one another—each owning shares in the other.

‎‎This interconnection creates a problem: when companies like ours that are still operational submit collateral assets and apply for loans, banks deny the request by citing the non-functioning EFFORT companies that hold shares in us. They say the inactive ones are liabilities, and that becomes an obstacle to accessing finance.

‎‎This issue can be solved—either through an administrative remedy or by setting up a temporary or permanent solution. But that depends on the willingness to reach an understanding.

‎‎There are cases where, instead of addressing issues straightforwardly and constructively, unnecessary obstacles are created—solutions that look good on paper but have no practical meaning. If there is no genuine intent for resolution, resentment grows and that breeds closure of regional state owned development enterprises.

‎‎In short, the perception surrounding these institutions remains highly negative and deeply discouraging. These are, after all, business enterprises; they should be trusted, allowed independence, and properly regulated, not stifled by fear or suspicion. There is a system. There is law. There are governing rules and procedures. Beyond that, everything should be possible through proper oversight.

‎‎Apart from that, we must also recognize the capacity of the Tigrayan people—and indeed of the Ethiopian people as a whole. A solution is necessary. Mesfin’s capacity belongs not only to Tigray but to the entire nation.

‎‎Therefore, these companies deserve to be viewed through a business lens. If the foundation remains one of mistrust or if their names are stigmatized, everything associated with them collapses under that burden. This isn’t unique to Mesfin or EFFORT—it’s a pattern seen across many institutions and even at the individual level. The impact of such prejudice is very harmful.

‎‎That’s why this is such a delicate task. What we need is to measure, assess, and operate as a business institution. Beyond that, as the head of a business enterprise, I have no political or hidden agenda in what I’m saying.

‎‎As long as I am here, it is expected of us to operate within business systems, laws, and regulations. Likewise, it is expected of the relevant authorities who have the mandate to oversee us to manage this process legally and responsibly.

‎‎Even while this audit is being conducted, what is required of us as a company is to continue contributing to the country and its people in a lawful and accountable manner.

‎‎The sector in which Mesfin operates is one of the most labor-intensive areas of the economy, employing a large number of workers. How many employees did you have before and after the war?

‎‎Mesfin still employs a significant number of people. At present, we have over 1,500 permanent employees on the payroll. Even though we are operating under great difficulty and while for many institutions the ‘solution’ would be cutting staff, downsizing, or scaling back operations, we see things differently. If we let these workers go, where would they go? The answer to that question is what guides our decisions. The truth is, there’s nowhere else for them to go. As a company, we are now in a chapter focused on sustaining our institutional survival—that’s why we’ve chosen this path.

We are doing everything we can to retain as many of our employees as possible, within our capacity. Many of them, however, are still earning the same amount of salaries to what they were making seven or eight years ago. Obviously, that income is no longer sufficient to sustain a living. Right now, our workers are underpaid, with little to no benefits. Frankly, they are serving the company almost voluntarily.

‎‎But from an institutional standpoint, our only way forward is to endure—to stay alive as an organization and evolve through the hardship. There’s simply no other solution. Even when we say we’re ‘moving forward with a small force,’ in reality, Mesfin can’t even move effectively with that small capacity. Without our workers, what could we possibly do with all this machinery and infrastructure? Without manpower, machines become idle assets—wealth that sits uselessly. That’s why maintaining our workforce remains our top priority.

‎‎Of course, some employees, as the cost of living keeps rising, are seeking other opportunities—not because they want to leave, but because their circumstances force them to. We feel sad about it, but we wish them well. And when the situation improves, we will always welcome them back as part of our family.

‎‎At the same time, there are many who choose to stay with us through all this hardship. They see this company as belonging to the people of Tigray. For them, working here is an act of service—to stand together, to fall and rise again with the institution, as part of Tigray’s struggle. They say, ‘This is the property of the Tigrayan people; by working here, I’m helping sustain my community’s livelihood.’ That’s the kind of belief and commitment that keeps many of our workers going.

Every day, we move forward with the hope that tomorrow will be better than today. We’re not a purely profit-driven enterprise that operates on commercial logic alone. We’re a company with deep social responsibility. When we think of our employees, we’re thinking of the people of Tigray.

‎‎Each of those one thousand five hundred workers supports a family. How many households is that? How many lives depend on them? Cutting one worker means destroying the livelihood of an entire family. It’s a matter of principle and survival balance—we must not create a second crisis by destroying our human capacity in the name of solving the first one.

‎‎That’s why we say: we’re doing fine, nothing catastrophic has happened. We’re surviving.

This month, an innovation expert from the University of Tokyo took part in a workshop at Addis Ababa University (AAU), where he offered practical lessons from Japan’s startup ecosystem to inspire Ethiopia’s innovation landscape. This rare exchange provided valuable insights for local entrepreneurs, educators, and policymakers on building globally competitive ventures and positioning Ethiopia as a co-creator of global solutions, with a special appeal to female entrepreneurs seeking actionable strategies.

Professor Shigeo Kagami is the current president of a local Japanese university in Niigata and a former professor of Innovation and Entrepreneurship at the University of Tokyo. While at the University of Tokyo, he served within the Graduate School of Engineering’s Department of Technology Management for Innovation (TMI) and as Deputy Director-General of the Division of University Corporate Relations (DUCR) from 2002.

He continues to work at the University of Tokyo as a part-time professor and has been pivotal in developing the university’s startup ecosystem since 2004. 

Kagami’s academic background includes a degree from Hitotsubashi University (Japan), an MBA from IMD (Switzerland), and a doctorate from the Weatherhead School of Management, Case Western Reserve University (USA). Prior to his retirement at the end of March this year, he served for five years as a professor of graduate school philosophical science.

The author of ‘Global Clusters of Innovation’ (2004) and ‘Clusters of Innovation in the Age of Disruption’ (2022), Kagami visited Ethiopia to share the insights he gleaned during two decades of building Japan’s university startup ecosystem as part of a partnership between AAU and the University of Tokyo. His visit also aimed to share expertise and encourage the university to focus on innovation and startups, in line with the objectives of the Yokohama Declaration. 

Kagami contends that a well-designed policy, coupled with proper implementation, is essential for a country to enable innovation and entrepreneurship under the framework of a robust startup ecosystem.

In a wide-ranging discussion with The Reporter’s Abraham Tekle, the expert addressed several crucial subjects, including entrepreneurship education and startup creation. Key themes of the conversation included cultivating an entrepreneurial mindset adapted to Ethiopia’s cultural and academic context, enabling universities to become national innovation hubs, and identifying practical steps to ensure women become leaders within the startup ecosystem. EXCERPTS:

The Reporter: The University of Tokyo’s move toward autonomy in 2004 catalyzed entrepreneurship education and startup creation. How did its autonomy enable that shift? What key structural steps should Addis Ababa University prioritize to establish a sustainable startup ecosystem as it moves toward autonomy?

Professor Shigeo Kagami: Even if we say autonomy, I think we call it the incorporation of national universities, including the University of Tokyo. That is, the University of Tokyo will be celebrating its 150th anniversary soon, because the university was founded in 1877. The University of Tokyo has existed for quite a long time. In the year 2004, there was what I call academic reform. In a simplified fashion and for the first time in history, in 2004, we created a balance sheet and income statement of the university, because now it is a separate entity from the government and the Ministry of Education. So, you call that autonomy.

But at the same time, the government in Japan said, even though you might have more freedom as an independent organization, unfortunately, we are not able to continue to support you as we used to do and have decreased budget allocations year by year. But I think you might get access to external funding, so you might be able to be an independent organization, managing education and managing research. At the same time, you may utilize university assets — that might include intellectual property rights or patents, whatever comes from the research results. So, you might be able to use those research results, even those patentable researches and then license the technology out to existing organizations, or you might be able to use a particular technology for a startup. Before April 2004, a national university had no corporate status, thus it was not able to be a patent owner. Intellectual properties are a university’s asset.

Again, we reincorporated the National University back in 2004. You may call that autonomy quite similar to something happening here in Ethiopia. As Addis Ababa University is a leading university, the University of Tokyo is also a leading university in Japan. That is the similarity between them. In that sense, my experience might be of some help in understanding what’s really going on after autonomy in Japan. Particularly, as I indicated, university research used to be very important — and it has always been very important.

At the University of Tokyo, we produce 500 to 600 inventions a year. These inventions used to be part of the individual researcher. But after 2004, the inventions belonged to the university based on a principle. After that, a subsidiary of the University of Tokyo called the Technology Licensing Organization (TLO) evaluates each invention’s worth; whether the technology is attractive enough to be used for business. If that’s the case, this technology might generate revenue in the future even if the invention belongs to the university, researchers should be motivated.

After 2004, suppose you are an inventor, and then that invention is great and possibly generates revenue. After the deduction of necessary expenses, royalty fees go into the pocket of the University of Tokyo. Then 40 percent goes to the inventor while 30 percent goes to the department you belong to and the remaining 30 percent goes to the headquarters of the university. That rule came into effect in 2004. This rule is quite similar to the counterpart systems in the US, Singapore, or wherever. We have learnt a lot from this rule and applied it in the Japanese marketplace.

How can this be incorporated in universities to prioritize the startup ecosystem?

This is a policy of the government. The Ministry of Education believes it is the most important thing to change. Some Japanese companies including Toyota were founded either before or during the [Second World] War. All of a sudden, Japan was defeated and everything was gone. And then new companies started coming up with a similar situation. So, in those almost three decades, Japanese companies were deteriorating in their competitive advantage against US, Chinese companies, and other older and big companies. But the Japanese government believes that most of the great company innovations came from the universities in the past — even in the 1930s and 1920s. So, we can pick up lots of companies that came from university technologies.

Like I said, the government policy really fits the notion that the university plays a very important role in fostering innovation, either through startups or through technology licensed out to existing organizations. That is the organic government policy and a change of law to incorporate national universities. Universities are now independent national corporations as academic institutions and triggering factors in the sector. 

What strategies do you find most effective in cultivating an entrepreneurial mindset among students in Japan? How might those be adopted to Ethiopia’s cultural and academic context and how do you plan to mix that in?

It’s not easy. You’re not able to change instantly. I think we’re in the process of changing as well, even after the year 2004. But again, the first thing that I created myself is changing the university’s staff, as most of the people were not experts in intellectual property rights who came from industry and other sectors. In this case, during the first years, we basically hired those people who were not available before the year 2004. I think, for the first five to ten years, the government, primarily the Ministry of Education, financially supported each national university with money that could be used for hiring people not necessarily available in the old days. Those people might be very key resources to enable you to have more innovation and to change the mindset of the university.

I’m probably one of them, as I spent 15 to 16 years at a management consultancy — consulting managers, creating a micro-consulting firm. Therefore, I was requested by the university to become such an individual who can create a bridge between science and business. So that is the first thing in terms of changing mindset. The second one is entrepreneurship education. I started an entrepreneurship education program at the University of Tokyo, called the UT Entrepreneur Dojo. We offer programs to the students and researchers about where they could learn about how to start a company, how to cope with venture capitalists, and how to capitalize on technology.

What are your recommendations for AAU in terms of capitalizing on a Startup Center and ensuring fairness, sustainability, and continued innovation?

At the University of Tokyo, we were lucky enough to start a venture capital arm, dedicated to the university. This was before the incorporation of the university. 

In addition, in 2004, that tech transfer office became a 100 percent subsidiary of the University of Tokyo. Those are some of the key components of encouraging entrepreneurship, where AAU is trying to follow what we did in the past.

In Japan, successful startups often give back to their universities, making the ecosystem self-sustaining. How was this cycle established and what financial mechanisms or policies could AAU adopt to replicate this system in Ethiopia?

As I indicated, the University of Tokyo created a venture capital company. So, a venture capital company is in a position to make an investment to a particular company, particularly based on technology. The technology came from a University of Tokyo researcher. The technology is good enough to generate revenue. How can you come up with a great platform for pharmaceutical discovery, for example. How can you really help those who are suffering from a particular disease, with additional business segments that will go public that are acquired by an existing organization and an increased value as well as capital gain? Here the venture capital is able to generate what is called a capital gain out of it. 

So, once they recognize the success in terms of the exit of the startup company, through initial public offering, or may be getting acquired by a company. In this case, money comes back to the University of Tokyo through the venture capital company. In most cases, venture capital people give donations to the university. That’s one source of money coming back to the University of Tokyo. Also, through licensing agreements with startups. Suppose you agree to research, you have a technology, and then you are willing to start a company yourself, business would be great, as the technology belongs to the university. 

