Ethiopia 2026: Tigray reintegration, GERD power, and the birr float

Pretoria implementation and the Tigray reintegration ledger #

The November 2, 2022 Cessation of Hostilities Agreement signed in Pretoria under African Union auspices ended a two year conflict that, by Ghent University and Lancet estimates cited in International Crisis Group reporting, killed between 162,000 and 600,000 people from combat, famine, and the collapse of health services. The agreement bound the TPLF to disarm heavy weapons within 30 days and the Ethiopian National Defence Force to assume security in Tigray, while restoring federal services. AU monitoring confirmed that heavy weapons handover proceeded through 2023 and 2024, but light weapons handover, TDF reintegration into the federal army, and the disputed western and southern Tigray zones occupied by Amhara forces remain open files.

The April 2025 split inside the TPLF between the Getachew Reda interim leadership and the Debretsion Gebremichael faction has stalled the political track. The Amhara theatre is the second order risk: the April 2023 federal decision to dissolve regional special forces triggered the Fano insurgency, and a state of emergency in Amhara has been renewed multiple times into 2025. ICG documentation places active combat in roughly half of Amhara woredas at peak. Oromia faces a parallel insurgency by the Oromo Liberation Army, with no signed ceasefire after Dar es Salaam and Zanzibar talks.

The fiscal cost is concrete. The federal 2024 to 2025 budget allocated roughly ETB 20 billion for Tigray reconstruction, against a World Bank Damage and Needs Assessment that placed total northern Ethiopia recovery at USD 19.7 billion over five years. Donor commitments from the EU, IDA, and AfDB cover a fraction. The financing gap, estimated above USD 12 billion, is the binding constraint on whether the Pretoria peace produces visible economic dividends before the next political cycle.

GERD: six turbines online and the Nile operating rule vacuum #

The Grand Ethiopian Renaissance Dam, financed almost entirely by Ethiopian domestic bond issuance and diaspora contributions since 2011, reached full fifth phase reservoir filling in September 2023, holding 74 billion cubic meters at a wall height of 145 meters. By April 2026 six of the planned thirteen Francis turbines had been commissioned, with installed capacity at roughly 2,550 MW out of the 5,150 MW nameplate. Ethiopian Electric Power has reported GERD generation feeding both the domestic grid and export contracts to Sudan, Djibouti, and Kenya via the Eastern Africa Power Pool interconnector commissioned in 2022.

The trilateral track collapsed in December 2023 when Cairo declared the four round resumption with Sudan and Ethiopia exhausted, reverting to the position that any unilateral filling or operation breaches the 2015 Declaration of Principles. Khartoum, distracted by its own civil war since April 2023, has not issued a binding position. Ethiopia continues to operate without a multi year operating rule, the asymmetric risk for Egypt's Aswan buffer in drought years. Hydrological data through 2024 and 2025 has been benign: Blue Nile flows recorded by the Eastern Nile Technical Regional Office stayed near long term mean.

GERD's commercial pivot is the export business. EEP signed a 25 year PPA with Tanzania in 2023 covering up to 400 MW, and the existing 400 kV Ethiopia Kenya line has carried up to 200 MW since commissioning. Djibouti imports cover roughly 70 percent of national electricity demand under a 2011 PPA. Pricing in the USD 0.06 to 0.08 per kWh band, per Ministry of Water and Energy disclosures, sits below regional thermal alternatives. Every 1,000 MW of net export capacity at 60 percent load factor generates roughly USD 350 million of annual export receipts.

The July 2024 birr float and the IMF Extended Credit Facility #

On July 29, 2024 the National Bank of Ethiopia ended the multi year managed crawl and authorized commercial banks to set rates against the dollar. The official rate, held at roughly ETB 57 per dollar through July 28, opened above ETB 74 on the first trading day and reached ETB 110 to 115 by end 2024. The parallel premium, which had peaked above 100 percent through 2023 and into mid 2024 with parallel quotes near ETB 120, compressed sharply through Q4 2024 and Q1 2025 as the official rate moved to clear, narrowing into the 15 to 25 percent band by 2026 per central bank and World Bank monitoring.

The float opened a four year, USD 3.4 billion IMF Extended Credit Facility approved by the Board on the same day, with first disbursement of USD 1 billion. Subsequent reviews are tied to fiscal consolidation, tax mobilization toward 11 percent of GDP, monetary tightening via a new policy rate framework, and continued FX reform. The World Bank approved USD 16.6 billion in pledges over three years across IDA and IFC, and the AfDB announced a USD 1 billion package. G20 Common Framework coordination, requested February 11, 2021, produced an Official Creditor Committee co chaired by France and China.

Inflation accelerated as expected. NBE and CSA series showed headline CPI moving from 19.9 percent year on year in July 2024 to a peak above 30 percent in H2 2024 before easing back toward 20 to 25 percent by early 2026. Fuel subsidy removal in tranches from late 2024 contributed roughly 3 percentage points to headline by NBE decomposition. The NBE policy rate, introduced as the new monetary anchor at 15 percent, was raised in steps to 17 to 18 percent through 2025.

Eurobond default and the G20 Common Framework restructuring #

On December 26, 2023 Ethiopia missed the USD 33 million coupon on its USD 1 billion 6.625 percent eurobond due December 2024, becoming the third African sovereign after Zambia and Ghana to default in the Common Framework era. The default was a deliberate fiscal choice, taken after the 30 day grace period elapsed, to align bondholder treatment with the Official Creditor Committee track. S&P Global and Moody's downgraded Ethiopia to selective default and Ca respectively in late December 2023 and January 2024.

