Tsegaye Degineh (PhD) is a prominent economist, management expert, and public diplomacy researcher whose life journey has spanned continents and careers. Born in Addis Ababa, he left Ethiopia for East Germany in 1988 at the age of 20, driven by a passion for better education.
A certified expert in project management and modern work methodologies, Tsegaye earned his PhD in Economics from Humboldt University of Berlin in 2000 with great distinction. He also holds an MBA in 1995 from the same university.
In 2021, he received the Federal Merit Cross of the President of the German Federal Republic.
A well-known figure in Germany’s academic circles, Tsegaye delivers guest lectures and motivational talks at universities on topics such as diversity, sustainability, economics, project management, work culture, digital mindset, and migration, among other critical subjects.
Since 2024, Tsegaye has served as an Honorary Judge at the Administrative Court of Berlin, alongside three other distinguished judges.
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In an interview with The Reporter’s Abraham Tekle, Tsegaye discussed Ethiopia’s economic reforms, its quest for sea access, and the potential economic and security benefits, as well as the geopolitical and regional implications among other critical issues. EXCERPTS:
The Reporter: Considering your professional insight and the prevailing conditions, what is your comprehensive overview of Ethiopia’s current economic and financial stability?
Tsegaye Degneh (PhD): Providing a general overview of the Ethiopian economy is challenging due to its inherent complexity. However, recent data indicates significant growth in national income [GDP]. This assessment is based on verified statistics and financial reports following banking sector reforms, ensuring an objective evaluation. Additionally, the expansion of the digital economy and electronic transactions has further contributed to this growth, serving as key indicators of economic progress.
Productivity across various sectors has improved, supported by modernization efforts in tax collection and increased project completion rates—though there remains room for further enhancement. Despite these advancements, persistent challenges such as high inflation continue to strain the economy. This inflation stems from demand-supply imbalances, market inefficiencies, and population growth outpacing productivity. Additionally, structural weaknesses in manufacturing and industrial output exacerbate the issue, highlighting the need for greater sectoral development to stabilize prices and meet rising demand.
In addition, Ethiopia’s export capacity has shown positive growth, with trade balance statistics reporting a 5.5 percent increase compared to previous years. However, the overall trade index remains approximately USD 12 billion below expectations due to high import dependency. Key imports—such as USD five billion worth of goods from China, along with significant purchases from the US and European nations—offset export gains. While progress in exports is evident, reducing the import burden remains critical for achieving a stronger trade balance. So, no matter whether we export a lot, we have a lot to improve.
What do you see as the most significant early outcomes and unforeseen challenges in relation to Ethiopia’s recent economic reforms—including the currency float and shift to a market-based monetary policy under an IMF-backed program initiated in July 2024?
A currency float typically brings both advantages and disadvantages. On the positive side, it often enhances export competitiveness and increases export volumes in international markets while also stimulating the tourism sector. However, Ethiopia’s tourism revenue remains low compared to other African nations, largely due to lingering peace and security concerns. Additionally, the exchange rate liberalization encourages import substitution by supporting domestic industries. While this policy shift may attract foreign direct investment (FDI), it also raises import costs—potentially exacerbating inflationary pressures.
Another critical issue is Ethiopia’s substantial existing debt and its potential need for further borrowing. Servicing these obligations could become more challenging under a floating exchange rate regime due to currency volatility. This situation demands careful adjustments in the process.
How effective have the reforms under the Homegrown Economic Reform Agenda been in stabilizing inflation and forex shortages?
The Homegrown Economic Reform Agenda, supported by institutions like the IMF, aims to drive structural economic transformation—though it’s important to recognize that such institutions naturally prioritize their own interests. The reforms focus on FDI-friendly sectors like telecommunications and agricultural commercialization, among others. While the reform framework itself is sound, effective implementation remains critical. Success requires robust execution to address challenges like inflation through proper monetary-fiscal policy coordination. Additionally, achieving meaningful results will depend on capacity building, institutional mindset changes, and establishing peace and stability – as the later one is essential for attracting sufficient foreign direct investment to sustain the momentum.
As Ethiopia gradually opens key sectors including telecommunications and banking to foreign investment, what do you consider to be the most critical risks facing state-owned banks in this transition?
Having lived abroad for most of my life, I don’t view this situation as a significant setback. In countries like Germany, foreign banks operate successfully under strict regulatory frameworks that maintain financial stability while allowing them to provide services. These institutions maintain their market presence precisely because of robust administrative controls and their established financial strength.
For instance, if a major commercial bank enters Ethiopia, it could bring substantial capital investment while potentially dominating the market. This might marginalize local banks and limit their international competitiveness. Therefore, careful monitoring is essential to ensure foreign banks don’t undermine domestic institutions’ financial health, particularly regarding capital reserves and hard currency management, while still benefiting from their foreign exchange inflows.
Following Eritrea’s independence in 1993, Ethiopia became landlocked, leading to its current overwhelming reliance on Djibouti for foreign trade. With the current administration actively pursuing direct sea access, what is the strategic economic imperative of this endeavor for Ethiopia’s sustained long-term growth? What tangible economic returns and opportunities would accrue from sovereign control over a port, particularly in light of Ethiopia’s current trade dependency?