In this case, the university is in a position to license technology out to the startup company where research is involved in the invention. The University of Tokyo employs a mechanism to commercialize research-based inventions by licensing technology to startup companies founded on that research. This is formalized through a licensing contract that requires the startup to pay for technology usage. Crucially, the university accepts equity in the company as a form of royalty payment rather than just cash fees. This arrangement has proven highly lucrative, as demonstrated by the success of one company, Capture Dream (offering a drug discovery platform), which went public with a market capitalization exceeding USD eight billion, providing a significant financial return to the University of Tokyo’s programs.

Beyond financial returns, the successful startups contribute to the sustainability of the university’s ecosystem by having their founders return to act as mentors and teachers, and sometimes by providing individual donations. This full-circle mechanism encourages researchers and students to become entrepreneurs, with the understanding that their success is recognized and their contributions will financially and structurally support the University of Tokyo and its system for the long term. That is the general mechanism. 

Stakeholders in Addis Ababa stressed that AAU should open its Startup Centre to the wider public. How important is community integration in building a thriving startup ecosystem?

Before community building, I think the community within the university is very important. In most cases, schools or maybe graduate school are somewhat relevant to the startups, this includes medical school, hospital, engineering school, and business school as well. I think the University has those very important academic disciplines. So, those schools are very important to fostering innovation through either students or researchers within the university.

As the university may have different campuses, each campus may have a different sort of academic discipline. But even in the University of Tokyo, we have three major campuses, but it’s quite difficult to communicate with the other faculty members if the campus is different. So again, the important thing is that internally, we should have the key relevant schools and academic institutions be involved with this joint effort to really encourage startups.

Therefore, in Tokyo, we used to have a governance board or a council board. This board consists of different academic disciplines relevant to the startup company that have a shared policy. Such kind of stuff is a very important thing, as all these stakeholders within the university should be involved for that, even startup company CEOs. This structure is crucial because it ensures that all stakeholders within the university are involved in the process.

A key concept is the “triple helix,” which refers to the collaboration between industry, academia, and government. This partnership is considered vital. For a leading university like Addis Ababa University, this means its initiatives should be supported, both financially and mentally, by the government, and it should align its strategy with government policy. Simultaneously, the business must be accepted by the industry, requiring relevant industry knowledge.

Furthermore, while an academic researcher can be a technology champion, they are not necessarily skilled in business. Therefore, it is often necessary to bring in a CEO or equivalent manager from the industry. This industry knowledge is essential to bridge the gap between technology and business success. As a leading university, Addis Ababa University should take a leadership role in fostering this essential triple helix relationship. That is the most ideal system.

Can you share successful examples from Japan or elsewhere where universities became national innovation hubs, not just academic centers?

As I indicated, the University of Tokyo, like the AAU, is a leading university. Historically, the University of Tokyo has been a powerful source of national leadership, producing a significant number of prime ministers, finance ministers, and high-level government officials. Academically, it maintains a broad institutional structure, with prominent faculties including medicine, engineering, the largest after medicine, law, and economics. This influential nature and diverse academic foundation provide the university with significant potential for driving innovation.

However, the university must shift its traditional view where graduates are treated merely as alumni with no requirement for deep engagement. For encouraging startups, the university’s graduates are a vital asset. Graduates who have become entrepreneurs, businesspeople, and government officials are important resources who can give back to the university. They can serve as role models, mentors, and teachers for the startup center, making them a crucial element in addition to the triple helix model. So, graduates are very important. In addition to the triple helix, I think graduates are considered a very important asset for you.

The recent TICAD9 symposium highlighted youth and women as central elements to co-creating innovative solutions to Africa. What role do you see they could play in global innovation? What practical adjustment should AAU take to ensure both are empowered as leaders in startup ecosystems?

This is something I always say to people here, even to the students. As the young generation is an integral part of any community, the most important thing is to understand how to transform startups into business. I’m 65 years old. I’m going to be 66 soon. Anywhere in Addis Ababa, I’m the oldest. I see only young people. That’s quite amazing. Here in Addis Ababa, the population is very young, which is different from Japan where the average age is 44 or 45. This youth is an advantage because young people do not have the unconscious bias, prejudice, or legacy obstacles that exist in a developed country like Japan.

Younger people have great potential for creating real innovation, as seen with founders of companies like Google and Facebook who started in their early twenties. Unlike in Japan, where you must go through multiple technological layers, here you can jump into advanced technology immediately, which is a significant potential advantage for the younger generation. This is something similar to the Chinese experience, where some return to their country from the US and become a leader of a particular technology and startups. I know a few Ethiopian people with the same vision living in the US or Europe. 

Therefore, it might be an idea that you might also have those young people involved with the innovation and start-up vision here in Ethiopia. So, integrating the youth into Ethiopia’s innovation and startup initiatives is essential, as their proven capacity for national contribution represents a key developmental asset.

Drawing upon your expertise, do you have a final message or key takeaway you would like to share with our readers?

I’m very much impressed with the fact that you’re a very young nation with smart people. There is a vast similarity between your nation, Ethiopia and Japan as both nations share similarities in different aspects. However, the crucial task for the University, and its entrepreneurial center, is to encourage the youth to explore their passion and apply their energy to solving both local Ethiopian and global problems. This can be done through the dedicated efforts of the university’s key people, the entrepreneurial mindset and atmosphere to bring out future entrepreneurs.

But I think the initial four to five years of building this ecosystem will likely be a painful process, but the key to moving forward lies in achieving a solid, visible success. This first success is the crucial trigger that will inspire others. So, the AAU with its smart students and researchers, has great potential to achieve this success by creating the necessary institutional setting. 

In the age of digitization, strong cybersecurity policies and adequate enforcement are crucial to maintaining safety and security, yet Interpol indicates that 90 percent of African countries report needing ‘significant improvement’ in law enforcement or prosecution capacity.

Africa’s race to catch up to the quickly evolving world of cyber was on the agenda during the Global Forum on Cybersecurity Expertise, which took place this week in Riyadh, Saudi Arabia.

Among those in attendance was Craig Jones, a seasoned international expert in cybersecurity and law enforcement. Jones served as head of Interpol’s cybercrime division for five years beginning 2019 following an impressive career in cybersecurity in the UK, his home country.

At Interpol, Jones spearheaded the Global Cybercrime Programme that brought together law enforcement, governments, and private sector partners from 196 countries in an effort to combat the growing threat from digital crime. Today, he works as an advisor and consultant in cybersecurity.

Jones caught up with The Reporter’s Ashenafi Endale on the sidelines of the forum in Riyadh to provide his expert opinion on Africa’s cybersecurity prospects, the challenges the continent can expect ahead, and the tools on offer in the new age of security. EXCERPTS:

As Ethiopia progresses in digitization and the online presence of its citizens and institutions grows, so does the exposure to cybersecurity threats. Do you think Ethiopia’s cybersecurity defenses are evolving at an equal pace to its digitization?

You are quite right, as a country’s digitization grows out, it does so at a rapid pace because it’s enabling communities to improve their business functions and their sociability as well. And what we have to build into that is the security side of that. Now, countries have cybersecurity strategies but often those strategies can lag behind. And there is a cost to cybersecurity. We’ve been used to using the open, free internet and all of a sudden we’re told we have to pay and put security in. That’s quite difficult when it’s something we can’t feel or touch; unlike when we lock our car or when we lock our houses with burglar alarms.

There’s a lot of work to do, not just in Ethiopia, but in a number of countries around building out that cybersecurity model. But I wouldn’t put the emphasis just on the Ethiopian government and communities, I’d also put that on the industries that are supplying the infrastructure in terms of hardware and also the software that runs it. There has to be security baked into that infrastructure and also the software. But that does come at a cost, unfortunately.

According to Interpol’s 2025 Africa Cyber Threat Assessment Report, two-thirds of African member countries surveyed said that cyber-related crimes accounted for a medium-to-high share of all crimes, rising to 30 percent in western and eastern Africa. Does this include Ethiopia?

Yes, absolutely. That cyber threat assessment is a really important report that we first started doing around 2021 because if we don’t understand the threat and we don’t have the data, then we’re not able to put things in place around that. Based on that report, Interpol was able to set up their regional operations desk in Africa supported by the UK Foreign and Commonwealth Office. And what that allowed Interpol to do with those countries is drive operational activities which targeted criminals operating in the African region, but also allowed us to undertake preventative measures and identify vulnerabilities in, for example, public administration systems and financial sectors. We really shone a light on where the threats were going to be impacting [to be able to] do something about it.

Interpol recently ranked Ethiopia as the world’s most targeted country for malware in 2024, signaling the scale of threats facing African governments and institutions. Can you elaborate on this? How do you evaluate INSA’s agility in the face of rising threats?

When I was at Interpol, before I left last year after the end of my five-year tenure, we saw attacks through malware. Trying to assess the level and scale of that can be very, very challenging. That’s why when Interpol were writing those reports, they worked very closely with the private sector. Because the private sector had the understanding and knowledge, and [Interpol] could look in and see exactly what was going on. So, taking their data and information and aggregating that with police reporting gave us a really rounded picture and the Interpol reports are probably some of the most in-depth reports for that region across all pieces of cybercrime.

Which institutions, organizations, and sectors are targeted by cybercrime in Ethiopia?

I don’t think Ethiopia is any different to any other country: public sector. The public sector is often targeted because of the data and also because of the destruction it can cause. That’s followed by the financial sector and telecommunications. The reason the criminals target these sectors in particular is the disruption it causes. If they do a ransomware attack, which is where they attack an institution and encrypt the data set, the government or financial sector find it very difficult to operate thereafter. That then puts pressure on them to potentially pay a ransom to the criminals, or they have to rebuild everything and that can take a lot of time and cause massive disruption to a country.

Can you quantify the potential economic losses brought on by cybercrime in Ethiopia?

When you look at the economy of any nation, when a cyber-attack happens and closes down the infrastructure in that country so people are no longer able to log in to their emails or make financial transactions, that has a massive impact. We’ve seen in the UK recently the attack on Jaguar Land Rover. There, you’re looking at maybe 50 million pounds per week in losses for that company. But it’s the trickle-down effect to everybody else that’s connected to an organization, so when they can’t operate, they can’t pay their bills, they can’t take out cash, they can’t purchase food. It’s not just the economic loss, it’s that impact on society as well.

How can Ethiopia work with Interpol to counter the growing threat of cybercrime?

When I was at Interpol, we set up the regional operation desk in Africa. Ethiopia is part of that model. They get training, they get support. More importantly, what Interpol were able to do with the private sector is identify criminals operating in Ethiopia, or in other countries in the region. We brought law enforcement together in Rwanda in 2022, where we trained up over 40 people. And you’ve seen on the news recently some of the results they’ve had. Criminals have been arrested, money is being recovered, and communities are being made safer.

What is expected from the Global Forum on Cybersecurity Expertise?

At this forum, we have a number of international leaders in both government and industry as well. What we’re doing is discussing the challenges we face. As a foundation board member of the Global Forum on Cybersecurity Expertise, we’re really concerned about the capacity of countries in the global south. And when I talk about the global south, I’m talking about those less developed countries. How can we level up the playing field for law enforcement, for example, or government. How can we help them develop those strategies and policies, which then can be implemented in their countries to protect their communities? It is also addressing women and empowering women in cybersecurity. We see a massive underrepresentation of women in this area and industry. Here in Saudi Arabia, for example, women account for over 33 percent of the cybersecurity industry. I wish those figures could be repeated around the globe as well.

What differentiates a country with strong cybersecurity systems and one with weak ones? What are the parameters?

What we’re looking at here is the frameworks, the monitoring, and the reporting. SOme countries have little or no reporting, infrastructure, or frameworks in place to identify the attacks that are going  on within their boundaries. Some countries have really strong national cybersecurity centers that work directly with government, law enforcement, and also the industry. What they’re able to do there, where it may be more digitally enhanced, is they’re able to see the greater picture and then put policies in place, but also more importantly set out objectives for the different departments and agencies who can then put in the cybersecurity measures and protect communities.

Is cybersecurity taking precedence over traditional national security, characterized by military and intelligence? Or do you believe cybersecurity is enhancing traditional approaches?

Up until about a year ago, I would have said cybersecurity is more on the agenda of governments. But I think as we’ve seen the conflicts around the world, different countries are now looking inwardly at their own defenses and that very much is about the security posture of a country. The countries that are getting it right are those that are doing a blended approach. They’re not just looking at cyber in isolation. They’re looking at cyber as a potential threat alongside all the others. But any country has to make those risk-based decisions. Where are they going to invest at this moment in time?

What can you tell us about how Interpol operates and how it collaborates with its member countries as well as other organizations like the UN?

