Bank mergers are not a new or recent phenomenon. These strategic steps have been taken by bankers during the first half of 20^th century bank mergers were occurring at the rate of 150 to 350 per year with a population of banks totaling above 25,000, the Bank Merger Rate was in the range of 0.6% to 1.4%. The rate due to the impact of pandemic and inflation grows to grow 2.3% with 107 bank mergers in 2023. During earlier period of There was no law defining a true merger between two banks. The work-around solution was to have the Selling Bank liquidate and to have the Acquiring Bank purchase the assets and assume the deposits and other liabilities (think Credit Union acquisition of a commercial bank today). For a national bank, the surviving bank could only operate out of a single office as no branching was allowed such that one of the offices of the newly merged bank would close. This trend and regulatory complexity in the 21^st century completely changed globally.

Recently the global financial sectors were struggling to manage the impact of inflation, postmortem effect of covid-19 resulting in the capital strength of bankers and insurers. It was our recent memory that the impact of covid-19 on the world financial sector and global economy was beyond the known parameters of measurement. Particularly  the financial sector is  challenged by  Profitability and credit management/cost of risk, operational resilience and business continuity management, high volatility in stock markets depressed banks’ valuation, securitization landscape And Customer relationship and commercial models

Yet  globalization pressures persist and the global competitive landscape becomes progressively more dynamic, mergers and acquisitions (M&As) continue to be a popular growth strategy among multinational corporations (MNCs) headquartered in every region of the world. In fact, at the turn of the second decades these millennia,   the total value of announced M&A transactions on a global basis exceeded $3.5 trillion. This recent growth in M&A activity is driven in part by the increasing need for MNCs to expand beyond the developed markets of North America and Europe in search of larger customer bases along with related scale economies, improved access to raw materials or other location advantages, as well as greater opportunities to exploit current competitive advantages and develop new ones. During this period  the total number of deals involving African target firms increased from 242 to 367 and the total deal value grew from 15.0 billion to 17.9 billion on an overall basis. In recent years, mergers and acquisitions (M&A) activities have become an important channel for investment in Africa for both global and local market players. M&A deals have allowed companies to consolidate their positions in African markets, contributing to better market access and competitiveness.

In African financial sector alone, merger picked the highest and the rate of merger during pandemic reached 2%. (than decades before) .  In the last decade the total number of bankers and insurers merged due to economic of scale , high return , synergy , diversification , seeking of strong capital and  using it as a  strategically channel for investment accordingly.

Mergers and acquisitions in the financial services sector are receiving a great deal of attention in the Ethiopian financial sector ever since the decision of the government opening up the financial sector. The trend of attracting foreign investor seems an inevitable one. As Merger and acquisition encompasses   the various parts of the financial sector in Ethiopian, case particularly commercial banking, insurance companies and some bigger micro financial institute, there should be a well- planned and thoughtful strategy to implement. The sector waits   some big challenge. Some of them even difficult to predict their impact   surface on if left with stagey of tackling them.  

Regardless different reasons one with the others have i.e. strong capital , market expansion , enhanced competitive advantage , competitiveness , technological , brand  , existence , accelerated growth , capital formation and creating strong asset , all banks should map a clear strategy of merger and or acquisitions. Selecting peer bank intermesh of the finance function, The HR function, Strategic direction, IT systems, Product and service lines and binding legal contracts are challenging job and demanding reactiveness in line with progressive decision made by the regulatory body. When we compare the largest and strongest African bank Standard Bank (Stanbank) Group: (South Africa) with an asset $172.9 billion, alone is 7.2 fold than the leading bank, Commercial Bank of Ethiopia. the figure even will be far  if we compare it  with the remaining all commercial banks in Ethiopia whose total asset is lower than commercial banks of Ethiopia i.e  more than 10 folds . the implication is leave alone individual Ethiopian commercial bank   with other  African bank , all local bank merged capital or total asset is far  below than standard criteria of merger.

 This indicates that commercial banks should have  to have a workable strategy  a strategy of Merger and acquisition, regardless the method and type the merger is implemented.

The ongoing change in the financial sector  by the regulatory body , the national bank of Ethiopia , i.e historical reform deciding market rated currency than regulated one , indicate that foreign banker  entry is approaching , that will shift the financial land scape including merger ,and acquisitions, which is an inevitable one leaving which bank merge locally with the other ,or which bank acquire  the other and or what strategy is fit in to merge with  foreign bank donkey work for merger strategists.

