Ethiopia ’s prime minister loves big projects. With a mega-dam completed on the Nile, Abiy Ahmed now plans Africa’s largest airport and a nuclear power plant. But the threat of war is back as the landlocked nation seeks its most audacious feat yet: access to the sea.

The prime minister hailed the country’s transformation in a parliamentary address in late October. The capital, Addis Ababa, has seen a development boom. The Grand Ethiopian Renaissance Dam was inaugurated in July. Abiy has called it a “harbinger of tomorrow’s dawn” that will end the reliance on foreign aid for Africa’s second most populous nation. The country has been one of the world’s biggest aid recipients.

But multiple challenges lie ahead that could badly damage the economy, which has seen some of the strongest growth on the continent.

Eritrea

Abiy’s government is determined to regain access to the Red Sea, which Ethiopia lost when Eritrea seceded in 1993 after decades of guerrilla warfare.

The countries made peace in recent years, bringing Abiy a Nobel Peace Prize, then teamed up for a devastating war against Ethiopia’s Tigray region. Now tensions have returned.

In June, Eritrea accused Ethiopia of having a “long-brewing war agenda” aimed at seizing its Red Sea ports. Ethiopia insists it wants to gain sea access peacefully.

Ethiopia recently claimed Eritrea was “actively preparing to wage war against it." It has also accused Eritrea of supporting Ethiopian rebel groups.

Magus Taylor, deputy Horn of Africa director at the International Crisis Group, described the tensions as concerning.

“There’s a possibility of mistakes or miscalculation,” he said. “And the situation could deteriorate further in the coming months.”

Egypt

Egypt relies on the Nile for nearly all its drinking water and fiercely opposed the Grand Ethiopian Renaissance Dam, asserting that it would threaten the supply. Egypt and Ethiopia have held several rounds of inconclusive talks to regulate the use of the dam, especially in times of drought.

Since the dam’s inauguration, Cairo has toughened its rhetoric against Ethiopia. In September, it said it reserved “the right to take all necessary measures … to defend the existential interests of its people.”

Ethiopia says the dam is critical for its development as it seeks to lift millions of people out of poverty.

Egypt has also sought to exploit tensions between Ethiopia and its neighbors. It has bolstered security ties with Eritrea and signed a security pact with Somalia, which last year reacted furiously when Ethiopia signed a port deal with the breakaway region of Somaliland, over which Somalia claims sovereignty.

Ethnic conflicts

The war in Ethiopia’s Tigray region ended with a peace deal in late 2022, but the country’s two largest regions — Amhara and Oromia — are wracked by ethnic-based insurgencies that threaten internal security.

Both the group of loosely organized militias called Fano in Amhara, and the Oromo Liberation Army Oromia, claim to represent those oppressed by the federal government.

Witnesses have reported massacres and other extrajudicial killings by all sides. Kidnapping for ransom has become commonplace, and humanitarian aid groups struggle to deliver supplies.

Amnesty International has described the cycle of violence as a “revolving door of injustices.”

Meanwhile, the peace deal for Tigray risks unraveling. Southern areas of Tigray have seen clashes between regional forces and local militias aligned with the federal government. Tigray’s rulers accused the federal government of “openly breaching” the agreement after a drone strike hit its forces.

Abiy’s government now accuses Tigray’s rulers of colluding with Eritrea.

Economic inequality

The insecurity contrasts starkly with the mood in Addis Ababa, where Abiy has spent billions of dollars on a face lift that has included creating bike lanes, a conference center, parks and museums.

The prime minister wants to turn the capital, already home to the African Union continental body and one of Africa’s busiest airports, into a hub for international tourists and investors.

He has floated Ethiopia’s currency, opened the banking sector and launched a stock exchange — all dramatic steps for a country where the economy has long been state-owned and state-managed.

The reforms helped Ethiopia secure a $3.4 billion bailout from the International Monetary Fund last year. But investors are wary about Ethiopia’s internal insecurity and tensions with its neighbors.

Poverty, meanwhile, has risen alarmingly. About 43% of Ethiopians now live under the poverty line, up from 33% in 2016, two years before Abiy took power, according to the World Bank. That’s due in part to rising food and fuel prices as well as defense spending taking up more of Ethiopia’s budget.

The sense of prosperity prevailing in Addis Ababa is not shared by Ethiopia’s regions, said Taylor with the International Crisis Group.

“Abiy has a firm grip on the country at the center, but then you have these periphery conflicts partly based on feelings of injustice – that they are poor and the center is rich,” he said. “So we expect this kind of instability to continue in these areas.”

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