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Ethiopia sees strong growth in FDI, but greenfield projects decline, says World Investment Report 2025

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Ethiopia recorded a robust increase in foreign direct investment (FDI) inflows in 2024, despite a challenging global investment climate, according to the newly published World Investment Report 2025 by the United Nations Conference on Trade and Development (UNCTAD)1. The report highlights Ethiopia’s resilience and continued attractiveness to international investors, even as the country faces headwinds in new project announcements.

The data shows that Ethiopia’s inward FDI rose to $3.98 billion in 2024, up from $3.27 billion in 2023—a 21.9% year-on-year increase1. This growth outpaces the East African regional average and stands in stark contrast to the global trend, where FDI flows to developing economies grew by just 3.2% in the same period. Ethiopia’s FDI stock also expanded significantly, reaching $42.5 billion in 2024, up from $38.5 billion the previous year.

“Ethiopia continues to be a leading destination for foreign direct investment in East Africa, reflecting the country’s ongoing economic reforms and efforts to improve the investment climate,” the World Investment Report 2025 states.

However, the report also flags a sharp decline in announced greenfield investment projects—a key indicator of new business ventures and job creation. In 2024, Ethiopia attracted just $801 million in greenfield project announcements, a steep drop from $3.2 billion in 2023, representing a 75% decrease. This mirrors a broader slowdown across East Africa, where announced greenfield investments fell by 80% over the same period.

The report attributes the decline in greenfield projects to global economic uncertainty, tighter financing conditions, and lingering effects of recent geopolitical and supply chain disruptions. “Infrastructure investment is slowing. Industrial investment is under strain. And developing countries—those most in need—are being left behind,” UN Secretary-General António Guterres notes in the report’s preface.

Despite these challenges, Ethiopia’s overall FDI performance remains strong. The country’s share of FDI as a percentage of gross fixed capital formation also improved, underscoring the importance of foreign investment to Ethiopia’s economic development.

UNCTAD urges Ethiopian policymakers to focus on revitalizing new project pipelines and enhancing the enabling environment for both existing and prospective investors. The report emphasizes the need for targeted reforms and international cooperation to sustain investment momentum and foster inclusive growth.

NBE to maintain tight monetary policy as Treasury bond directive ends

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The National Bank of Ethiopia (NBE) has reaffirmed its commitment to employing various monetary policy tools to maintain a tight monetary stance, despite plans to phase out some previous instruments. The Monetary Policy Committee (MPC) is scheduled to meet before the end of June to discuss a range of economic issues.

As part of its agreement with international partners, including the International Monetary Fund (IMF), the Ethiopian government will lift the Treasury bond directive, which took effect on November 1, 2022, by the end of this month. Additionally, the government aims to remove the cap on private sector credit growth by September 2025.

The credit growth restriction, initially imposed in August 2023, had limited credit expansion to 14% before being adjusted to 18% in January 2025. A key measure, the NBE’s Treasury bond requirement, mandated that banks allocate 20% of their new loan disbursements to government bonds. These two measures have been effective in curbing inflation, which had risen above 30% but has since decreased to around 14%.

While the IMF supports the gradual removal of these measures, it has advised Ethiopia to maintain a tight monetary policy to ensure price stability.

Experts attribute much of the inflationary pressure to direct advances the government previously obtained from the NBE. However, in a significant shift, the government has ceased such borrowing this fiscal year, marking a first in recent history.

In its latest assessment, the IMF praised Ethiopia’s macroeconomic performance, highlighting improvements in inflation control, export growth, and international reserves.

Alvaro Piris, head of the IMF delegation monitoring Ethiopia’s reform program under the Extended Credit Facility, stressed the importance of sustained reforms and tight monetary conditions to stabilize inflation and exchange rate expectations.

Fikadu Digafe, Vice Governor and Chief Economist of the NBE, confirmed the planned removal of the two policy instruments to stimulate market activity.

However, he clarified that their elimination does not signify an end to tight monetary policy. “We will introduce new monetary tools to further reduce inflation,” he stated, although he did not specify what these instruments would be.

Finance Minister Ahmed Shide also emphasized that the government would rely on market-based financing instead of direct advances from the NBE to cover budget deficits.

“We will mobilize funds through taxes and other market sources,” he told Capital last week following his recent budget speech.

Currently, the government is using Treasury bills (T-bills) as its primary financing tool, with plans to expand money market instruments through the newly established Ethiopian Securities Exchange.

The IMF has recommended enhancing the attractiveness of T-bills by allowing broader participation in the bidding process.

Notably, T-bill interest rates have risen to 17%, exceeding both the inflation rate (14%) and the NBE’s policy rate (15%).

Fikadu indicated that the central bank’s policy rate might be reviewed during the upcoming MPC meeting in late June.

