Why the U.S. Embassy’s Tribute Insults Ethiopians











Introduction: A Tale of Two Ethiopias

In the quiet halls of Addis Ababa’s diplomatic quarter, Ethiopia’s economic story is being retold in glowing terms. When the U.S. Embassy issued a farewell tribute to Mamo Mihretu, the outgoing Governor of the National Bank of Ethiopia (NBE), it was not just a polite send-off. It was a clear endorsement. The embassy praised “historic reforms,” “transformative steps,” and a government that had the courage to embrace a market-oriented future. In the language of international finance, the achievements looked dazzling: inflation tamed, reserves rebuilt, and investor confidence restored.

But a few kilometers away in Merkato—the sprawling, anarchic marketplace at the heart of Addis Ababa—another reality dominates. Here, reform means the price of cooking oil that has doubled, the cost of teff that puts injera out of reach, and the cruel arithmetic of wages eroded by inflation. For families living hand to mouth, the “floating of the birr” is not a technical policy but the reason they cannot afford imported medicine.

The U.S. Embassy’s applause is therefore more than tone-deaf. It is an ideological statement. By celebrating Mihretu’s neoliberal pivot, Washington aligns itself with international creditors and foreign investors while ignoring the suffering of ordinary Ethiopians. The statement erases a recent history in which Ethiopia’s state-led model delivered rapid poverty reduction and double-digit growth, recasting the current painful reforms as the only viable path forward.

Deconstructing the Accolades – The Washington Consensus Returns

A Technocrat for the IFIs

When Mihretu was appointed in 2023, his CV reassured Washington and the IMF. A former World Bank insider, he was fluent in their vocabulary. His “Homegrown Economic Reform Program”—a misnomer given its tight alignment with IMF orthodoxy—was billed as Ethiopia’s last chance to restore stability after years of debt-fuelled state expansion.

The “Historic” Steps

His tenure brought three sweeping changes:

Currency flotation – In July 2024, the birr was floated for the first time in five decades, plunging from 57 to the dollar to over 75 in a matter of days, later sliding beyond 130.

Monetary tightening – The NBE was recast into an inflation-targeting central bank, with interest rates, open-market operations, and an end to direct deficit financing.

Financial liberalization – A stock exchange was launched, and foreign banks and investors were allowed into Ethiopia’s once-shielded financial sector.

The Official Scorecard

By mid-2025, the IMF could point to achievements: headline inflation fell from over 30% to 14%, foreign reserves tripled to $3.6 billion, and the parallel market premium collapsed. More importantly, a $3.4 billion IMF package was unlocked, buttressed by World Bank funds. FDI ticked upward. From Washington’s vantage, this was textbook reform: hard medicine, competently administered, yielding stabilization.

Yet the narrative is less analysis than choreography. The IMF hosted Mihretu in softball interviews. Western embassies amplified the “success story.” The applause was not independent evaluation but part of a carefully staged performance to reassure creditors and investors.

The Price of Reform – When Macroeconomics Meets the Marketplace

The Shock of a Floating Birr

The currency float unleashed a tidal wave of price increases. Imports—fuel, medicine, fertilizer—skyrocketed. Merchants passed costs on, households bore the burden. Authorities even shuttered shops accused of “unjustified” price hikes, a tacit admission that the policy had spun beyond control.

Inflation’s Mirage

Headline inflation fell, but from the perspective of households, the numbers are meaningless. A family already battered by 100% food price increases sees little solace in inflation easing from 30% to 14%. Wages stagnated while the cost of survival kept rising. Public servants, the backbone of Ethiopia’s state, found themselves priced out of their own economy.

Illustrative Collapse in Purchasing Power (2023–25):

Cooking oil: 250 → 550 birr per liter

Teff: 80 → 160 birr per kilo

Petrol: 78 → 150 birr per liter

Public sector salary: 6,000 → 6,500 birr/month→ Real income effectively halved

The Export Mirage

Economists defending devaluation argued it would boost exports. But Ethiopia’s exports—coffee, oilseeds, khat—are price-inelastic. Cheaper beans do not persuade Germans to drink more coffee. Imports, by contrast, are inelastic and unavoidable. The result: higher costs, no export surge, and a worsened trade balance.

The reforms thus risk manufacturing poverty. Poverty rates, which fell from 44% in 2000 to 24% in 2016 under the developmental state, have reversed upward, edging back over 30%. This is not a temporary shock. It is a structural feature of the chosen model.

The Ghost of Meles Zenawi – A Philosophical Reversal

The reforms are not occurring in a vacuum. They mark a clean break from the philosophy of Meles Zenawi, Ethiopia’s intellectual strongman until his death in 2012.

The Developmental State Vision

Meles rejected neoliberalism as a “dead end” for Africa. He argued that markets in poor countries were riddled with failures, and only an activist state could marshal resources into infrastructure, education, and industry. Ethiopia became the poster child: GDP growth averaged 10% for a decade, poverty halved, child mortality fell, school enrollment soared.

The Model’s Limits

Yet the same model sowed its downfall: debt piled up, foreign exchange shortages crippled the economy, and the state crowded out private initiative. By 2023, Ethiopia defaulted on its foreign debt. The IMF’s medicine was not invited; it was imposed.

Two Eras in Contrast

2004–16: State-led, double-digit growth, massive poverty reduction, authoritarian politics.

2020–25: Market-led, slower growth, rising poverty, macro “stability.”

The pendulum swung from one extreme to another. The tragedy is that Ethiopia is stuck between two flawed models: one that built but could not finance progress, and another that stabilizes spreadsheets while destabilizing lives.

A Necessary Pivot or Neocolonial Mandate?

Washington calls the reforms “homegrown.” In reality, they were conditional. Ethiopia, broke and desperate, had little bargaining power. The $3.4 billion IMF loan came with strict prerequisites: liberalization, flotation, austerity. This was structural adjustment by another name.

Who Gains?

Foreign investors snap up Ethiopian assets at fire-sale prices, thanks to a devalued birr.

Creditors see improved repayment prospects, their influence over Ethiopian policy entrenched.

Ordinary Ethiopians pay the bill: salaries worth half as much, food that costs twice as much, clinics and schools squeezed by austerity.

The asymmetry is glaring: stability for capital, instability for citizens. Diplomatic praise thus reads less like a neutral assessment than a declaration that Ethiopia is once again safe for business.

Conclusion: Beyond Diplomatic Applause

The U.S. Embassy’s tribute to Mamo Mihretu is not just a farewell. It is an endorsement of a contested economic turn—one that privileges creditors over citizens, markets over livelihoods. By focusing on inflation charts and reserve levels, the embassy overlooks collapsing real incomes, rising poverty, and social discontent.

Ethiopia cannot return to the unsustainable state-capitalism of the past, but neither can it survive a neoliberal program that hollows out its middle class. The task is to find a third way: a synthesis that combines fiscal realism with developmental ambition, that disciplines debt while prioritizing poverty reduction.

Until then, Washington’s applause will echo as hollow in Merkato as it is loud in the IMF’s boardrooms.