Undoubtedly, countries with direct sea access typically have at least three times higher GDP than landlocked nations. Major economic powers like China, Germany, the US, and Russia all possess direct sea access, which is crucial since approximately 90 percent of global trade occurs via maritime routes. Landlocked countries must spend 20-30 percent more to meet their import/export needs.
The World Bank reports that among the world’s 12 poorest countries, nine are landlocked – most located in Africa. These nations generally experience higher corruption levels compared to coastal countries, which tend to have stronger economies, greater political influence, and more stable social structures. Consequently, landlocked nations remain economically dependent on coastal neighbors to fulfill their trade requirements.
Regarding Ethiopia’s need for sea access, the country must significantly increase exports. Currently, over 90 percent of Ethiopia’s import-export trade passes through Djibouti’s port at an annual cost of about USD two billion—equivalent to one-fifth or one-sixth of the national budget. This substantial expense negatively impacts Ethiopia’s overall economy, reduces productivity, and constrains export capacity. So, having the access will answer the demand and help to be strong in terms of economics as well as to be influential politically.
Tensions are on the rise between Ethiopia and Eritrea regarding Ethiopia’s interest in accessing the sea. What are the sources of this tension and its potential implications?
The Red Sea is one of the world’s most vital trading routes, handling approximately 15 percent of global commerce. Ethiopia possesses a larger workforce than many coastal nations in the region, which could leverage this human capital for economic benefit. Additionally, the Bab el-Mandeb Strait has become a strategic focal point, with major powers including the UAE, Türkiye, France, China, America, and Saudi Arabia establishing military bases and naval deployments to control this crucial trade and energy corridor. For Ethiopia, gaining access to this strait would mean entering this intense geopolitical competition.
The region remains highly sensitive and unstable, encompassing conflict-affected nations like Somalia and Sudan, alongside Ethiopia’s own peace challenges and Kenya’s fragile stability—all while most inhabitants live in extreme poverty. The area also experiences constantly shifting alliances, where cooperative partners may quickly become adversaries. This volatile environment demands robust diplomatic engagement, regional integration, and multilateral cooperation among all neighboring states.
This is the complex geopolitical environment where Ethiopia has positioned its sea-access ambitions. The significant involvement of multiple foreign powers in the region makes this pursuit particularly challenging, requiring careful navigation of competing interests.
How do their rivalries impact Ethiopia’s pursuit for port access, especially with threats disrupting Red Sea trade and the current military engagement between Israel and Iran?
This analysis leans more toward political considerations than pure economics from my perspective as an economist. However, Ethiopia currently faces a strategic crossroads regarding this situation. The opportunity could potentially attract trade investments from Gulf States, but this requires carefully selecting alliances while managing adversarial relationships. Crucially, Ethiopia must maintain control to prevent economic and political repercussions. Given the region’s sensitivity and fragility – which directly impacts trade flows – the situation demands thorough and thoughtful diplomatic engagement.”
How might this heighten or stabilize Red Sea tensions?
European history provides relevant examples regarding sea access. Before World War I, nations like Austria, Hungary, Russia, and Poland shared borders and coexisted for centuries. Post-war territorial changes left some countries landlocked while others retained ports. For instance, Austria secured port access through Italy under equal payment terms with Italian users. This arrangement reflects principles later formalized in the EU’s sea access policies, aligned with UN Convention provisions granting landlocked nations sea access rights comparable to coastal states. Successful implementation, however, requires regional cooperation and shared infrastructure investments.
For Ethiopia to truly prosper, a mentality of shared economic development with its neighboring countries is essential. This diplomatic integration is, as I’ve noted, crucial for Ethiopia’s quest for sea access.
To what extent would Ethiopia’s quest for sea access be accepted by the international community?
Based on my personal experience living abroad, international reactions to Ethiopia’s initiatives typically involve criticism—as seen with the GERD project. However, Ethiopia’s current pursuit of sea access has notably not generated similar criticism, at least not in German media or other international outlets I’ve observed. It’s crucial to clarify that this quest doesn’t imply seizing territory by force, but rather seeking access through proper international frameworks, rules, and diplomatic channels. Most importantly, successful sea access would significantly enhance Ethiopia’s export capabilities.
Drawing lessons from other nations’ experiences, what peaceful approaches could Ethiopia adopt to secure sea access? What is expected from organizations like the AU, IGAD, UN, and EU to solve the issue in a peaceful manner?
The world has demonstrated various methods for securing sea access through proper negotiations and trade agreements. In today’s interdependent global system, mutual compromise is essential. Willingness to cooperate remains paramount, as no nation can operate in complete isolation. Any unilateral approach would effectively constitute a monopoly, which contradicts modern economic principles.
International frameworks like the UN Convention and AU agreements should establish clear mechanisms for sea access when formally requested. Ethiopia’s substantial size and population justify this legitimate need, particularly given its proximity to coastal neighbors—Eritrea, Somalia, Sudan, and Djibouti.
Additionally, we should consider the potential of constructing artificial canals as alternative access solutions.
Ultimately, successful sea access requires robust economic and political integration coupled with strong domestic economic development. As emphasized, mutual benefit drives international relations. Ethiopia’s significant human capital and strategic position as East Africa’s potential hub support its ambitions. However, these aspirations must be pursued pragmatically, maintaining careful balance in implementation.
