Ethiopia Country Risk Rating

Ethiopia remains high overall, with security conditions continuing to dominate the assessment. Political violence is rated very high, while legal & regulatory risk, political interference, supply-chain disruption and the risk of doing business are all high. Prime Minister Abiy Ahmed’s Prosperity Party retained overwhelming political control following the 2026 election, but voting could not be completed in parts of Tigray, Amhara and Oromia because of insecurity. The election therefore provided policy continuity without resolving the ethnic, regional and constitutional disputes that continue to drive violence. Fighting and insurgency persist in Amhara and Oromia, the 2022 Tigray peace agreement remains fragile and relations with Eritrea have periodically deteriorated. Political restrictions, arrests and limits on opposition activity also reinforce the high political-interference and legal-risk ratings. Despite this difficult security environment, headline economic growth remains strong.

The IMF projects GDP growth of 9.2% in 2026, while average inflation is forecast at 11.8%. Foreign-exchange and monetary reforms under Ethiopia’s IMF-supported programme have improved price discovery and helped rebuild reserves, but the birr’s depreciation has raised import costs. The Middle East energy shock has added further pressure to fuel and transport prices. Ethiopia also remains dependent on Djibouti for the vast majority of its seaborne trade, making logistics and regional relations important sources of supply-chain risk. Sovereign non-payment and exchange transfer risk are both medium-high. Ethiopia defaulted on its USD1 bln Eurobond in 2023, but progress has been made under the G20 Common Framework. In August, official creditors endorsed a preliminary restructuring agreement with bondholders, advancing the process toward a more sustainable debt profile. The government’s inability to provide stimulus is medium and banking-sector vulnerability is low. The financial system remains shallow and state influenced, which limits direct global-market contagion but also constrains access to credit. Strong coffee, gold and services activity provide upside, yet conflict, debt restructuring and foreign-exchange constraints continue to discourage private investment. Much of the medium-term outlook depends on whether economic liberalisation is accompanied by greater political stability and a durable settlement in the country’s conflict-affected regions.