Africa’s second-most populous country Ethiopia is taking a different approach to cryptocurrencies.

In September 2022, the country’s central bank issued a directive for all crypto operators to register with the Information Network Security Administration (INSA), the national cybersecurity agency. This directive, which was largely seen as a step towards regulating crypto, was contrary to the June 2022 public warning by the National Bank of Ethiopia (NBE) against engaging in crypto trade.

The country had an estimated five million crypto owners as of May 2023, a jump from last year’s 1.83 million crypto owners.

Though in its early days, the legislation is expected to grow the crypto space in the Horn of Africa nation, which has been experiencing challenging economic and political landscapes.

Ethiopia’s economy has been largely closed, with the government controlling major sectors such as banking and telecommunication. However, the country’s industries are being liberalized, giving a new lease of life to the economic fortunes.

These are some of the key economic developments in the country since January:

*(Addis Ababa, Ethiopia / Photo by Unsplash)*

January – Mixed Economic Outlook

The African Development Bank (AfDB) said GDP growth is projected to rise to 5.7% in 2023, compared to 4.8% in 2022. The growth is driven by industry and by private consumption and investment. A tourism rebound and liberalization of the telecoms sector are expected to boost the growth outlook
Fitch Ratings downgraded Ethiopia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from ‘CCC’ to ‘CCC-‘ indicating a further deterioration in Ethiopia’s creditworthiness and an increased risk of defaulting on its foreign currency obligations. The ‘CCC-‘ rating signifies a highly speculative and vulnerable credit rating.

February – Cooling Inflation Rate

UN World Economic Situation and Prospects (WESP) 2023 report, projects Ethiopia’s inflation rate to fall to 24.9% in 2023, signaling a decrease from 34.5% in 2022.
February’s inflation rate was 32% from the previous month of 33.9% in January. The Consumer Price Index, which is primarily controlled by food prices, eased in the month, as Trade Economics reported.

March – Blockchain-based Digital IDs for Schools

John O’Connor, the director of African operations at Input Output Global (IOG) stated that over 3,600 schools and up to 750,000 teachers will benefit from Cardano-based Digital IDs to stem fraud in the education system. The company is building the system with the backing of the Ethiopian government.

April – Third Largest Economy in Sub-Saharan Africa

The Business Daily reported that the Ethiopian economy is set to become the third largest economy in sub-Saharan Africa, after Nigeria and South Africa in 2023. The data that was collected from the IMF suggested that Ethiopia’s GDP in 2023 will be $156.1 billion.

May – Liberating the Economy

Ethiopia planned to issue up to five banking licenses to foreign investors in the next five years, part of plans to open up the financial service sector to foreign competition, Reuters wrote. This is part of Prime Minister Abiy Ahmed’s government plan to open up sectors controlled by the state to drive investments in the country.
The mobile money sector was also opened to foreign investment with the first license given to Safaricom’s M-Pesa services. Business Daily reported that the consortium led by Safaricom paid $150 million as license fees to the National Bank of Ethiopia (NBE).
Triple-A research firm confirms that there are over 5 million cryptocurrency users in Ethiopia, a 4.01% ownership rate for the over 126 million population.
Ethiopian Investment Holdings has floated a 75% stake in Ethiopia Securities Exchange (ESX). The remaining 25% will be held by the government. The EIH has completed all necessary preparations for the sale of the stake, local media reported.

-Edited by Faustine Ngila, Shigeru Sato