As Ethiopia navigates these monetary adjustments, maintaining the momentum of reform will be essential for sustaining economic stability and promoting long-term growth.

Ethio-Djibouti Railway eyes major stake in Damerjog Fuel Facility

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The Ethio-Djibouti Railway (EDR) has announced its intention to participate in a significant construction project in Djibouti, which includes acquiring a substantial sftake in the Damerjog fuel storage facility.

The company seeks to enhance regional fuel distribution and transportation efficiency by expanding its operations through interconnected ventures, such as terminal and multimodal logistics.

Last week, EDR CEO Takele Uma led a delegation that met with senior officials from the Djibouti Ports and Free Zones Authority (DPFZA), including Chairman Aboubaker Omar Hadi.

The discussions centered on critical issues, such as securing a freight forwarding license for EDR, a joint venture between Ethiopia and Djibouti, and improving infrastructure to facilitate smoother cargo movement between Djibouti’s ports and landlocked Ethiopia, which depends heavily on Djibouti for international trade.

One of EDR’s major proposals is to construct a 17-kilometer railway line from Damerjog Liquid Bulk Port to Nagad, the largest and most distant railway station on the southwestern outskirts of Djibouti City.

This line would specifically enhance fuel transportation by rail, addressing a significant gap in Ethiopia’s logistics network.

The Damerjog Liquid Bulk Port, a modern facility capable of accommodating next-generation oil tankers, is located near the Somaliland border and is part of the Damerjog Industrial Park development, which includes an oil terminal. EDR’s proposed rail link aims to improve the efficiency and reliability of fuel imports and distribution in the region.

A feasibility study conducted by Great Horn Investment Holding (GHIH), a subsidiary of DPFZA, estimates the project’s capital expenditure (CAPEX) at USD 90 million, or USD 5 million per kilometer. Founded in 2016, GHIH specializes in multimodal transport solutions for logistics, aviation, and maritime industries.

During the meeting, EDR also expressed interest in investing in Damerjog’s fuel storage facilities, proposing a 49% ownership stake in the project, which includes infrastructure for jet fuel handling.

Experts emphasize that the Damerjog facility will be vital in ensuring a sustainable fuel supply for the entire region, not just for Ethiopia.

Currently, Ethiopia relies on the Horizon Djibouti Terminal, developed by the UAE in 2005, which has an annual capacity of 4.5 million tons.

 In contrast, the Damerjog Liquid Bulk Port, which is nearing completion as part of the USD 4 billion Djibouti Damerjog Industrial Park, is expected to handle 13 million tons annually.

Although the Ethio-Djibouti Railway became operational in 2018, it has not yet transported oil due to the absence of connections between Djibouti’s terminals and Ethiopia’s depots. Consequently, 110 tank wagons purchased for fuel transport remain idle.

To address this issue, EDR is prioritizing a rail link to the Awash Oil Depot, Ethiopia’s primary national fuel terminal located 235 km east of Addis Ababa.

Sources indicate that this connection, just 300 meters from the Ethio-Djibouti Railway, is nearing completion.

“Transporting oil via rail is a top priority for Prime Minister Abiy Ahmed, which is why this line will be finalized shortly,” the sources added.

EDR and DPFZA are exploring the development of joint-venture dry ports at Nagad and Indode Stations, the latter situated on the southeastern outskirts of Addis Ababa. This project will involve collaboration between GHIH and EDR.

During discussions with a delegation from the China Development Bank and the China-Africa Development Fund, DPFZA Chairman Omar Hadi highlighted the need for USD 150 million in financing for two major initiatives: the Nagad-Damerjog railway connection and the establishment of new dry ports in Nagad (200 hectares) and Indode.

Sources indicate that both EDR and DPFZA have agreed to continue discussions to finalize the terms of cooperation, investment structures, and implementation roadmaps.

The USD 4 billion electrified Ethio-Djibouti Railway, in which Djibouti holds a 25% stake, is experiencing increased activity as EDR expands its focus beyond rail transport.

Through its new subsidiary, Global Logistics, EDR is actively entering the multimodal logistics sector, integrating land and maritime transport services to enhance regional trade connectivity.

This strategic expansion highlights EDR’s growing role in improving transportation and energy infrastructure in East Africa, facilitating more efficient trade flows between Ethiopia and Djibouti.

More Good News for China-Africa Relations

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By ZHANG Wei

On June 11, 2025, the Ministerial Meeting of Coordinators on the Implementation of the Follow-up Actions of the Forum on China-Africa Cooperation (FOCAC) was held in Changsha, Hunan Province, China. Over 100 ministerial officials from FOCAC member countries, representatives from the African Union Commission, and diplomatic envoys of African countries to China attended the event. In his congratulatory letter sent to the meeting, Chinese President Xi Jinping elaborated the significance of China-Africa solidarity and cooperation, and announced the measures to further expand openness and cooperation with Africa, providing guidance for China and Africa to jointly advance modernization and build an all-weather China-Africa community with a shared future for the new era.