The Official Creditor Committee, co chaired by France and China and including Saudi Arabia, India, Korea, and other Paris Club and non Paris Club creditors, agreed an MoU in principle with Ethiopia in early 2025 covering roughly USD 8.4 billion of bilateral debt service rescheduling. China, holding roughly USD 6.8 billion of Ethiopian bilateral debt at default per Boston University Global Development Policy Center tracking, is the consequential player. The MoU follows a Zambia style maturity extension and rate concession structure rather than a nominal haircut.

The eurobond track has lagged. The Ad Hoc Bondholder Committee, advised by Newstate Partners, rejected Ethiopia's initial proposal in March 2024 of an 18 percent nominal haircut, arguing it overstated Ethiopia's debt service relative to comparable cases. Subsequent rounds through 2024 and 2025 moved closer to a Zambia comparable structure with limited nominal write off, maturity extension to 2032 to 2035, and a state contingent debt instrument linked to GDP or exports. Total external public and publicly guaranteed debt at end 2024 stood at roughly USD 28 billion (bilateral USD 13 billion, multilateral USD 13 billion, commercial USD 2 billion). Final terms in 2026 will set the precedent for whether Common Framework restructurings on commercial debt can be executed at scale.

Somaliland MoU, Berbera, and the port dependency reset #

On January 1, 2024 Prime Minister Abiy Ahmed and Somaliland President Muse Bihi Abdi signed an MoU under which Ethiopia would lease 20 kilometers of Red Sea coastline near Berbera for 50 years for a naval base and commercial port access, in exchange for Ethiopian recognition of Somaliland independence in due course and a stake in Ethiopian Airlines. Mogadishu rejected the MoU as a violation of Somali sovereignty, recalled its ambassador, expelled the Ethiopian ambassador, and renegotiated ATMIS troop withdrawal in a way that opened space for Egyptian deployment under the AUSSOM successor mission.

The Ankara declaration of December 11, 2024, mediated by Turkey, formally suspended MoU implementation and committed Addis and Mogadishu to a technical track on Ethiopian sea access through Somali ports under Somali sovereignty. By 2026 the Ankara process has produced limited operational change but lowered the Horn of Africa escalation curve. The Egyptian footprint in Somalia, including the May 2024 defense protocol and arms shipments through H2 2024, remains the strategic counter Cairo runs against Ethiopia given the Nile dispute.

Operationally, Ethiopia still routes 95 percent of containerized trade through Djibouti, against a 2018 to 2019 baseline that had aimed for diversification through Berbera (DP World concession), Lamu, and Port Sudan. Berbera handled roughly 750,000 TEU in 2024 per DP World disclosures, of which Ethiopian transit accounted for an estimated 5 to 7 percent. Djibouti port fees, estimated at USD 1.5 billion to USD 2 billion annually for Ethiopia by World Bank trade logistics work, remain the dominant FX outflow on the trade account. The Berbera concession is a long dated optionality rather than a near term cash flow.

Investor playbook: telecoms, banking, eurobonds, and power offtake #

Telecoms liberalization is the most advanced privatization track. The May 2021 award of the second mobile license to the Global Partnership for Ethiopia consortium led by Safaricom, with Vodafone, Sumitomo, Vodacom, CDC, and IFC at a USD 850 million license fee, ended Ethio Telecom's monopoly. Safaricom Ethiopia launched in October 2022 and reached roughly 7 million customers by Q4 2025, with M Pesa launched in August 2023. Partial privatization of Ethio Telecom, targeting a 45 percent strategic stake plus 5 percent domestic IPO, was relaunched in 2024 with Ethiopian Investment Holdings as seller, with the IPO listed on the new Ethiopian Securities Exchange opened in January 2025.

Banking opening, legislated in December 2024 under the Banking Business (Amendment) Proclamation, allows foreign banks to enter as branches, subsidiaries, or via stakes up to 40 percent in a single domestic bank and 49 percent in aggregate. KCB, Standard Bank, Equity Group, and Société Générale have publicly indicated interest. The NBE prudential framework, including a minimum paid up capital lifted to ETB 5 billion in 2022 and again under 2024 review, has accelerated consolidation among 30 plus domestic commercial banks. The FX trade, dominated by Commercial Bank of Ethiopia which still holds over 40 percent of system assets, is the immediate revenue pool for entrants.

On fixed income, the eurobond restructuring outcome will set the recovery price. Pre default the December 2024 bond traded in the 60s of par; through 2024 and 2025 it ranged in the 70s to low 80s on rescheduling expectation per Bloomberg composite quotes. The reference comparable is Zambia, where restructured bonds came back at roughly 70 percent NPV under a base case discount rate. Ethiopian credit, on a faster export and remittance recovery and a credible IMF anchor, can support tighter terms, with bondholder economics most sensitive to the GDP linked component. Power offtake contracts with Sudan, Djibouti, Kenya, and Tanzania underwrite a long dated dollar revenue stream from GERD that is the second cleanest hard currency story in the credit.

Sources #

• African Union, Pretoria Cessation of Hostilities Agreement
• International Crisis Group, Ethiopia Tigray and Amhara reporting
• IMF Ethiopia Country Report and ECF program documents (July 2024)
• World Bank Ethiopia Damage and Needs Assessment (northern Ethiopia)
• National Bank of Ethiopia statistical bulletins and BoP data
• Ethiopian Electric Power, GERD operational disclosures
• Reuters, GERD trilateral negotiations and Pretoria implementation
• S&P Global Ratings, Ethiopia sovereign actions December 2023 to 2025
• G20 Common Framework Official Creditor Committee communiques
• Boston University Global Development Policy Center, China Africa loan database
• Safaricom Group annual report, Ethiopia operations
• Ethiopian Investment Holdings, privatization disclosures
• DP World Berbera annual disclosures
• African Development Bank, Ethiopia country strategy and Eastern Africa Power Pool