Sidama Crisis Monitor

ADDIS ABABA — Ethiopia’s plan to allow foreigners to buy real estate in the country for the first time is the latest move aimed at opening up its beleaguered economy and attracting foreign direct investment.

Prime Minister Abiy Ahmed, who has sought to liberalize the country’s state-run economy since taking office in 2018, announced the policy shift on March 23. “We will introduce a law that will allow foreigners to own properties,” he said on state TV, but did not say when the proposed legislation would be brought to parliament.

Ethiopia previously banned foreign property ownership based on political and economic concerns. The architects of Ethiopia’s socialist revolution of 1974 were replaced by an authoritarian administration that oversaw a command economy and held power until Abiy took office. That regime was wary of loosening controls due to fears over any outside influence on the country’s sovereignty.

The country’s political history in recent decades, and its status as one of just two African countries never colonized by Europeans, left it out of step with other nations on the continent where real estate and lucrative franchises are often owned by a few powerful families and their foreign partners.

There were also fears that opening the real estate market could work against locals, some of whom could be priced out of the market.

Abiy had made some headway in loosening state control of the economy. For example, Ethiopia has invited international investors to take stakes in the telecoms and banking sectors in recent years, though that has had varying degrees of success. Ethiopia has opened up its telecoms and banking sectors over the past six years as part of his long term drive to attract foreign investment.

Ethiopian authorities are most immediately concerned about the country’s dwindling foreign currency reserves and surging inflation. National Bank of Ethiopia data suggests the reserves can barely cover a month’s worth of imports, a dangerously low level that impacts many sectors of the economy from imports of crucial economic inputs like fertilizers for farmers to essential pharmaceutical products.

The conflict in the northern Tigray region that ended one year ago, alongside others in the Amhara and Oromia regions, have also taken a heavy toll on the country’s economy and deterred investors.

The shortage of hard currency fell so low last year that Ethiopia was unable to service its debt obligations. It defaulted on a loan from private international creditors for the first time in decades, dealing a severe blow to its hope of becoming more attractive to foreign investors.

Source: yahoo!finance