Asseged G/medhin is C.E.O of AT(@t)INSURANCE BROKERAGE & CONSULTING FIRM

It is necessary to emphasize the importance of developing the livestock export chain and Ethiopia’s cold supply chain to strengthen Djibouti’s position in the global export of flowers, fruits, and vegetables to gain more market share in the global agribusiness. This is not just about improving logistics; it is a strategic move that could exponentially increase Ethiopia’s competitive standing in international markets.

Ethiopia is at a crucial crossroads in its quest for modernization and optimization of production. To fully leverage its abundant resources, the country must specialize its training and learning hubs across all production sectors. With strong foundations in coffee, teff, spices (such as ginger and turmeric), horticultural products (fruits and vegetables), oilseeds (such as sesame and soybeans), pulses (like lentils and chickpeas), livestock and livestock products, honey, cotton, wheat, all types of products arising from agriculture, construction materials, and the burgeoning industries of gas production and mineral processing (such as gold, tantalum, lithium, potash, gems including opals and sapphires, copper, iron ore, marble, gypsum, calcium carbonate, and many more), Ethiopia has the tools to further bolster its economy.

The country has made strides toward adding value to its mineral resources before export, a move highlighted in the World Bank report (2021) which underscores the critical role of resource transformation in economic development. By focusing on value-added activities, Ethiopia can generate employment, foster economic growth, and strengthen its global standing.

It is perplexing and counterproductive that producers, exporters, and the entire logistics chain in Ethiopia do not fully prioritize meticulous attention to detail and quality management in agricultural products. This stands in stark contrast to Ethiopia’s considerable potential in agriculture, which benefits from vast arable lands, diverse climates, and abundant natural resources. These assets could make Ethiopia’s agricultural sector highly competitive internationally, but without careful attention to quality and logistics, this potential remains largely untapped. This applies to all types of production.

Ethiopia’s logistical advantages further heighten this paradox. The country boasts some of the best connectivity on the African continent, giving it unmatched access to global markets. Consider these points:

– Ethiopian Airlines offers the best air connectivity in Africa, with direct flights to major global airports, facilitating access to the world’s largest markets. This unrivaled network not only boosts tourism but also supports the transport of high-value agricultural products.

– With Ethiopian Shipping & Logistics, the country enjoys one of the strongest maritime shipping networks in Africa, ensuring seamless ocean logistics for Ethiopian exports.

– Additionally, Ethiopia benefits from direct rail links to Djibouti’s state-of-the-art ports, which connect to the world’s largest shipping lines. This infrastructure, vital for Ethiopia’s global competitiveness, is essential for facilitating efficient and cost-effective export logistics.

– Through the synergy of multimodal transport, combining sea and air, multiple Asian ports, including those in India (Mundra), China (Dalian, Guangzhou, Hong Kong, Ningbo, Qingdao, Shanghai, Shenzhen, Xiamen), and Malaysia (Klang), are currently directly connected to the deep-water terminal dedicated to containers at Doraleh (SGTD). The Djiboutian Sea-Air Cargo network facilitates smooth connections from the aforementioned Asian ports to 24 African countries (Burkina Faso, Benin, Botswana, Cameroon, Chad, Côte d’Ivoire, D.R. Congo, Equatorial Guinea, Ethiopia, Gabon, Guinea, Madagascar, Mali, Namibia, Niger, Nigeria, Rwanda, Somalia, South Africa, Sudan, and Togo) and 27 cities (Abidjan, Addis Ababa, Antananarivo, Bamako, Conakry, Cotonou, Douala, Entebbe, Gaborone, Goma, Harare, Johannesburg, Kano, Khartoum, Kigali, Kinshasa, Lagos, Libreville, Lomé, Lubumbashi, Lusaka, Malabo, Mogadishu, N’Djamena, Niamey, Ouagadougou, and Windhoek), primarily thanks to Rwandair, EgyptAir, and mainly Ethiopian Airlines.

Despite these impressive logistical achievements, the lack of attention to product quality, handling, packaging, and smooth movement of goods continues to limit Ethiopia’s growth in global markets in general. As competition intensifies and global standards for quality and sustainability rise, Ethiopia risks missing valuable opportunities if it fails to meet expectations. Moreover, neglecting these crucial elements diminishes the nation’s reputation as a reliable exporter and leads to economic losses across the entire supply chain.

Beyond agriculture, Ethiopia has taken proactive steps in mineral transformation before export. As noted in a World Bank report, such efforts are essential for economic diversification and growth. By embedding these industries within well-defined value chains, Ethiopia can secure a smooth, synchronized logistics network, enhancing its global competitiveness.