Interpol is a neutral organization. It is an international, intergovernmental organization. It has 196 member countries. Interpol has a very clear constitution, which all member countries have to sign up to.  Interpol is not able to intervene in anything political, religious, or military. It only deals with crime. If it is a crime recognized in a country, it can go through that country’s judiciary process. If someone flees that country, the country can write what we call a red notice, or wanted notice for a person. That’s placed on the Interpol systems. All 196 countries have access to that system. So if someone was to travel from one country to another and they had a red notice on them, they would be detained upon entering the second country and extradited back to the original country. It sounds a little complicated, but it does work. Just recently we have seen in Qatar, for example, a Canadian person that had been wanted for three years for murder was identified in that country. The red notice was seen. He was detained in Qatar and currently the extradition process is being gone through by Qatar and Canada. So Interpol’s role in connecting policing for a safer world is really important, and the tools and platforms that Interpol provides are a neutral platform for all countries to access.

To mobilize resources and align efforts toward powering Africa, these leading financial institutions are working alongside key partners such as The Rockefeller Foundation, the Global Energy Alliance for People and Planet (GEAPP), Sustainable Energy for All (SEforALL), and the World Bank’s Energy Sector Management Assistance Program (ESMAP) trust fund.

Enas Abdella Abdulmalik serves as the country lead for Ethiopia at GEAPP. The Reporter’s Sisay Sahlu sat down with Enas to find out more about the massive undertaking that is Mission 300. With more than two decades of experience in strategy, finance, and sustainable development, Enas plays a pivotal role in advancing GEAPP’s mission to tackle energy poverty and climate change through innovative clean energy solutions tailored to local needs. Read more about what she had to say.

The Reporter: Could you briefly introduce yourself and Mission 300?

I am the country lead for the Global Energy Alliance for People and Planet, which is a philanthropic organization that was started a few years back by the Rockefeller Foundation, IKEA Foundation and Bezos Earth Fund. It has three pillars: energy access or transition, job creation and enabling livelihoods, and carbon removal. So they got together and formed this new entity called GEAPP for short, the Global Energy Alliance, to further this mission.

Mission 300 is an initiative that brings together two large multilateral development banks, the African Development Bank and the World Bank, to accelerate and provide energy access for 300 million Africans by 2030. This is an initiative that started last year.

How do you plan to implement this initiative? Do you believe the target of reaching 300 million people by 2030 is truly feasible?

That’s a very good question. Some of the access numbers are going to come from existing programs that the World Bank and African Development Bank are actually already doing, but some are going to be new.

Is it feasible? We’re going to try. The good thing about this sort of initiative is that the two banks came together and agreed on a path forward to actually accelerate this sort of initiative. So is it feasible? I mean, unless you try, you won’t know, right? But really, our strategy is designed to empower nations.

We have the political leadership from the top down to actually implement this. In January 2025, there was something called the Tanzanian meeting on energy access where over nearly 30 heads of state came together and agreed to the Mission 300 initiative and to drive it from the top down.

So at least we have the buy-in from the top-down and then we can actually push it through as well.

What mechanisms are you using to achieve this goal? Are you directly engaging in implementation, or are you primarily supporting governments in building the systems themselves?

We support governments. We support the integration of essentially locally led approaches into the broader climate finance agenda. There are currently 27 national energy compacts in progress. Twelve have been signed and 15 are underway, which structure and promote country-specific energy efforts. For example, in Ethiopia, which is where I work as well, the compacts, which is the document that actually says that we’re going to try to do X and Y, is in the process of drafting and ready to be signed hopefully in the next month or so. Once these compacts are signed, we, as GEAPP, are creating what we call CDMUs, or Compact Delivery Monitoring Units.

This will look different in every country where we can actually deliver and monitor, essentially like a delivery unit of these compacts across the board. It essentially aims to strengthen delivery capacity, improve stakeholder coordination, and integrate development goals such as job creation into the energy projects. GEAPP also is working on an initiative called Productive Africa, which looks at the development side of the access story.

For example, if you avail energy access to a community that has never had power, they will use it to charge their mobile phones or one lamp. But what we’re hoping to do is actually accelerate additional uses or the productive use of energy, which also has really large broader economic development for our communities.

One issue often raised in Sub-Saharan African nations, including Ethiopia, is the level of political commitment to climate action. How are you addressing this challenge?

That’s a great question. And that’s why I mentioned what took place earlier this year in Tanzania. It’s called the Dar es Salaam Energy Declaration. It happened just this January where 30 heads of state all signed on to the Mission 300 initiative.

So there is political commitment. There is willingness. Now we just have to push it through.

This year marks COP30. Over the past three decades, we’ve seen agreement after agreement and initiative after initiative on climate action. What gives you confidence that this particular initiative will be fulfilled?

Well, this is African. COP constitutes the broader goals; Mission 300 is purely African. The initiative aims to electrify 300 million Africans. That’s half the number of people that don’t have power today. Six hundred million Africans don’t have power today.

This is a very audacious goal to reach by 2030. But there is political commitment. The aim is to actually accelerate the implementation and mobilize money, not only from DFIs and multilateral banks, but also bring together private sectors. There are agreements with the Trade and Development Bank (TDB) to mobilize and funnel through the private sector into energy generation. And that’s why it’s different. Never in history, at least on African soil, have the World Bank and African Development Bank worked together with this joint mission from their heads to actually push this agenda through.

Why are the IKEA Foundation, Bezos Earth Fund and Rockefeller Foundation involved if the initiative is purely African? 

I do not represent Rockefeller, IKEA Foundation, or Bezos Earth Fund. I’m from GEAPP, the Global Energy Alliance. So that’s a different entity.

But, for example, Rockefeller has been supporting energy access and transition programs across the world for many, many years. They’re providing technical assistance money to support the CDMUs across African countries where they could actually embed this. For example, in Malawi, it might be embedded within the presidential office. The unit will be embedded there to actually work with all the line ministries because energy, as you know, is just not energy usage. It touches agriculture. It touches irrigation. It touches many industries.

Whose initiative is this?

It’s an initiative by AfDB and the World Bank.

Is it not possible to work with an African philanthropic organization instead of going outside the continent?

You tell me, is there an African philanthropic organization?

If there is a strong determination to establish an Africa-led initiative, why not take the lead and act on it directly, rather than waiting for another round of philanthropy from the west or North America?

Mission 300 is driven by the World Bank and AfDB. AfDB is an African entity. Their partners are also African. For example, TDB is an African entity working in southern and eastern Africa. But there’s lots of African entities actually involved in this.

You can’t push the compacts across different countries without working with African entities. The technical support and assistance; some of them are actually coming from Rockefeller, Solar Cookers for All (Sc4all), and some support from others like JAP Africa as well. But I think different folks are actually keen to push it through. For example, we had a meeting earlier today around clean cooking. JAP Africa does not do clean cooking, but there’s a clean cooking alliance, which is Africa-based. That’s also part of Mission 300.

In international gatherings and summits, there is often concern about the persistent funding gap — a concern that has only grown since the United States withdrew from some international organizations. How will this affect institutions such as the World Bank and the African Development Bank? Do you believe they will still receive some level of funding from the US, one way or another?

I think that’s a question for the World Bank and African Development Bank.

Given that you are implementing something here, would it be unreasonable to assume that you have some idea?

So far, we do not.

Have you encountered any funding issues?

Not under Mission 300, no. I mean, part of Mission 300 is actually to mobilize money and catalyze money across the board from many different entities. If the Americans drop out, the Americans drop out.

There’s still a need for electrifying 300 million Africans in Sub-Saharan Africa.

What are the main challenges in achieving clean energy access across the African continent? Which key factors are holding back progress, and what specific issues does this initiative aim to address?

That’s very complicated. Africa is not one country. For example, in South Africa, access is not really an issue; its transition. They have non-renewable sources of energy and they have to transition over to renewables because of the climate change issue. In DRC and Nigeria, it’s a mix of both. They have people that don’t have access and people that do but are using diesel generators.

So it’s a mix. I don’t think you can paint the solution and the problem with just one liner. I can talk about Ethiopia, which is not the same as any other country. In Kenya, access is not an issue as well. There’s maybe optimal access. Do they have blackouts? Is it cheap? Is it affordable? All these other questions are there. And are they actually using appliances optimally? In Ethiopia, we have 50 to 60 million people without power.

Most of these people are smaller farmers in rural areas where the transmission line might go over their village but doesn’t come down to their houses. There are fundamental issues as to why this is. For example, the tariff rate is highly subsidized.

So both EEP [Ethiopian Electric Power] and EEU [Ethiopian Electric Utility] are operating at a loss. But farmers can’t afford to pay cost-effective tariffs. We in the city can’t afford to pay cost-effective tariffs.

There’s a mismatch there. They can’t pull down the lines because it’s very expensive to do so. So then they have to find sources of financing. And it takes a long time. What Ethiopia has done in the last five years is actually allowing private sector developers in off-grid areas to actually generate and sell energy—DRE or distributed renewable energy. Mini-grids are now a thing. And under EEU, they’re building 20 to 30 mini-grids under the World Bank program. We also have a program called DREAM that’s actually looking at doing that around Arba Minch, outside Hawassa, and in other southern cities.

But these are all mini grids, off grid. We’re hopeful that we can power centralized irrigation schemes for farmers that are actually in clusters, who then actually cost-subsidize their own homes and have very, very low subsidized rates for their homes. But for the actual productive use of energy, it’s actually a much higher rate.

Our directive allows that. It’s been five years, but no company has actually even fully tested it or been fully licensed. We’re hoping that our program might be the first one. We have developers coming into Ethiopia and actually investing as FDI into the space. Things are changing.

It’s highly complex. But fundamentally, the more energy you use, the more you earn money in terms of empowerment and broader economic development. It goes hand in hand. Really, energy is an enabler of the reduction of poverty. It’s a big factor and a big focus why our program, under Productive Africa, actually supports sort of the additional usage of energy and not just access.

As governments are often the largest investors in the sector, is there an enabling legal framework and enabling environment for private investment to engage in the energy sector?

Yeah, absolutely. I mean, I can speak about Ethiopia again. Our Ministry of Finance is trying to do large-scale, utility-scale PPPs or IPPs with private investors in geothermal and solar plants and wind. There are always MOUs signed with very large firms. But the feed-in tariff rate is always a big issue. For example, on the off-grid site we operate, we have an international mini-grid developer that’s keen to invest in the next month. The developer is in the process of registering or being licensed. It’s changing slowly but the regulation is there and it allows private sector investment. But it’s also difficult. There’s a lot of processes. It’s new to the country. It’s new to the investors. So we have to walk that path before we actually provide feedback to improve it.

Is it open to all investors?

In off-grid, it is. The law allows for off-grid developers. There’s a directive that permits the generation and selling of energy to off-grid customers. But nobody has fully tested it out. So we’re testing it out. For utility, large-scale, you can sign PPPs like the Ministry of Finance. But if it’s small-scale and off-grid, it’s possible.

There is a significant data challenge here in Ethiopia, where many have to rely on international institutions like the UN for up-to-date information. Does this pose a challenge to you? In reality, how many people actually have access to electricity?

For example, the Ministry of Water and Energy has a lot of data but it’s a tricky question. I think the answer is that it depends. When was the last time a census was conducted in Ethiopia? Like 15, 18 years ago. So yes, data accuracy is a big question. You’re right.

Has this been a problem for you?

Once you make your presumptions, then you have to go to the sites and actually do actual physical ground-truthing. For example, if you presume that this area doesn’t have power because the median voltage line is here, but nobody’s giving you information, you have to pay money and go fly there or drive there to actually confirm that what you think on paper is true is actually true. Ground-truthing is a big part of the work that developers do on the ground. 

Climate change is a major issue today, especially among millennials and Gen Z. We see protests in the west and even across Africa, as young people demand action. Yet some leaders, such as President Trump, appear indifferent to the issue. Climate change has become a global agenda item. How do you see the relationship between climate change and renewable energy?

Well, the good thing is that we’re on a different continent. We’re in Africa, so we’re not in America. But, you know, it’s funny, I had a meeting earlier today with members of parliament that are part of the climate parliamentary working group in their own countries—Uganda, Botswana, and several others—and climate is a big part of the conversation. In Uganda, you cannot start new work before receiving a certificate of climate compliance. Climate agendas are embedded into parliaments and members of parliament today.

Can we say there is an equal understanding of climate issues and their impact?

I don’t think anybody can say that, because my understanding is probably even very different from yours.

How do you see climate injustice as an African?

It’s an injustice. Like you said, it’s an injustice.

How do we correct this injustice?

Our Prime Minister said it during the opening session. He said that we have had the least impact, well, if you remove South Africa, and we’re the most impacted. Even during my earlier meeting with members of parliament from Botswana, they said that villages are aware that if they don’t make this an agenda, they’re going to be impacted. There are floods. There are droughts where historically it was not part of their life. But now it is. I think a sort of grassroots movement is also happening within the African continent.

Whenever there are climate-related meetings, the central issue is often financing. Developed countries usually promise and pledge billions of dollars, but in practice, the funds are not delivered. How can developing nations address this challenge?

