The US Department of State has warned that Ethiopia’s reform programme, including the July 2024 decision to float the birr, has failed to reassure investors amid political instability, weak property rights, and regulatory uncertainty.

In its 2025 Investment Climate Statement released this week, the department said abandoning the currency peg—previously overvaluing the birr by more than 100 percent—initially drew renewed interest. But by late 2024, a gap between official and parallel exchange rates had re-emerged, fuelling currency shortages and renewed inflation despite a 10.5 billion US dollars IMF-World Bank package.

Foreign businesses continue to face bureaucratic delays, arbitrary tax claims, and state interference, the report noted. Conflicts in Amhara and Oromia further restrict travel, trigger asset seizures by officials or armed groups, and weaken government enforcement. Property rights remain fragile, with large development projects displacing residents and firms, often without adequate compensation. The absence of private land ownership and reliance on long leases heighten investor exposure to disputes.

Taxation and infrastructure compound risks. A small domestic tax base leaves foreign companies vulnerable to “questionable and excessive” bills, while poor logistics inflate costs even as state-owned enterprises dominate finance and transport with preferential access to land and foreign exchange. Corruption and weak rule of law also deter investment, with judicial interference in commercial cases and lengthy dispute settlements undermining confidence.

Despite these challenges, Ethiopia continues to attract foreign capital, led by China, Saudi Arabia, and Türkiye, with the United Arab Emirates gaining ground. The State Department concluded that without stronger stability, property protections, and predictable regulation, reforms will struggle to deliver lasting gains.