This path aligns with Ethiopia’s larger vision of becoming a central player on the world stage. With its best-in-class air and sea connectivity, Ethiopia is poised to become a key hub for Africa, not just for its own economy but for the wider continent through the African Continental Free Trade Area (AfCFTA). Ethiopia’s commitment to growth in these industries solidifies its role as a leader, transforming it into the economic granary of the region, including for the Middle East and beyond.

Ethiopia has already demonstrated its capabilities to excel in education and skill development, a crucial factor for sustaining its growth. A prime example is the Ethiopian Airlines Aviation Academy, which has trained countless professionals, shaping the future of aviation in Africa. Ethiopian Airlines was recognized by the International Air Transport Association (IATA) as Africa’s top-performing airline and currently remains the best in terms of network, passenger, and cargo transportation, illustrating the effectiveness of its integrated model.

By strengthening its cold supply chain, Ethiopia could significantly enhance its export capabilities. The country’s wealth in resources, whether agricultural, mineral, or industrial, can only reach its full potential through a holistic and strategic approach to logistics, production, and human capital development.

Ethiopia shines like a white light, radiating from the harmonious fusion of diverse wavelengths. It is a nation rich in diversity, where the coexistence of monotheistic faiths is a testament to its unity and peaceful pluralism. The cultural and physical diversity of its people, united under one flag, creates an atmosphere where all Africans can feel at home; it is similar to Malaysia with its “Truly Asia.” This plurality offers fertile ground for constructive dialogue and respectful exchanges with other African nations, underscoring Ethiopia’s significant diplomatic and economic role on the continent and beyond.

It is both legitimate and essential for Ethiopia to diversify and strengthen its maritime access, especially given its vast production potential. The country plays a crucial role in serving landlocked nations such as South Sudan, which is going to connect Melut to Djibouti Damerjog Industrial Park and the Central African Republic via the ports of the Horn of Africa. Far from being rivals, these ports foster a mutually beneficial dynamic for regional trade and international commerce. Together, we form a harmonious and diverse ecosystem, united by common interests.

In conclusion, Ethiopia’s path to modernization, its focus on logistical excellence, and its commitment to professionalizing its human capital will allow the nation to harness its full potential and emerge as a pivotal player in the global economic arena.

Strengthening and improving the value chain and the logistics chain are essential. It is also advisable, in all areas, to emphasize greater synergy for efficiency.

In recognition of our great shared history and our collective responsibility to the African continent and the broader community, we all must remain deeply committed to supporting regional growth.

Peace and stability are the most valuable ingredients to achieve sustainable development on both the continental and global stages.

In September 2024, Ethiopia floated its currency, the Birr, in line with an agreement with the International Monetary Fund (IMF) to secure over $3 billion USD in loans aimed at improving the country’s balance of payments. This dramatic shift took the exchange rate from 1 USD = 56 Birr to 1 USD = 115 Birr overnight, representing a massive devaluation of the local currency. While this move is praised by orthodox economists and the international financial community as a step toward market liberalization, few argue that the country has chosen a more complex and potentially perilous path.

The Real Cost of Devaluation: Inflation and Social Strain

The immediate impact of the Birr’s devaluation is a surge in inflation that disproportionately affects the working poor and the already struggling informal sector. By floating the Birr, Ethiopia has embraced a more market-determined exchange rate, which, while theoretically improving competitiveness, has led to skyrocketing costs for essential goods, especially those reliant on imports.

Ethiopia’s total budget of 971.2 billion Birr, which would have amounted to approximately $17.34 billion USD before devaluation, now sits at just $8.45 billion USD. This currency collapse has effectively halved Ethiopia’s purchasing power on the international market, creating a situation where the state’s capacity to fund critical imports—including food, medicine, fuel, and industrial inputs—has been decimated.

The orthodoxy of “correcting” currency overvaluation to address balance of payments issues misses a key insight: the real economy, especially in a country like Ethiopia with its high poverty levels and low per capita income, does not adjust smoothly. Inflation, driven by the rising cost of imports, is hitting food prices especially hard, in a country where 15 million people already rely on food aid. The World Bank and IMF have long championed the floating of currencies as a way to boost exports and attract foreign investment. However, this orthodoxy underestimates the severe social costs of devaluation in an economy where the informal sector dominates and basic goods are mostly imported.

Public Debt: A Neo-Colonial Trap?

A critical element of this devaluation is Ethiopia’s growing public debt, which requires 139.3 billion Birr (now $1.21 billion USD) in debt servicing for 2017. The $3 billion IMF loan is meant to ease this burden by boosting foreign reserves and stabilizing the economy. However, this influx of external financing raises concerns about deepening Ethiopia’s dependence on external debt and international financial institutions, trapping the country in a cycle of borrowing that constrains its fiscal sovereignty.