The ministerial meeting serves as a “refueling station” for the development of FOCAC. Since the FOCAC Beijing Summit held last September, China has made an additional investment of over RMB 13.3 billion, and provided funding of over RMB 150 billion to Africa. In the first five months of this year, China’s imports and exports with Africa reached RMB 963 billion, up by 12.4 percent year-on-year, hitting a record high for the same period of the year in history. At the ministerial meeting, the two sides issued the List of Outcomes of the Implementation of the Follow-up Action of the Beijing Summit of FOCAC, and the Concept Paper of 2026 China-Africa Year of People-to-People Exchanges, demonstrating the joint efforts of both sides to implement the outcomes of the FOCAC Beijing Summit, and providing new driving forces for deepening political mutual trust, advancing mutually beneficial cooperation and building closer bond between two peoples. 

The ministerial meeting is an accelerator for the high-quality development of China-Africa cooperation. On FOCAC Beijing Summit last year, President Xi Jinping announced that China would give all the least developed countries having diplomatic relations with China, including 33 African countries, zero-tariff treatment for 100 percent tariff lines. In his congratulatory letter to this ministerial meeting, President Xi announced that China will implement measures of granting 53 African countries having diplomatic relations with China zero-tariff treatment for 100 percent tariff lines through negotiating agreements on economic partnership for shared development, and facilitate greater access for exports from least developed countries of Africa to China. The move makes China the first major developing country and the first major economy to take such a step. In its cooperation with Africa, China has always adhered to the principle of combining righteousness with shared interests, with righteousness as the priority. The greatest “righteousness” in China-Africa relations is to boost Africa’s growth with China’s development, and ultimately achieve mutual benefit, win-win results and common development.

The ministerial meeting will be a stabilizing force for the global landscape. The current international situation is marked by changes and turmoil. Disregarding international laws and trade rules, the United States abruptly cut aid to many countries including those in Africa, indiscriminately imposed tariffs worldwide, and released a proclamation imposing new travel restrictions affecting nationals from 10 African countries. Those bullying acts have created severe difficulties for the economic and social development and the improvement of livelihood in African countries. At the ministerial meeting, the China-Africa Changsha Declaration on Upholding Solidarity and Cooperation of the Global South was issued, which reiterated that China and Africa will continue to stand side by side with mutual understanding and support amid chaos and changes, jointly uphold true multilateralism and oppose all forms of unilateralism and protectionism, stabilize the uncertain world with the certainty and resilience of the China-Africa relationship.

The ministerial meeting reassured Africa of China’s responsibility as a major country. President Xi Jinping’s congratulatory letter sends a clear signal that China’s Africa policy is stable and will promote cooperative development. While the international order is facing grave challenges, China has been consistently marching forward with Africa as equal partners, making China-Africa cooperation a model of Global South cooperation. The weighty outcome list fullfills the commitments made on FOCAC Beijing Summit, demonstrating China’s credibility as a major country. The outcomes are vivid footnotes to the China-Africa community with a shared future, as well as powerful responses to unilateralism and protectionism. With its firm and efficient actions, China has proved that openness and cooperation go with the tide of history and that mutual benefit is a consensus shared by the international community. The U.S. tariff bludgeon and other acts of hegemony, bullying and coercion will never stop China and Africa from advancing together. On the contrary, they will only strengthen the friendship and tighten the cooperation.

The ministerial meeting made a road map for the development of China-Africa relationship. China and Africa, as the world’s largest developing country and the continent home to the largest number of developing countries, together form the backbone of the Global South. The more complex and turbulent the international landscape becomes, the more imperative it is for China and Africa to stand firmly shoulder by shoulder and actively steer the course of the times. Chinese Foreign Minister Wang Yi put forward a five-point proposal to promote high-quality development of China-Africa cooperation, i.e., upholding mutual assistance and serving as defenders of solidarity among Global South countries, upholding openness and serving as advocates for international free trade, upholding mutual benefit and win-win results and serving as partners in global development cooperation, upholding fairness and justice and serving as defenders of an equitable international order, upholding exchanges and mutual learning and serving as promoters of the diversity of world civilizations.

Looking ahead, no matter how the international situation evolves or China develops, China will unswervingly prioritize strengthening solidarity and cooperation with African countries in its diplomacy, and remain the most sincere friend and the most reliable partner of African countries. China and Africa, standing united in the century of great transformation, will open up even brighter prospects for global peace and development, and make bigger contributions to building a community with a shared future for mankind.

ZHANG Wei is Charge d’Affaires a.i. of the Mission of China to the African Union