Conflict with Fano Militia Halves Tax Revenue in Ethiopia's Amhara Region

The Amhara region of Ethiopia is facing a severe economic crisis, collecting only 33 billion birr in tax revenue, which is less than half of its 71 billion birr target. This shortfall is a direct consequence of the ongoing conflict with the Fano militia.

Why this matters: The ongoing conflict in Ethiopia's Amhara region has significant implications for the country's economic stability and regional security. If not resolved, the conflict could lead to further economic decline, humanitarian crises, and regional instability.

The conflict has been ongoing since last year, significantly disrupting economic activities across the region. Fikre Mariam Dejene, Deputy Head of the Regional Revenue Bureau, attributed the shortfall to the security problems in the western zones of the region. He highlighted that the region had suffered 15 billion birr in property damage as a result of the conflict.

"In the first 10 months of the current fiscal year, it was planned to collect more than 71 billion birr, but only 33 billion birr could be collected," said Dejene. Despite the challenges, he urged businessmen to pay their taxes in the remaining time, citing relative peace in the region.

The Amhara regional president, Arega Kebede, claimed that 97% of the region was safe and under government control. However, the significant drop in revenue collection suggests that the conflict's impact is more widespread than officially acknowledged. Taxpayers in the region face multiple challenges, including closed roads, business closures, fertilizer shortages, and mandatory health insurance, in addition to the tax burden.

The insurgency by the Fano militia, which began in August 2023, has resulted in widespread violence and property damage. The militia's decentralized and loosely coordinated command structure has retained significant support within the region and the Amhara diaspora, indicating its enduring influence on the security environment.

The federal government has extended the state of emergency in the region for another four months, signaling its intention to continue military operations. The conflict has severely disrupted the economy of the Amhara region and beyond, with no signs of an end in sight. The situation requires creative political solutions, since the current low-level insurgency is unsustainable.

The ongoing civil war in Ethiopia, which began in November 2020, has affected not only the Tigray region but also other regions, including Amhara, Oromia, and Afar. These regions are vital to Ethiopia's export economy, and the conflict has had profound consequences on agricultural production, manufacturing, and overall trade dynamics.

The Amhara region, known for its diverse agricultural output and burgeoning industrial sector, has been severely affected. Agricultural exports, including teff, sesame seeds, and livestock, have faced significant disruptions as a result of the conflict, resulting in lower production levels and decreased export capacity. The industrial sector, which includes textiles and garment manufacturing, has also suffered, with factories damaged or forced to close.

Efforts to rebuild infrastructure, restore agricultural productivity, and attract foreign investment are crucial for recovery. The government, along with international partners, needs to focus on creating a conducive environment for economic recovery by addressing security concerns, rebuilding damaged infrastructure, and supporting displaced communities.

Reintegration into international trade agreements and restoring eligibility for trade benefits, including the African Growth and Opportunity Act (AGOA), will be vital for revitalizing the export sectors. Achieving lasting peace and stability is vital for the recovery of Ethiopia's export economy in Amhara and other regions.

The Amhara region's economic challenges highlight the urgent need for a resolution to the conflict. Without peace, the region's economic prospects remain bleak, and the humanitarian toll will continue to rise.

Key Takeaways

• Amhara region's tax revenue drops to 33 billion birr, less than half of 71 billion birr target.
• Ongoing conflict with Fano militia disrupts economic activities, causing 15 billion birr in property damage.
• Region's economy severely affected, with agricultural exports and industrial sector suffering.
• Government and international partners must address security concerns and rebuild infrastructure for recovery.
• Lasting peace and stability crucial for revitalizing export economy in Amhara and other regions.