With the value of the Birr halved, Ethiopia’s foreign-denominated debt has effectively doubled in local currency terms. This worsens the fiscal outlook and forces the government into a corner, having to allocate more of its budget to debt repayment while cutting social services. The IMF loan may provide short-term relief, but the structural adjustment policies accompanying it will likely impose austerity measures that undermine Ethiopia’s social safety nets.

The floating of the Birr is part of a larger set of neoliberal reforms aimed at shifting Ethiopia away from its historically state-led economic model. Yet, without addressing deeper structural issues like agricultural productivity, domestic industrialization, and equitable wealth distribution, these reforms could end up reinforcing dependency on external capital, leaving Ethiopia more vulnerable to future shocks.

Military Spending vs. Social Spending: A Stark Trade-Off

Ethiopia’s budget allocates 65.7 billion Birr (about $571 million USD) to national defense—a massive figure in the context of a sharply devalued currency and pressing social needs. The prioritization of defense over social services reflects a dangerous imbalance in national priorities. While security is indeed a concern, especially with ongoing instability in Amharaand other regions, such a large allocation to military spending is a short-term reaction to long-standing governance failures.

Meanwhile, critical sectors like education and health – which receive 79.8 billion Birr ($694 million USD) and 33.9 billion Birr ($295 million USD) respectively – are severely underfunded, especially when viewed through the lens of the deteriorating social conditions in the country. Ethiopia’s Human Capital Index of 0.38 and its 90% learning poverty rate demand far greater investment in education and healthcare, particularly in a context where rising inflation is making basic services more expensive.

Orthodox economic frameworks often justify military spending in unstable regions to safeguard economic growth. Yet, this overlooks how poverty and inequality, exacerbated by underinvestment in social services, are root causes of instability. The government should be reallocating resources from defense to the long-term building blocks of peace—namely, education, healthcare, and jobs.

Infrastructure Development: A Double-Edged Sword?

The government’s continued commitment to infrastructure investment, with 283.2 billion Birr (approximately $2.46 billion USD) allocated for capital projects, is in line with Ethiopia’s traditional development strategy. Infrastructure—especially in urban development, water, and energy—has long been a pillar of Ethiopia’s economic growth, which reached an average of nearly 10% annually between 2004 and 2018.

However, in the context of a devalued currency and rising inflation, these investments may no longer yield the same returns. With the cost of imported construction materials and energy equipment surging, many infrastructure projects are likely to face cost overruns or delays. From a heterodox perspective, infrastructure investment in such a volatile macroeconomic environment could deepen Ethiopia’s debt burden without producing the expected developmental outcomes.

Moreover, infrastructure development alone cannot address Ethiopia’s structural issues. Without concerted efforts to develop the domestic industrial base, improve agricultural productivity, and create jobs for the 2 million people entering the labor force each year, Ethiopia risks falling into the trap of infrastructure-led growth without social inclusion.

Regional Subsidies and the Need for Equity

The budget allocates 236.7 billion Birr (~ $2.06 billion USD) for subsidies to regional governments, a critical lifeline for Ethiopia’s poorest and most conflict-affected areas. However, these funds, already stretched thin by the devaluation, may not be enough to address the deepening social crises in regions like Afar, Amhara, Benshangul, Oromia, and Tigray, where millions have been displaced and infrastructure has been destroyed.

It’s important to stress the importance of equitable development across regions as a foundation for long-term stability. Rather than focusing solely on national-level growth figures, the government must prioritize resource redistribution and regional development to ensure that the benefits of economic growth are shared. Failing to do so risks entrenching inequality, which in turn fuels further conflict and instability.

Conclusion: A Call for Alternative Approaches

The floating of the Birr and the accompanying reforms mark a decisive shift in Ethiopia’s economic trajectory. However, this shift carries significant risks. Devaluation, while boosting export competitiveness in theory, has imposed immediate costs in the form of higher inflation, lower real incomes, and increased debt burdens. The government’s prioritization of defense spending and infrastructure investment, while understandable, may prove short-sighted in the face of deepening social crises.

What Ethiopia needs is a more balanced approach that focuses on inclusive growth, equity, and social justice. Instead of relying on IMF loans and neoliberal reforms, the country should prioritize domestic resource mobilization, industrial policy, and public investment in education, healthcare, and food security. The challenge is not simply to “fix” the balance of payments but to reimagine Ethiopia’s economic model in a way that centers the needs of its people over the demands of global financial markets.