That’s why programs like Mission 300 are critical because it coalesces everybody and actually drives an agenda forward to ensure that people are moving forward from the high levels, say in D.C., heads of state and all the way down. That’s why it’s really, really important that we all support initiatives like this.

What about financing from domestic entities and investors?

A big part of Mission 300 is engaging the private sector. Private sector developers, implementers, financiers, all of that is part and parcel. Even a small country like Malawi requires billions of dollars.

How’s it going to happen? You have to get everybody involved. A bigger country like Ethiopia needs tens of billions of dollars. So, you have to get everybody involved. It’s not a grant thing. It’s not just money being given away. It’s mobilizing everyone toward the same goal and moving it forward and with the highest levels of commitment.

At the center of these efforts was Mukhtar Babayev, COP29 president and Special Representative of the President of Azerbaijan for Climate Issues, whose supervision of the process has been defined by a focus on unity, ambition, and practical implementation.

In the lead-up to COP30 set to take place in Brazil, Babayev visited Addis Ababa to participate in the Second African Climate Summit. He underscored the importance of Africa’s role in the climate conversation, both as a region disproportionately affected by climate impacts and as a continent with vast potential for clean energy transformation. In his engagements, he urged nations to accelerate investment in climate solutions, strengthen multilateral cooperation, and ensure that promises made in previous summits translate into tangible action.

With a career rooted in environmental stewardship and a clear vision for collaborative action during his August 2025 visit, Babayev sat down with The Reporter’s Sisay Sahlu and discussed the state of global climate negotiations. The conversation explored the progress achieved since COP29, the pressing challenges that remain, and the strategic priorities shaping the road to COP30. From climate finance to the role of the private sector, Babayev offered open insights into the opportunities and obstacles facing the international community. EXCERPTS:

The Reporter: Brazil is preparing to host COP30. The UN climate summit has been taking place annually for three decades. What has been achieved in that time? Climate financing remains a key unresolved issue. What is your take on this?

Mukhtar Babayev: When we speak about climate change and what the impact of climate change is for the developing world, to the African continent, and how we can manage it, we can at least to do our best from the COP presidency’s point of view to assist the developing world in the fight against climate change. We’ve made a lot of changes in our understanding of how to move in the year since COP29 because there are a lot of geopolitical changes now in the world.

And from the beginning, the previous COPs adopted a lot of very important decisions for climate change, especially on how people need to fight climate change and how countries need to support this multilateral process because it is so important now to support multilateral approaches. Unfortunately, new challenges in the world have caused a little turbulence in this understanding. For us, it’s very important to have all countries on board, all countries to be together to continue the climate agenda.

A lot of big and very positive decisions were made during previous COPs, but unfortunately, the performance or how we perform these obligations, how we perform these decisions is a big question. Unfortunately, if we go to history and look at how many decisions were adopted and how they were implemented, we will see, unfortunately, a not-so-attractive picture. Most of the decisions were not performed or not implemented, not completed, and it is another very important period for us to hold on and to call the countries to perform these obligations, to prevent any regression.

It is so important now to be here, to be in Addis, to be in Africa, which has less emissions than other parts of the world, but also big potential. We need to think about how to transition or to move this potential to have more access for electricity, more development, more prosperity, and at the same time to unite the continent and the countries around the clean energy and possible green ideas on the continent. That’s why we are here in Addis, so that we can discuss with our partners about what we can do together.

Recently, many have expressed concern over the actions of the developed world, particularly regarding the delivery of their financial pledges. At the same time, multilateralism appears to be under pressure and is failing to resolve global issues as effectively hoped. This has become especially evident since President Trump came to power, when the dynamics seemed to shift. How is this situation affecting the fight against climate change?

I don’t want to think that the multilateral process is failing, but I think it is under huge pressure. You are right. [There has been] a lot of turbulence after the different approaches from the different countries, especially, as you mentioned, the United States position regarding the withdrawal from the Paris Agreement and possible other geopolitical factors. Yes, we are under a lot of pressure. And this pressure is not only that the countries cannot agree regarding very tangible and very important targets. But now we are talking about climate finance, about how to finance green energy, how to finance development on the continent, but we need big financial resources for that. The situation has changed a little bit from last year and previous years.

If you see that, if you look at the picture of the financial resources scheme or possible increasing or restructuring, we see that today the world is paying more for military; for defense. NATO countries have decided to increase financial investment in the military, for defense, to five percent of GDP. It is billions of dollars.

Last year, we decided in Baku to contribute annually 300 billion dollars for development from donors. This is now under big pressure and the performance is under big pressure, because countries, especially donor countries, need to decide how to accumulate this money and correctly allocate for the strategic targets.

In our understanding, COP29’s position is to prevent possible regression from the decisions made in Baku last year. And unfortunately we understand there is only one pocket. If countries decide to allocate more towards defense issues, it means that climate finance is possibly under pressure.

And it’s risky for non-performance of the obligations made in Baku. That’s why now, together with the COP30 team, we are working very closely to talk with the donor countries, to international financial institutions, Multilateral Development Banks (MDBs), to the private sector, to be ambitious, to be strong in the decisions made in 2024.

The issue of climate change has been at the center of global discussion, perhaps more than any other topic. Yet countries and political leaders continue to prioritize building strong defenses and allocating huge budgets to military spending, despite the equally urgent crisis of worsening climate impacts. We are witnessing severe drought in the Horn of Africa, devastating floods in Pakistan, India, the United States, and many other nations, wildfires in North America and Europe, and increasingly hotter, drier seasons with rising temperatures worldwide. Can we truly say the world is as concerned about climate change as it is about defense and military preparedness, and that it is investing in climate action at the same scale? Why are countries failing to meet their climate commitments? Is the reason primarily political, economic, or both?

No, I think a lot of geopolitical factors now play an important role. And more and more conflicts, more and more wars on the planet. If you compare the last years, you will see that this year is a peak of conflicts, peak of wars.

And on one hand, we understand that the country is trying to protect themselves from these risks, geopolitical risks, from the wars, from the conflicts. But at the same time, the climate change issues, climate change impacts are growing more and more important and more and more risks are coming to the map. And it is so important for us, in this position, to have all the countries be more ambitious and confirm the ambitions demonstrated in past years.

We have very good results from the previous COPs, especially regarding energy transition, energy efficiency, alternative energy sources, and climate finance, Article 6, the decision made in Baku, carbon market and others.

We have a lot of things, a lot of decisions made. Now is the time for implementation.

What actions are needed?

It is time to act now. And as I mentioned, from previous COPs, a lot of decisions were made. This year is the year of implementation. And we need to think about how to build this strategy of performance, strategy of implementation. And each country needs to perform their obligations. When we are talking about multilateralism, sometimes we misunderstand what each country needs to do. Together we can move. Each country has its own role. And now it is very important that each country needs to understand what they need to do, at least to contribute to the whole process.

The United States has been a major international financier in the fight against climate change. However, under the leadership of President Donald Trump, the US withdrew from the Paris Agreement. What has been the impact of this decision, and how do you evaluate its overall effect?

Now we are working together with our Brazilian friends, hosting COP30. We have started to work on the Baku-Belém roadmap to increase climate finance to 1.3 trillion dollars a year by 2035. We need to build this roadmap and to build this picture of how the contributors will participate, how to invite more and more actors to the climate finance process. And in this case, we are looking not only at public sources from donor countries, but also expectations from the private sector.

And here, you are absolutely right that the US is a big country, a big emitter [of greenhouse gases], and at the same time a big source of financing. We need to consider other sources. We need to think about what will happen if the US withdraws; the system will stop.

We need to think about the other resources we can invite to the process of finance. And in this case, the private sector is a main source of possible financial resources.

Apart from external financing sources, how are domestic financial resources being mobilized in the developing world both at the government level and within the private sector?

During the forum here in Addis Ababa, we discussed this issue with the different ministers. A lot of regional programs could be developed and performed in Africa. I think it is a very good chance for the continent to perform the regional projects, not only country by country, but separately.

Potentially, it will provide more efficiency, something like synergy. An investment of one dollar will be more efficient. It is a very good time to cooperate on the basis of good projects. But international support is very important in this case, from the capacity-building point of view, and economic, expert, and financial support. It is not possible to consider all these processes separately. We need to think about how to make it into one process for maximum efficiency.

How are climate experts and leaders like you working with multinational companies and industries, particularly those responsible for the largest share of global greenhouse gas emissions, to push for change and foster cooperation?

We have had chances to meet with hundreds of partners, hundreds of companies from all over the world during our [Azerbaijan’s] term of presidency. We have very good partners from the private sector. A lot of big companies have adopted the green policy and green strategy in their development programs for many, many years.

And they are very strong in their strategy to invest in the green transition to clean energy. They are very strong in their policy and they support a lot of processes started in previous years. And they possibly postpone some programs, but the strategy is the same to develop the green programs, green technologies, clean energy and other green transition issues.

Regarding the three essential strategies for addressing the impacts of climate change: mitigation, adaptation, and loss and damage, how is the African continent responding?

African countries are very vulnerable, and we have witnessed a lot of disasters, a lot of climate change impacts on the continent. It is very important to assist the countries to reconstruct, to rehabilitate, to at least to finance or to compensate part of the expenses coming from the climate change impacts and disasters. A loss and damage fund was created in 2022 in Sharm el-Sheikh and now in Baku we have already adopted necessity regulations. All programs have been confirmed by the communities, and this fund is already operationalized.

Yesterday, I met with the executive director of the fund and we discussed how to implement the projects and requests coming from different countries. They have built very good contact with the possible recipients, and they will start to consider this financial support to the countries. I think this work will be very transparent. I understand that the money is not enough. There we need to call on all possible partners, all possible donors to increase their contributions to the loss and damage fund.

Because huge damages are coming from climate change now and already the accumulated financial resources in the fund are not enough to compensate even a little part of this damage. That’s why we need to work with the possible countries, partners, and private sector and all possible other sources to increase our financial resources in loss and damage.

Ethiopia recently hosted the Second African Climate Summit. What is your view on Ethiopia’s role in advancing solutions to the climate crisis?

We are here for the second African climate summit. During each visit, we see real changes in the region. And Ethiopia is a leader in the continent on climate issues, in clean energy transition, and clean energy programs. I think Ethiopia, Kenya and other countries are leaders in their respective regions. That’s why we hope that this second climate forum in Addis will play a big role in consolidating these activities around Ethiopia and other countries.

Ethiopian government officials have expressed interest in hosting one of the upcoming COP meetings. What is your position on this, and how would you support Ethiopia’s bid?

Ethiopia is the candidate for COP 32. I think Ethiopia has very good chances to be the host country for COP32, but the continent will decide. But I think in the face of Ethiopia, today the African continent, has a very good leader in the fight against climate change.

What kind of support can be expected from you?

We have worked a lot with the Ethiopian government, NGOs, and the private sector, and  we can use our experience in this process to at least cooperate and support the Ethiopian teams to do it.

On the journey toward transitioning to renewable energy, how do you assess the progress in Africa as a whole, and in Ethiopia in particular? How is this transition unfolding?

There is big potential in Ethiopia in energy projects, and during the forum a lot of information was delivered to the community regarding the new renewable, new alternative renewable energy sources development in the region and especially in Ethiopia. Ethiopia is a source of energy for itself and for other countries also. That’s why today Ethiopia is playing a bigger role in the region as a leader in clean energy and possible green projects on the continent.

Ethiopians everywhere hope 2018 will be the year when well-wishers are proved right, when problems inherited from the past are set right, and when the country climbs to new heights.

The Reporter’s Nardos Yoseph spoke about the prospects of the new year and the highlights of the old with a few well-known political figures and analysts. This is what they had to say:

 Mulatu Gemechu | Vice Chairman, Oromo Federalist Congress

The Reporter: How would you assess the past Ethiopian year?

Mulatu Gemechu: As you know, the year was very challenging. There was war, insecurity, and a situation where people could not freely move from place to place. It was a very difficult year. Our hope is that 2018 will be different, that peace will prevail, and that people can once again move about safely, that the bad will pass and the good will come.

Were there any significant positive or negative developments during the year?

To be honest, there was nothing we could call a positive development for us. It was a difficult year. As you know, our party’s offices were closed, our movement was restricted, and we were unable to present our political program, our social policies, and our economic agenda to the public. It was a year in which we were unable to do what we are supposed to do. So, no — we cannot say there was any success.

What are your expectations for the new year?

We believe the upcoming election can only be conducted if there is peace. Peace must come first. People need to feel safe, move freely from place to place, and express themselves without fear. Democracy must be given space, and democratic institutions must be strengthened so that a conducive atmosphere for elections can be created. If this happens, we believe there can be a credible election in which the public can freely choose their representatives. Otherwise, if an election is simply declared for the sake of it, then it becomes a business-as-usual exercise — which we do not support.

