Ethiopia has inaugurated its first stock exchange in 50 years, marking a significant step in the government’s efforts to liberalise the economy and attract foreign investment. The launch of the Ethiopian Securities Exchange (ESX) comes as the country seeks to recover from a recent civil war and address ongoing regional instability.
Prime Minister Abiy Ahmed officially announced the exchange’s opening today, stating it represented “a significant moment for our nation’s growth.” The ESX’s launch follows a series of economic reforms aimed at opening up the heavily state-controlled economy.
The first company slated for listing is Ethio Telecom, the state-owned telecommunications provider. Ethiopia Investment Holdings, which manages 40 state-owned enterprises, is overseeing the sale of Ethio Telecom shares in an initial public offering (IPO) expected to raise up to 30bn birr ($234m). Tilahun Kassahun, chief executive of the ESX, confirmed that other companies, including banks and insurers, are expected to follow.
This development marks a return to capital markets for Ethiopia after a five-decade absence. The previous stock market closed following the 1974 revolution that ousted Emperor Haile Selassie and ushered in a Marxist regime, the Derg, which nationalised much of the economy.
Since assuming office in 2018, Prime Minister Abiy has championed market-oriented reforms and encouraged foreign investment. However, progress has been hampered by internal conflicts, most notably the civil war in the Tigray region between 2020 and 2022, which led to international sanctions and economic disruption.
The launch of the new stock market in Ethiopia is part of a broader package of economic reforms undertaken by the Ethiopian government in recent months. In December, parliament approved legislation allowing foreign banks to establish subsidiaries in the country, albeit with a 49 per cent cap on foreign ownership. In October, the government conducted a preliminary sale of Ethio Telecom shares, offering up to 10 per cent to investors.
A key reform implemented in July involved floating the Ethiopian birr against the US dollar. This move, which followed pressure from international financial institutions, aimed to address an unsustainable fixed exchange rate. The reform unlocked a $3.4bn aid programme from the International Monetary Fund (IMF) and a $1.5bn financing plan from the World Bank.
Ethiopia, Africa’s second most populous nation with approximately 120m people, experienced robust economic growth, often exceeding 10 per cent annually, between 2004 and 2019. However, the economy has faced significant challenges in recent years due to internal conflict, the Covid-19 pandemic, and the war in Ukraine. According to the World Bank, economic growth slowed to an average of 5.9 per cent between 2020 and 2023, while inflation rose from 20.4 to 30.2 per cent over the same period.
The success of the ESX will depend on several factors, including investor confidence, the stability of the macroeconomic environment, and the government’s commitment to further reforms. The exchange’s performance will be closely watched as a gauge of Ethiopia’s economic recovery and its ability to attract both domestic and international capital.