Berhane Atsbeha | Head of Public Relations for Salsay Woyane Tigray (SAWET)

The Reporter: How would you assess the past Ethiopian year?

Berhane Atsbeha; For the people of Tigray, for its politicians, and for society as a whole, the past year was very bitter. It was a year of despair, a year of frustration, a year in which hopes were dashed and expectations were broken. It was not a year of complete loss of hope, but it was a year filled with pain.

Politically, it was the year when the first Interim Administration came to an end and a new Interim Administration was formed. It was a year when a forced restructuring of power took place. It was a year that left behind unsettled questions. It was also a year when society and political forces alike experienced disappointment and betrayal.

Economically, it was a year of collapse. Even though the sound of bullets has lessened, the economic destruction has continued. Inflation has worsened, scarcity has deepened, unemployment has spread, and people are burdened by debt. Our youth, as a result, were forced to migrate, and many paid with their lives — in Djibouti, in Saudi Arabia, and across dangerous seas.

Socially, it was a year of trauma. Families remain in grief. The suffering caused by the war is still very fresh. The questions of prisoners, the disappeared and displaced people have not been resolved.

In terms of peace, it was a year that fluctuated between light and shadow. At times there seemed to be peace, and at other times, the threat of war reappeared. The conflict with Eritrea, especially, has been a constant shadow of fear.

Overall, it was a very painful year — though not completely hopeless.

Were there any significant positive or negative developments during the year?

The year saw the final stages of the initial transitional administration in Tigray. Its inability to fully stabilize the situation affected the life of the Tigrayan population and caused severe economic disruption, even after the war. The year also left additional burdens. The promises of the transitional administration were largely unmet. While the government at the presidential level tried to assert authority, the reality on the ground showed widespread disillusionment. Economic instability persisted, including inflation and rising cost of living. Post-war recovery remained slow, and the Tigrayan youth were forced to leave for neighboring countries such as Djibouti and Saudi Arabia, risking their lives.

Overall, it was a year in which Tigray faced not only political and economic setbacks but also social and psychological strain. The loss of peace and security was felt deeply, and internally, the society remained fragile.

What are your expectations for the new year?

The first responsibility of the people of Tigray in the new year is survival. Existence itself must be the primary goal. To survive in such difficult conditions is in itself a victory.

As SAWET, our first belief is that the people of Tigray must continue to exist. Existence comes before politics. After that, our priority is to safeguard territorial integrity, to restore our economy, and to secure peace.

For 2018, we also hope for an improvement in stability, for the lessening of despair, and for stronger unity. On paper, the National Election Board has a plan. But as SAWET, we do not believe that there is either the capacity or the conditions in Tigray to conduct elections. The Interim Administration itself does not have much time left to make such preparations. Therefore, we do not think that elections are realistic at this time. There are attempts to create internal divisions and to fuel conflict. The risk of internal strife is real.

But our stance is that political forces should resolve their differences through dialogue rather than bullets. If that does not happen, it will be the youth who pay the price first.

Our hope is that 2018 will be a year when guns fall silent and dialogue prevails.

Girma Bekele | Chairman of Hibir Ethiopia Political Party

The Reporter: How would you assess the past Ethiopian year?

Girma Bekele: Well, in general, the Ethiopian year 2017 was one in which we hoped to see many of the country’s problems addressed. At the start of 2017, we expressed our wish that it would be a year of national consensus and reconciliation, where all of us, with our diverse ideas, could come together to create a situation that would bring peace to our country and lay the foundation for sustainable development. But unfortunately, this was not realized to the extent we had hoped.

Instead, civil war-like conflicts have persisted in the country and undermined our hopes. It is saddening that instead of seeing progress in development and good governance, what we faced was a worsening of challenges.

Were there any significant positive or negative developments during the year?

On the negative side, democracy-building has been hindered. We witnessed the exile and imprisonment of journalists and many others. The repression of free democratic institutions, the weakening of human rights organizations and the inability of the government to allow independent institutions to operate freely and independently are very concerning. These are negative developments that must be underlined.

On the positive side, however, the situation around the Grand Ethiopian Renaissance Dam (GERD) stands out. Though there are questions and debates around it, this project is something that we must support without reservation. It is a second Adwa, a second victory. At the time, we repelled the enemy that came with arms to invade our land; now, through this project, we are reversing Ethiopia’s image as a symbol of famine. GERD is a powerful instrument for national development, boosting our energy supply, strengthening our foreign currency reserves, and above all, playing a transformative role in our agricultural economy. It also opens opportunities for better relations with neighboring countries (aside from historical adversaries). For these reasons, we consider it a major positive achievement of the year.

What are your expectations for the new year?

The year 2018 is expected to be an election year. At the same time, many economic questions remain unresolved. So what should we expect? What kind of work lies ahead?

For our party, national consensus and reconciliation are not temporary slogans but part of our political program. Ethiopia is home to more than 85 nations and nationalities, and naturally, diverse social, economic, and political questions will always arise. These need to be addressed around the table. Questions of identity may emerge, as well as questions of economic justice, language, and culture. These must be discussed openly, and institutions that allow the people to express themselves must be strengthened.

Looking at the country today, even beyond politics, we see open tensions in Oromia, Amhara, and Tigray. There is high unrest. In Gambella, Benishangul-Gumuz, as well as between Somali and Afar, we see conflicts and intensifying tensions. We are not in a situation where we can say there is peace with any region, or that we can continue development in a stable manner. If this is not addressed in 2018, then we will continue to live under empty propaganda, lies, loud rhetoric, and false promises of prosperity, while the political space shrinks and the government monopolizes power.

That is why we must urgently push for national consensus. We will continue our efforts in this regard. Political forces across Ethiopia, whether from ruling or opposition parties, must cooperate and come together. Likewise, other stakeholders in Ethiopia’s future must also participate in this collective effort.

This year should be the time when we make the real effort to rescue our country from collapse and chaos. For our part, we will make every contribution possible to ensure this.

Costantinos BerhuTesfa(PhD) | Political Economy Expert

The Reporter: How would you assess the past Ethiopian year?

Costantinos BerhuTesfa : It was a year in which many reforms were carried out in the economy. First, after fifty years, new policy shifts were introduced including laying the legal ground that allows foreign banks entry, reforms in the forex trade, and strengthening of Ethiopian Investment Holdings, which consolidated state-owned enterprises under one umbrella. We also saw the launch of the capital market, which previously was just an idea about a future stock exchange. These were significant policy reforms. I believe these measures could have a profound impact on major economic issues in the years to come.

Were there any significant positive or negative developments during the year?

On the positive side, in 2017, the government improved tax collection. We also witnessed an increase in state revenue. The central bank recorded good outcomes in various exports, especially gold and coffee. These were encouraging results.

On the negative side, however, such policy shifts come with macroeconomic challenges. For instance, the volatility in the market has directly affected ordinary people. Imported goods such as sugar, edible oil, and other consumables became much more expensive. People already burdened with debt are now struggling more because of rising living costs and the shortage of foreign currency.

Even though the government claims inflation has been reduced from more than 30 percent to 14 percent, the cost of living crisis continues to seriously impact the population. These issues, in my view, require urgent government response.

What are your expectations for the new year?

Looking ahead to 2018, I believe there is hope for improvements in the economy if certain issues are addressed. The first is governance: the government must improve its performance in good governance, which has been identified as a major bottleneck. If tackled properly, this would be very promising.

The second challenge is contraband and illicit trade, which are draining the economy. I expect improvements on this front. Closely linked to this is the issue of illicit financial flows. The Washington-based Global Financial Integrity reported that Ethiopia loses up to USD 3.5 billion annually through illicit financial transfers. Africa as a whole loses USD 88 billion, with Ethiopia being one of the major contributors.

If governance improves, contraband is curbed, and illicit financial flows are controlled, then I believe the economy could show much better growth.

Another promising development is the entry of foreign banks. Since they bring in foreign currency, this could help finance large-scale capital projects, create jobs, and generate opportunities for the youth. At the same time, newly established investment banks could play a critical role. Unlike commercial banks, these institutions would focus on equity financing and shareholding, which could strongly support startups and emerging entrepreneurs.

However, I must emphasize that without peace, economic growth is very difficult. During times of war, wealth is concentrated in the hands of a few companies, while the broader economy suffers. Therefore, peace is essential for Ethiopia’s sustainable economic progress.

But what harms the economy most is this situation we are in now. The government says we are growing by eight percent, but if GDP is really meant to improve people’s livelihoods, then the country’s challenges must be solved. Especially now, indeed, the government has established a National Dialogue Commission, peace committees are being set up, but the question remains: beyond that, what more can be done?

Because if there is no peace in the country — especially in the major regions like Amhara and Oromia, where the problems are very serious — the economy will suffer greatly. And in 2018, along with the completion of the Grand Renaissance Dam, the government must turn its face towards peace and open the way to achieve it, I believe.

If these macroeconomic reforms are followed, Ethiopia could return to growth above 10 percent, as it once had before. And the people, who are now burdened by inflation, low income, and the overall pressure of living costs, could see some relief.

But the government must urgently prioritize four issues: corruption, illicit financial flows, foreign trade, and securing peace. These are matters that are in the government’s hands and can be addressed with urgency.

As for the agricultural sector, perhaps certain works could be carried out to strengthen it. Agriculture is the main driver of the economy. So now, with selling shares of state enterprises and taking various measures, there must be ways to expand participation in the agricultural sector.

Previously, in different ways and under different governments, developing the private sector has always been a mantra. That’s true today, but the problem is that the government itself, through corporations and agencies, is always expanding the state sector. This is very dangerous for the development of the private sector.

The reason is that the government can borrow from its own banks, it can borrow from abroad, it can use the taxes it collects and the aid it receives — it has a lot of money. In addition, there are enterprises tied to the ruling party. All these prevent the private sector from growing.

When Prime Minister Abiy first came to power, he said, “We will address the question of ease of doing business.” And indeed, many things have been done so far — such as opening industrial parks, introducing digital administration, e-government systems, and so on. But still, people continue to complain. When they go to a woreda office or a city office, the situation is such that they cannot get services without bribery.

These things must be corrected by the government. What would make the private sector grow most of all, in my opinion, is the arrival of foreign banks. Because when foreign banks come, foreign investors will also come with them. The reason is that investors believe that if foreign banks are here, they will be able to get financing. And these investors have experience working with such banks.

These foreign private investors can grow the private sector in Ethiopia in a way that could lift it all at once — that is my belief. For this reason, now everything at the woreda administration level is handled atworeda level: education, health, investment, mining, agriculture, infrastructure, and all basic development activities. And even though the people there are elected, those who could support them — such as graduates of Addis Ababa University in development administration or public administration — are not being seen entering government service.

A way must be created for them to work within the government. Because in public administration and development administration, development managers are trained to integrate all the development actors and bring growth at the end. And most of the woreda administrators who come through elections often lack such skills. They might manage politics, but they cannot implement development programs, control corruption, or fix the many failures that exist.

These young people, who are capable of that, are mostly working in NGOs or teaching at universities, so they must be directed toward that. And unless the domestic private sector is energized, we will fail to attract foreign private capital into Ethiopia.

One example is that when a directive was issued saying foreign companies entering Ethiopia should only engage in trade, that was a mistake. The reason is that when these companies come to this country, they don’t only bring capital — they also bring work skills, administrative management, and above all, high-level connections and access to markets. They can export abroad. For example, if we say we will export roasted coffee or processed oil, it is very difficult for us to penetrate international markets. But those companies already have agreements in place.

So, they can open large markets for Ethiopia’s exports, and likewise, when they import, they have access to big markets. This means they can import high-quality inputs at low prices, which in turn can stimulate Ethiopia’s private sector. That is why I believe their role is essential.

As a key negotiator for the Grand Ethiopian Renaissance Dam (GERD), Fekahmed navigated one of the most complex and high-stakes regional discussions in East Africa, emphasizing equitable resource sharing and fostering collaboration among Nile Basin countries. Beyond the negotiating table, his work as a water resources management consultant and hydro-diplomacy expert has helped shape policies that balance development ambitions with sustainable management of shared waterways.

‎In this interview with The Reporter’s Nardos Yoseph, Fekahmed shares a firsthand account of the decades-long journey surrounding the GERD—from navigating opposition and skepticism from downstream neighbors to balancing international pressure while safeguarding Ethiopia’s sovereignty. He details the complex interplay of technical studies, international panels, ministerial meetings, and even attempts at proxy influence, offering a rare glimpse into the challenges of negotiating one of Africa’s largest infrastructure projects.

‎The conversation also explores the strategic importance of the GERD for Ethiopia’s energy security, regional cooperation, and economic growth. Fekahmed outlines how the dam, beyond its engineering marvel, represents a broader assertion of national agency in the face of historical inequities, geopolitical maneuvering, and the influence of international financial institutions. His reflections not only dive into the diplomatic intricacies of the Nile Basin but also into Ethiopia’s broader pursuit of self-reliance, regional integration, and sustainable development. EXCERPTS:

‎The Reporter : The Grand Ethiopian Renaissance Dam (GERD) is scheduled for inauguration in a few days’ time. Ethiopia has faced intense diplomatic challenges over the dam since its inception. How would you describe the diplomatic process that accompanied GERD’s construction?

‎Fekahmed Negash: The story of the GERD is, in many ways, the story of Ethiopia’s transparent and principled diplomacy. The decision to build such a massive project was one of the most consequential in our nation’s modern history.

‎Naturally, the first major challenge came from downstream countries, particularly Egypt and Sudan. Their initial reaction was one of fear and alarm—claiming they had no information and worrying that the dam could harm them. Such concern is understandable; after all, this is a large-scale dam.

‎It’s important to note that the first response from Egypt was not a formal government approach, but rather a public diplomacy initiative. Around forty-six members of Egypt’s popular diplomacy delegation traveled first to Uganda, attempting to win over President Museveni—but they failed. They then came to Ethiopia and met with Prime Minister Meles Zenawi, senior government officials, prominent figures, religious leaders, and members of the business community. Their message was clear: “We are not here to pressure you; we simply want access to information.”

‎At the time, Egypt was under the transitional government of Prime Minister Essam Sharaf. Ethiopia’s response was straightforward—we invited them to access information through the Nile Basin Initiative. But the Egyptians replied that, as a transitional government, they could not make such commitments and requested a separate platform. This eventually led to the creation of a new forum and the establishment of an International Panel of Experts.

‎Ethiopia’s decision to cooperate was critical. Had Ethiopia refused and insisted on secrecy, this could have escalated into confrontation. Instead, Ethiopia agreed, and after the Egyptians returned home, their transitional government entered office.

‎Some have asked why Egypt sent a public diplomacy delegation in the first place. The answer lies in history: when Egypt was building the Aswan High Dam in the 1960s, Ethiopia requested information but was flatly denied—Egypt said it was none of Ethiopia’s concern. In contrast, Ethiopia chose transparency to avoid conflict.

‎The Egyptian Prime Minister and other senior officials later came to Addis Ababa, held discussions with Ethiopian leadership, and returned to Cairo. This was in 2010. By September 2011, Prime Minister Meles Zenawi himself led a high-level delegation—including several ministers—to Cairo for the Ethio–Egypt Joint Commission meeting.

‎During that meeting, Egypt again requested information about the dam outside the framework of the Nile Basin Initiative. Ethiopia responded positively, and after returning home, we formally established the International Panel of Experts, including two experts from each of the three countries plus four international experts. This panel worked for about a year.

‎As work progressed, however, Egypt’s position began to shift. They even called for construction to be halted and repeatedly walked away from talks, raising new demands. Nevertheless, the panel eventually released its final report, covering dam safety, downstream social and environmental impacts, and identifying benefits for all three countries. The report was positive and was immediately accepted by Ethiopia and Sudan.

‎Egypt, however, reacted dramatically. Then-President Mohammed Morsi publicly declared—during a televised joint meeting with cabinet members and opposition party leaders—that Egypt would take every measure possible to stop or sabotage the dam. Their strategies ranged from attempting to bribe Ethiopian officials, to threats of airstrikes, to plans for proxy wars aimed at destabilizing Ethiopia.

Following this, Egypt’s Foreign Minister came to Addis Ababa and proposed joint implementation of the International Panel of Experts’ recommendations. This led to a series of four ministerial-level meetings, eventually producing a tripartite committee that began follow-up studies and technical consultations.

‎What did the research process look like?

They didn’t want the research to be completed. The reason was simple — once the study was finalized, the flawed data they relied on would have been exposed. So they deliberately stalled it. But on Ethiopia’s side, it was agreed that the matter should be properly investigated, and researchers were assigned.

‎Experts from the three countries — five from each — were brought together and carried out the study. The researchers completed their work and submitted the findings. Yet Egypt refused to accept the results, which was quite surprising given that five of the researchers were Egyptians themselves.

‎After that, during the continued negotiations and discussions, a demand was made for a third party to join the process. The World Bank and the US government were brought in. But there was no consensus on this. The observers — particularly the Americans — went so far as to try to steer the negotiations into a kind of mediation process. This created conditions that completely eroded trust, and ultimately Ethiopia walked away from the talks altogether.

What happened then?

After that, the issue was taken back to the African Union. At the highest level, the Arab League also tried to intervene. The leaders of the two countries met again and made another attempt to move the process forward. But it still didn’t succeed.

‎The main reason was that the two countries’ fundamental interests were simply different. When the basic interests of countries diverge and don’t align, reaching an agreement becomes impossible. What was being discussed at the AU wasn’t grounded in shared fundamental interests — it was more about defending positions.

‎So, even after five rounds of negotiations, no agreement was reached. Ethiopia continued building the dam without waiting for a deal — and now, the project is completed and will be inaugurated in the coming days .

In March 2024, you authored an article on the complicated ‘hydro-diplomacy’ surrounding GERD. In it, you highlighted delays relating to the Tripartite National Committee, stating “the devil is in the details.” Could you elaborate on what you meant?

At that time, the Egyptians were astonishingly eager to influence the project. From the very beginning, their engagement wasn’t about constructive participation — even when they came to meetings, it was rarely because they were interested in solutions. They would often come just to drag out the process rather than focus on outcomes.

‎The first major shift was during the International Panel of Experts’ assessment. After that, when the Tripartite National Committee was formed, they managed to cause disruptions — especially during the ministerial meetings. The first three meetings were actually held monthly with Sudan actively involved. But by the third meeting, Egypt refused to proceed, saying “we do not agree, so we are leaving.”

‎They withdrew, went back to Cairo, and announced that they would now handle the issue through politics and diplomacy instead. As a result, the process was suspended for about six months.

‎During that six-month break, there were political changes in Egypt—a presidential transition, a new cabinet, and new ministers. At the AU summit in Equatorial Guinea, the two leaders met and agreed to resume the process.

‎When the meetings resumed, they surprisingly accepted, one hundred percent, the very same document they had rejected six months earlier. In a way, this showed that the six-month pause was essentially on their terms—they got to reset the process.

Another key issue was the selection of international consultants. Ethiopia insisted that the consultants be chosen through an open, competitive international bidding process to ensure impartiality. Egypt initially pushed for a ‘shortlist approach’ where each country would nominate its own consultant, and the others would choose from that list, but Ethiopia rejected this as biased.

‎Eventually, through competitive bidding, three organizations were shortlisted, and the French company BRLi won the contract with the highest combined score from all three countries. However, even after agreeing to this result, Egypt later refused to recognize the consultant’s work. Resolving that dispute alone took nearly two years.

‎Can you explain the challenges and delays involved in completing the study and why it took much longer than initially planned?

The debate was on the time span or the consultative company work delivery. The Egyptians contend that the overall study, including the hiring of the consulting company, would only take six months. Fifteen days to hire a company, another 15 to establish the tripartite committee, and five months to conduct and conclude the research. Ethiopia maintained that the overall process would take at least two years.

‎We tried to actually form the tripartite committee and appoint the consultant, and what was supposed to take fifteen days dragged on for a year and a half. They had estimated the entire study would take only six months, but by the time the consultant was hired and everything was finalized, we were already in the eleventh month. In the end, we had to agree to stretch it to eleven months instead of five.

‎Even then, they couldn’t meet the eleven-month deadline. This delay made it impossible to keep the process moving smoothly. And then there was the negotiation. The negotiation had been prepared by the international panel of experts, and they told us: ‘This is the draft; later you will sit down with your own experts and revise it.’ But later, Egypt refused to make any revisions at all, insisting that the study must stand as it was.

‎When we raised this with the relevant institutions, they agreed that the study should take at least two years to complete. Yet they still said it could be finished in six months. This was simply unrealistic. For example, water quality must be measured for a full twelve months without interruption to capture monthly variations. That requires building proper gauging stations, upgrading measurement equipment, and collecting accurate data. After that, you still need another six months just to analyze the data.

‎They said: ‘We will complete this in six months.’ These kinds of unrealistic expectations were the main challenge of the process. And there were other problems too—when the consultant was selected, there were disagreements, delays, and complications with the contract. In the end, nearly thirty percent of the work was subcontracted outside of the main consultant’s control, which caused further delays.

‎Finally, after all these back-and-forth talks with different countries, the study process we agreed to was much weaker than what we had initially hoped for. And by the time the study actually began, we were already far behind schedule.

Negotiations surrounding the dam, particularly talks held in the US, were described publicly as being very difficult. Some observers even argued the process infringed on Ethiopia’s sovereignty. What was really happening behind the scenes, and how did Ethiopia navigate it?

‎What happened was this: On September 29, during the United Nations General Assembly in New York, Egypt formally requested the United States to intervene and mediate on the issue. Following that, in October, there was the Russia-Africa Summit, where Ethiopia’s Prime Minister and Egypt’s President met directly.

‎Even before that summit, a day earlier in fact, the US Treasury Secretary had written a letter inviting the foreign ministers, water ministers, and experts of all three countries to Washington. Within our side, there were three schools of thought. One group argued firmly that Ethiopia should not go at all. Another group said: ‘The U.S. is our friend, we can attend but not issue any statement.’ A third group proposed to participate, listen, and accept if the process seemed reasonable.

 It was on this basis that Ethiopia eventually agreed, with the US and World Bank taking the role of observers.

‎Now, the difficulty arose with the declaration that followed. It stated that within two months four rounds of talks must be completed, with two of them taking place in Washington, and that the negotiations should conclude with a signed agreement. This was very difficult for us. The reason is simple: such a tight schedule meant decisions would be rushed, not deliberated. And the threat was clear—if no agreement was signed, the issue would be referred to international arbitration. That reference was embedded in what they called the ‘Declaration of Principles.’

‎For Ethiopia, this became a trap. Either we accepted Egypt’s position or we allowed the matter to be pushed into arbitration, something we rejected because we believed the global system was not neutral or fair. That was the real dilemma.

‎As the negotiations proceeded, the US and the World Bank, though only ‘observers,’ began to act more like participants—pressuring, drafting, and presenting their own texts. Ethiopian positions were often sidelined. This was what created the sense of guardianship over Ethiopia’s sovereignty.

‎At the first meeting, the pressure was not so visible—it was framed as technical discussions. But gradually, the pressure intensified. And when the two-month deadline passed without consensus, another meeting was convened in Washington. It was at that stage that Ethiopia firmly expressed its objection, stating: first, the process infringed on our sovereignty; and second, the proposed deal severely restricted Ethiopia’s right to utilize its own water resources.

‎In truth, what was being pushed was not negotiation but an arrangement designed to tie Ethiopia’s hands. Egypt and Sudan signed the draft agreement. Ethiopia, however, did not. We chose instead to walk away, making clear that no external political directive could dictate our rights. That was the situation we faced.

‎‎Now that Ethiopia has completed the dam and is preparing to begin full operation, some argue this may intensify diplomatic tensions with Egypt. Their concern is that Egypt continues to demand involvement in operational activities and insists that its water share must be safeguarded. Others, however, suggest the issue may simmer down. What is your perspective?

The key question is this: what exactly is Egypt’s goal? Egypt’s concern is not directly tied to the dam, and much of it is built on long-standing narratives. For decades, they claimed that if Ethiopia were to store even one billion cubic meters of water, a million of Egyptian farmers would be displaced. They presented this argument to the international community.

‎Today, the Grand Ethiopian Renaissance Dam holds 74 billion cubic meters. By their earlier reasoning, 56 million Egyptian farmers should have already been displaced. Yet to this day, not a single farmer has been uprooted. Why? Because that fear was manufactured. They even warned that millions would be forced to migrate to Europe and America, or become refugees. That, too, never happened. The purpose of these claims was to alarm Western countries—who worry about migration and instability—so that they would pressure Ethiopia.

‎Another claim was that once the Renaissance Dam filled, the Aswan High Dam would dry up and become a desert. But what has happened now? The GERD is on the brink of being fully operational, and Aswan remains intact, the Nile still continues to flow. In fact, water that would otherwise have been lost to evaporation in the desert or discharged into the Mediterranean is now stored in Ethiopia—where it contributes positively, even helping climate resilience. For Egypt, in many ways, this is an advantage, not a loss. Yet they opposed it.

‎Why? Because at the heart of their concern is not the dam itself, but recognition of what they call their ‘water share.’ Ethiopia has never recognized this—neither in the past, nor now. What Egypt wants is to tie Ethiopia down through negotiations, to extract some form of acknowledgment that such a ‘share’ dubbed in colonial era agreement exists.

‎So when they insist on being part of operational decisions, or demand binding agreements, their aim is not to protect themselves from actual harm—because the dam has shown it causes none—but to secure that recognition. That is why tensions will remain, because Ethiopia refuses to compromise its sovereignty.

‎From here on, disputes may arise particularly around dam operations—when and how much water is released, and under what conditions. But this is not about the dam endangering Egypt. It is about political leverage, about compelling Ethiopia to say: Yes, you have a share as embedded in a colonial era agreement Ethiopia was never part of to begin with. That recognition is what they seek.

‎Earlier, when we discussed the dam’s construction, you mentioned that Egypt sought to use proxies and outlined six different methods of destabilization. Some actors were even caught in the act. Given that Ethiopia has long faced attempts to fuel internal discord through such proxy measures—testing the country’s security mechanisms—do you think Cairo might still attempt to use this strategy today?

When it comes to safeguarding internal peace, that is fundamentally the responsibility of the government. As the Prime Minister himself has said, Ethiopia must be prepared for every option, because the challenges they set before us are real. Of the six options Egypt once tabled, five have already been attempted. Only one remains.

‎Which five? To list them plainly: supporting opposition groups, spreading disinformation, encouraging uprisings at different levels, using intimidation tactics, and fueling internal unrest. All of these have already been put into practice. For instance, Egypt even raised the idea of using air power, suggesting that from Cairo they could launch planes toward Ethiopia to cause destruction. Another option they once mentioned was deploying commando operations against the dam. Out of the six, only that last one has not yet been tried.

‎Does that mean they will never attempt it? Not necessarily. If circumstances allow, they could still consider it. However, I am confident that the government is adequately prepared. In terms of security and readiness, there is a strong protective system in place. So while one option remains untested, Ethiopia is not standing idly by.

Global diplomatic relations appear to have made a shift towards transactional politics, particularly following President Trump’s return to the White House. Some foreign analysts argue this transactional environment favors Egypt, which they say has certain things of strategic value to offer the US while Ethiopia does not hold the same level of leverage. They also claim Washington continues to apply pressure on Ethiopia, keeping the issue alive. How do you view this?

The reality is that when the United States engages in this matter, it does so for reasons of its own—it is not a neutral actor. The first reason dates back to 1978, when Egyptian President Anwar Sadat and Israel’s Prime Minister signed the Camp David Accords. Alongside those accords were a bunch of related agreements, including key bilateral deals: one between the US and Egypt, and another between the US and Israel.

‎Under the US-Egypt agreement, Washington committed to providing Egypt with 1.3 billion dollars’ worth of military aid annually. In return, Egypt accepted recognition of what it calls its ‘historic water share’ of the Nile. In effect, the agreement gave political acknowledgment to Egypt’s claim over the Nile. Since then, the US, as far as it can, has supported that position—not out of neutrality, but because of the binding commitments it undertook.

‎The second factor is economic. Egyptian investment in the United States is among the largest from the region. Their trade ties are also deep, far exceeding those between Ethiopia and the US. This creates a different kind of weight in bilateral relations.

‎The third factor is the Egyptian diaspora in America. Egyptians in the US are well-organized, exerting lobbying pressure and influencing political processes. A telling example from not long ago is an American senator named Robert Menendez who was lobbied heavily by Egyptian-American groups. He was pressed to take up three demands: first, to open the US market to halal meat exports from Egypt; second, to facilitate Egypt’s requests for US military purchases; and third, to pressure Ethiopia over the Grand Renaissance Dam. Reports indicated that more than USD 1.8 million, luxury vehicles, gold, and even salaried contracts to his wife were used to secure such influence.

Beyond that, during President Trump’s tenure, his personal friendship with Egyptian President Abdel Fattah el-Sisi is reportedly very strong. It is also reported that Egypt contributed up to USD 10 million to support Trump’s first election campaign. All these factors explain why America’s stance has consistently leaned toward Egypt.

‎Western powers more broadly share another perspective: they tend to see Ethiopia as a fragile state in the Horn, prone to instability. That perception reinforces their inclination to side with Egypt. For that reason, I do not believe the pressure will disappear. To some degree, it will continue.

How should Ethiopia navigate this pressure? As an expert, can you clearly explain the options and tools the country can rely on at this moment?

What they are really pushing for is a binding agreement. The first of these is what’s called the Declaration of Principles. That document contains ten principles in total. Out of those, Egypt mainly wants to enforce only one—Article Five, which deals with the filling of the dam, rights to oversight of operational activities and coordination with downstream states.

‎But it cannot work that way. If Ethiopia is asked to treat Article Five as binding, then Egypt must also accept all ten principles, not just the one that serves its interests. A binding agreement cannot be selective.

‎From Ethiopia’s side, we have to be extremely cautious. On the issue of water, we cannot and should not sign any agreement that sets fixed numerical allocations. Accepting quotas would permanently limit Ethiopia’s rights. What can be considered, however, is an agreement based on the electricity generated. The Declaration of Principles itself recognizes the right of downstream states to purchase power as a priority. That is something workable—we can commit to saying, ‘This is the amount of power we generate daily, and this much can be made available for purchase.’

‎From there, downstream countries can infer how much water continues to flow. If that’s their interest, then fine. But the fundamental position for Ethiopia is clear: no binding agreement that imposes water quotas, and any binding arrangement must apply to all ten principles equally, not just to Article Five.

Ethiopia is now close to operationalizing the Grand Renaissance Dam. Beyond meeting domestic demand, this also creates the potential to expand electricity exports to neighboring countries and deepen regional integration. Yet, some suggest this very opportunity is seen as a source of concern by Egypt. How do you see Ethiopia’s diplomatic relations in the region evolving after the GERD becomes fully operational?

The Horn and Africa as a whole face a significant power deficit. And when there is an energy shortage, everything suffers: industries stall, services are disrupted, agriculture weakens. Most importantly, from a social perspective, millions of people remain in darkness, just like our citizens once did.

‎On our borders, many towns in neighboring countries sit side by side with Ethiopian towns. On our side, the lights are on; on theirs, they are not. That imbalance does not create good neighborly relations. Supplying power across borders can change that. For Ethiopia, it means earning valuable foreign exchange. For the region, it builds lasting cooperation and upgrades relations to a higher level.

‎Energy is one of the sectors where cross-border integration is both necessary and possible. Already, some countries—Sudan, Djibouti, Kenya, Tanzania—are linked, and others are requesting connections. Providing power to them strengthens Ethiopia’s long-term partnerships. These relationships are peaceful by nature, and if nurtured, they can grow into deeper cooperation.

‎The benefits go beyond electricity itself. As these countries experience the advantages, they will be more inclined to align with Ethiopia on broader regional interests. In the future, when Ethiopia embarks on building additional large-scale dams, these same countries may well support our efforts because they know their interests and Ethiopia’s interests are closely tied.

In short, energy exports can transform Ethiopia’s neighborhood relations. They not only ease today’s shortages but also lay the foundation for stronger alliances that will help Ethiopia withstand future pressures.

On one side, international financial institutions say that developing countries must have electricity supply, development, and expansion. On the other hand, when countries like Ethiopia attempt to build a dam of this stature, they begin to consider issues unrelated to development needs. Ethiopia went ahead and built it anyway, and in doing so exposed the injustice. Do you think they will learn from the experience?

These financial institutions, of course, have their own complications. Perhaps most notably, when we look at the World Bank, the issue almost always circles back to Egypt. During the time of Sadat’s government, an Egyptian national served as vice president of the World Bank. Under his leadership, the Bank introduced a lending policy framework that made it a requirement for upstream countries to obtain the consent of downstream states before receiving loans or grants for cross-border water projects. That became embedded in what is known as ‘Operational Policy 7.5’.

‎Although later they modified its name and structure, the principle remains. According to that policy, Ethiopia, before accessing World Bank loans or grants, must obtain the consent of downstream states. The same policy framework is also followed by the IMF, the African Development Bank, and other multilateral lenders. As long as this policy stands, there is essentially no way for us to secure development financing or aid for grand projects like the Renaissance Dam.

‎Adding to this, within the World Bank’s leadership, one out of the five vice presidents is consistently Egyptian. Most of the time, the official responsible for African affairs in continental and international financial institutions is also usually an Egyptian. The same applies to the Nile desk—it is often headed by an Egyptian. And at the African Development Bank, Egyptians have held senior leadership positions for decades. Their main role has been to align the institutions’ policies with their government’s interests, systematically blocking projects they do not want to see materialize.

‎This is where the real gap lies: we do not have Ethiopian nationals positioned inside these institutions to defend our national interest. Unless they change these policies, we cannot expect real development support from them.

‎That is why we started building with our own capacity. We mobilized resources, constructed with what we had, and established a model. And in my view, that must continue—strengthening our capacity, building more dams with our own means, and carrying the people along. Ultimately, the Renaissance Dam is about more than electricity—it is about waking the economy and unlocking our broader potential.

‎So, at this stage, the real task is to consolidate what we started, expand on it with more self-financed projects, and eventually make it impossible for international finance institutions to ignore Ethiopia’s dams and keep them outside the global financing framework.

Holding a postgraduate degree in economics from Stockholm University, Kiflu is among the top researchers at the Policy Studies Institute (PSI), formerly known as the Ethiopian Development Research Institute. He and his colleagues are charged with studying a wide range of topics and forwarding their findings to the government to be used as input for policymaking.

Kiflu led a group of researchers on a collaborative project between PSI and the Ministry of Finance aimed at evaluating the outcomes of the first Homegrown Economic Reform initiative (HGER 1.0), which ended in 2024.

Officials had gambled on the ambitious reform to lead Ethiopia away from a developmental state model and towards a private-sector led economy, with other lofty goals including taming inflation, reducing unemployment, and reducing the country’s reliance on foreign credit and aid.

In this interview with The Reporter’s AshenafiEndale, Kiflu offers a candid evaluation of the reforms and outlines what policy makers can and should learn from its successes and failures. EXCERPTS:

The Reporter: Tell us a little about yourself and your role in HGER 1.0.

KifluGodefe (PhD): I’ve been a researcher at PSI, formerly EDRI, for a long time. Recently, I became a country economist for the International Growth Center [IGC].

My role in the Homegrown Economic Reform was limited to one project. The project was evaluating the implementation of HGER 1.0. The project was done collaboratively by PSI and the Ministry of Finance. I was the coordinator of that project

The overarching aim of the HGER was to shift Ethiopia’s economic growth model from EPRDF’s developmental-state approach towards a private-sector led approach. Looking back in 2025, do you think the reform has met its fundamental target?

Of course. The basic target of the HGER is to correct the mistakes that were made before. It also aims to correct the distortions emanated from that mistake. Of course, we cannot say the developmental state model was totally wrong and a mistake. Any country at the lower growth level obviously deploys a developmental state model. Ethiopia’s adoption of a developmental state was not wrong. It is because of the developmental state model that we have all the progress in infrastructure and public investment that we see today. You can take the dams, roads, power, and many other projects done through public investment as an example.

The problem was how these projects were financed. The private sector should be involved in the investments. For instance, we took huge foreign loans with market interest rates. Then we invested in nearly ten sugar projects, and many other mega projects. However, these projects were not successful. So, Ethiopia is burdened with debt distress, inflation, forex shortages and other macro-complications. It resulted in macro-economic imbalance. All this was a result of the wrong financing model we adopted under the developmental state model, and because the private sector was not brought on board.

The major targets of HGER is not only shifting the approach of Ethiopia’s economic growth model, but also correcting the distortions and problems resulting from the previous model.

We do not have to see the developmental state as the root cause for Ethiopia’s problems. Other countries have registered significant and robust growth by deploying developmental state models. The question should be ‘did we properly implement the developmental state model in Ethiopia?’

Secondly, government-financed development cannot be sustainable. It will get stuck at some point. Ethiopia’s development was led by public investment. It took us to some level. But it could not go further.

Still, we cannot say the current government has withdrawn from public investment. The government is now implementing a hybrid model. The government is still investing, with all the limitations. At the same time, the private sector is getting more space, through liberalization and open-ups.

I believe it is a bit too early to evaluate the impacts of the HGER. Plus, Ethiopia was going through difficult times during the implementation of HGER. COVID-19, the northern Ethiopia conflict, the Ukraine-Russia war, and the Houthi Red Sea conflict disrupted trade and posed other challenges.

These obstacles made HGER 1.0 difficult to achieve. It is also too early to evaluate the macroeconomic reforms Ethiopia introduced last year.

While measures of liberalization have been introduced, the government’s role in the economy has grown in several cases. Who is in the driver’s seat? Is the private sector in Ethiopia really empowered?

The reform is trying to create a conducive environment for the private sector. It takes time. For instance, regarding FDI, they are discouraged due to the instability and security issues across different parts of Ethiopia. Instabilities and conflicts in Oromia, Amhara and other parts of the country are bad for investment. Even existing investors might leave.

The macro reforms introduced last year, like the liberalization of the forex regime and banking sector, are playing a significant role in reigniting FDI inflow to Ethiopia. The currency floating is encouraging for FDI and also domestic investors. But the security issues remain.

Government investment will continue until the private sector is strong. But at least at the policy level, the government has leveled the playing ground for the private sector. The private sector will take over in the future. But for now, the government’s role remains in place since Ethiopia is implementing a hybrid model for now.

The banking sector is open to foreign investment. Do you think foreign banks are as eager to come to Ethiopia as the government anticipates? The government’s high investment levels and ballooning budget are also crowding out the domestic private sector. Is the flow of credit from domestic banks to the private sector increasing?

In nominal terms, the volume of loans disbursed to the private sector by domestic banks has surged. The government is reducing the huge financing it used to take from domestic sources like T-bills. This is also to tame inflation.

Regarding foreign banks’ entry, they are evaluating Ethiopia’s open-up reforms before making the decision to come. They are taking time. But they will come because this is a new market.

You stated the government’s role in the economy and public investment is still significant. However, when you break down the budgeting, you find the share allotted to capital expenditures is shrinking despite the overall budget ballooning. Most of the federal budget goes towards recurrent expenditures like salaries, administrative expenses, and non-productive sectors like parks and the corridor project. Real economic sectors and critical projects that would have been the backbone of the economy are not getting sufficient attention. Do you think the government is wisely utilizing its resources?

It is true that the government’s budgeting expenses are going more towards covering recurrent expenditures. The recurrent budget is increasing significantly. This will have a substantially negative impact on the economy. Capital investment is crucial for economic development, as well as private sector investments.

The problem is, the government has no sufficient fiscal space to increase capital investments. Unlike before, there is not much foreign aid coming to Ethiopia. We have also ceased taking concessional loans. So we are relying mostly on domestic resources.

To manage the shrinking fiscal space, the government is prioritizing its resources to cover only the ‘must be covered’ expenses. Debt service, civil servant salary, and others are the priorities. But above all, the recurrent budget ballooned mainly due to the cost of conflicts and war in the past few years. If the government wanted to expand the capital budget as much as the recurrent, it would mean a huge budget deficit. And to cover such a deficit, the government would have to levy huge tax burdens. Or it would have to take additional loans. But we can’t do that because we are already under debt distress.

Another source would be a direct loan from the central bank, which is printing money. That also has the negative consequence of fueling inflation.

So, the government’s decision is allocating a capital budget just sufficient to execute existing capital projects, but not adding new ones. This is why the recurrent budget surged, but that will not continue for long. It will reverse, once things get better. I believe the government understands the problem, but the shrinking fiscal has handicapped the government.

Taming inflation, reducing the unemployment rate, and reducing debt were also among the targets of the HGER episodes. Did the macro reform resolve these challenges?

Yes, resolving the forex shortage and bridging the wide gap between official and black market exchange rates were also among the targets.

Before the floating last year, the margin between official and parallel markets was more than 100 percent. Since the floating, the margin has shrunk to 10 percent. Very recently the margin regained slight momentum to 15 percent. The margin has significantly improved since the float. So the currency unification has achieved its target, though some work remains. We need to study the reason behind the resurgence of the margin lately. This indicates the currency exchange distortion in Ethiopia still hasn’t gotten a fundamental solution.

Foreign currency availability also improved since the reform. Before the currency floating, NBE [National Bank of Ethiopia] forex reserves covered less than one month of import bills. But that has since increased substantially. Importers don’t have to wait six months to access forex now, unlike before. I’m not saying accessing forex for imports is hassle-free now.

Inflation was above 30 percent before the reform. Now it is below 20 percent. There are still price surges, but inflation has dropped. There is no magic bullet to cut out inflation.

The reform, in fact, was not only the result of a domestic policy drive. It is not because Ethiopia embraced it wholeheartedly. There was also external pressure to adopt the reform. Ethiopia’s international creditors, development partners and the IMF were pushing the government. They were saying Ethiopia will default on its external loans unless Ethiopia adopts this reform. Other pressures include the widening forex imbalance, trade deficit, and inflation. Ethiopia’s reserves were at a low point. In general, Ethiopia was under immense pressure to adopt the reform.

Me and my fellow colleagues were bracing for the worst. But compared to what we were fearing, what we see today in Ethiopia’s economy is very encouraging. Inflation is tamed, and forex reserves are improving. The exchange rate depreciation rate is also precise.

In a bid to improve unemployment, the private sector must step up. I do not think unemployment has fallen significantly. Structural transformation in the economy takes time and depends on liberalization efforts.

Government data indicates inflation has halved since the reform. But what is really exercised in the markets, and what independent reports indicate is otherwise. Did inflation really drop, or is the data fabricated?

This is difficult. For a society whose income remains stagnant, it is difficult to cope with inflation. As long as there is no institution that can provide independent data, we have to accept government data. The government did not say ‘there are no price increments.’ It rather indicated that inflation is declining. Prices are increasing, but the government has controlled the rate of increase.

I am very thankful about the current state of inflation. When the forex regime was liberalized last year, my expectation and that of many other experts was that inflation would be out of control. We must be grateful that did not happen.

If the government did not impose tight monetary policy, the floating would have resulted in huge inflation increments. If the government continued injecting money arbitrarily like before, inflation would have gone up exponentially by now. The government took lessons from the previous government, and took tight monetary policy measurements. As a result, inflation did not surge as much as expected.

Another major aim of the floating reform was to reboot exports substantially, and substitute or discourage imports. A year on, the government reports substantial growth in export revenue, mainly from gold, coffee, and other primary commodities. Experts attribute this to market factors and argue that floating can boost exports only when there is a production surplus in the domestic market. But Ethiopia is still struggling with supply side constraints. Did the floating really contribute to the surge in exports?

I say the floating has resulted in increased export performance. It is difficult to produce fake figures when it comes to export data. It might be simple to add some figures to other parameters like GDP, and make the GDP look robust. But that cannot be done on exports. NBE stated export revenue doubled to USD eight billion since the floating. I accept that as correct.

Production might not have increased since the floating. However, commodities that were being smuggled out illegally before are being exported legally following the floating, increasing revenue. For instance, gold was largely being smuggled out. It is now being exported legally, due to the floating and the incentive margins.

The Birr was highly overvalued before. Since the floating, the value of the Birr against the Dollar has halved. So exporters are getting double the money without additional costs. That is a huge incentive. The fixed exchange rate regime was not favorable for exporters; it was favorable for selling domestically rather than exporting.

Many argue that Ethiopia’s exports are not elastic because we export primary products. Many argue that, even though export commodities like coffee, sesame, and others could get cheaper, foreign buyers would not tend to consume a higher volume of these commodities. This argument is partly true. But this sees only one side of the equation. When it comes to demand, these primary commodities might be inelastic. The floating might encourage foreign consumers to buy more of our products. However, the floating might encourage Ethiopian growers to produce more of these commodities.

Presumably, the floating also discourages imports by making them too expensive. However, there are commodities we cannot stop importing, even if they get much more expensive. We cannot stop importing fuel and fertilizer but we can substitute most of the imported items that fill our supermarket shelves. This improves the current account.

Why is the gap between official and black market exchange rates expanding again?

There are different reasons. Though it is diminished, a parallel market still exists. That is because the underground and illegal economy still persists. Many still transact in the black market, to evade tax and also to launder money. Some still prefer to buy dollars for 160 Birr in the black market, while they could buy it at 140 Birr at banks and forex bureaus.

The way banks finance foreign trade is also another reason. Banks are requesting a 100-percent deposit in Birr to disburse forex to importers who requested an LC [letter of credit]. Banks are doing this because they are facing a liquidity crunch. This also pushes traders to go to the parallel market to access forex.

In my view, banks should not require a 100-percent deposit. The LC approval process takes time. If an importer requests a 100 million dollar LC, it means the importer has to deposit the equivalent in Birr at the bank. Then until the LC is approved, the bank uses the deposit, while the importer has to sit and wait. This is unfair. Putting this much money idle in the bank is not good for the private sector. Banks should reduce their deposit requirement.

Capital flight is also contributing to the surge in black market. When there are security and instability issues, investors tend to sell their properties, exchange their Birr for dollars, and take the dollars outside Ethiopia and keep them abroad. They do so out of safety concerns.

Government policy also might contribute to the black market premium surge lately. The government introduced a proclamation that would allow it to seize and expropriate capital and assets gained through unverifiable sources. The proclamation applies for up to 10 years [retroactively]. Many investors and individuals might panic and start moving out their assets.

Before the floating last year, many businesses, individuals and the diaspora were forced to use the black market because the fixed official rate was so discouraging. Hence, many people gained property, money and assets through the informal rate. That was because of the faulty fixed exchange policy at the time. But now, the government introduced a legislation that could lead to the expropriation of such property and assets. What is the alternative for those people? They try to repatriate their assets, and the government takes it over. This also might be behind the black market slightly regaining momentum.

It is puzzling that the black market premium is increasing while banks are calling for businesses to open LCs.

Why does currency unification remain daunting?

It is difficult to get rid of the underground economy completely. Some margin will always remain. If the government continues raising the official rate to catch up to the black market rate, it will only keep rising. The only way to minimize the black market margin is by formalizing the underground economy.

Another reason, which is probably accurate, is how the banks have been behaving since the floating. In setting the daily forex rate, banks always calculate their benefits. They always prioritize their balance sheet. Hence, banks are probably not depreciating the Birr as much as forex supply and demand dictates. They might be holding back the depreciation, to give some space for the black market premium to thrive. This should be considered.

But the major reason is because there are businesses and individuals who do not want to get forex via official channels, relying instead on the black market.

Is forex supply really in a surplus, as the government claims? If so, why is price discovery proving so difficult?

The central bank said export revenue and other sources of forex have substantially surged since last year. I do not think there is a supply problem. Under such circumstances, there should be growing demand for forex in the black market.

Unless there is growing interest for money laundering, tax evasion and unofficial importing; the black market premium cannot reemerge. Studies are a must to ascertain this. Governor Mamo [Mihretu] said importers can notify the central bank if any bank is requesting an LC deposit of 100 percent.

Several new tax instruments and rates have been introduced over the past year. Tax collection has surged significantly, but Ethiopia’s tax-to-GDP ratio has halved to six percent over the past six years. What is your take on this?

It is a contradictory topic. Actual tax collection grew, but tax-to-GDP ratio dropped below peer economies. The ratio drop is telling the government that more potential tax in the economy is not being collected. But the taxpayer is complaining.

A potential explanation is that because government tax collection capacity is limited, the government is squeezing taxpayers in the tax net, while more businesses are still outside of the net doing informal business. The government should focus on informal businesses.

The government is serious about focusing on domestic resource mobilization since we can no more rely on foreign financing sources. Raising more taxes is crucial for the reforms to succeed. I believe the government comprehends the saying, ‘one should not kill the chicken that lays golden eggs.’

Others argue the tax-to-GDP dropped because our GDP calculating method is wrong. When GDP is unnecessarily inflated, then it is normal for tax-to-GDP to shrink. The government should collect taxes but should not pressure registered taxpayers.

Do you think the government is properly utilizing the resources collected from taxes?

I believe the government should put the available money in top priority areas that benefit the public and the economy. The government should not invest in unnecessary areas.

The government should focus on economic sectors that have a return on the real economy. Supporting low income citizens is also crucial. If the government complains that it cannot increase the salary of the civil servants and professionals, but at the same time spends money on unnecessary projects, that is contradicting and should be corrected. This leads to citizens to blame the reform.

Many claim that government officials and networks are behind the underground economy in Ethiopia and beyond. What is your take on this?

I have no sufficient information on this. In general, corruption has been on the rise. We all face it. The government should take serious measures because it will affect the reform. Instead of blaming the private sector for being an obstacle to the reform, the government needs to first take action against corruption. Once it grows, it is difficult to get rid of state corruption.

The IMF recently stated that Ethiopia’s reforms could be veering off-track. Will this statement also cast a shadow over Ethiopia’s expectations from the ongoing debt restructuring process with international creditors?

I have a different view on this. The IMF said the reform is resulting in good progress and also appreciated the government’s commitment to the reform. However, the media is distorting this.

The IMF said that, unless the peace and stability situation in Ethiopia improves, the reform cannot be successful. So the IMF urged Ethiopia to improve its peace and stability. That is the correct conclusion and recommendation. The IMF also urged development partners to support Ethiopia.

In general, the IMF statement is not damaging to the reform. The statement also does not affect the debt restructuring. Despite all the concerns over the security and conflict in Ethiopia, the IMF in general has a very good outlook on Ethiopia’s reforms.