❤️‍🔥Africa's New Power Couple

Welcome to the 78th edition of ፍራንክ Digest!

Your weekly brief on all things Finance and Investing. Quick, enjoyable reads for busy professionals in 5 minutes or less.

Here’s what’s coming your way:

• 💑 The Couple Shaping An African Single Market (Sort Of)

• 🚧 Default Danger Risks Derailing Reforms

• 🗝️ The Key Takeaways

Thanks for reading!

AfCFTA & COMESA Walk Into a Bar

Economy

We get it. Trade talk isn’t exactly a thriller.

In fact it usually puts people to sleep, but have no worries; we’ve done the yawning for you. እንኳን ደስ አላቹ.

Meet COMESA, the Common Market for Eastern and Southern Africa, a 21-country trade club stretching from Egypt to Eswatini, and of course includes Ethiopia.

It bills itself as Africa’s largest regional economic community with a combined GDP of roughly USD 1 Trillion. Its goal? To make it easier for the ~640 million people in the bloc to trade with one another without jumping through unnecessary hoops.

It’s been around since 1981, and yet, you’ve likely never heard of it.

That’s because it’s mostly known for issuing beautifully worded communiqués and hosting conferences with excellent catering. Indeed, only the food ever leaves a lasting impact.

But this month, it did something useful: it launched the COMESA Digital Retail Payments Platform (DRPP), a cross-border system being trialed between Malawi and Zambia that lets member countries pay each other directly in their local currencies.

So, the hope is eventually an Ethiopian buyer can pay for a COMESA origin product in birr, and the exporter receives it in their local currency. No dollars. No SWIFT fees. Just a smooth transaction with minimal fees. That’s a quiet revolution for boosting intra-African trade and possibly the next best thing to having a common currency.

Africa’s Moment?

When Europe wanted to boost trade, it built the European Union: a single market, one customs union, one set of rules, and for those in the eurozone, one currency and one central bank.

Africa’s answer is the African Continental Free Trade Area (AfCFTA), our grand plan to turn 54 countries into one big duty-free market.

The idea is simple: let African goods move freely across African borders without being taxed into oblivion. And last week Ethiopia officially joined the party (fashionably late, as usual), meaning our exports and imports should eventually move duty-free across the continent. You can find out more about Ethiopia’s AfCFTA commitments here.

With AfCFTA breaking tariffs and COMESA’s DRPP bridging payments, the continent is ever so slowly inching toward a market where goods and money move freely across borders.

Ethiopia’s Context

Ethiopia constantly burns through what little dollars it has to import fuel, medicine and everything in between. Our biggest trade headache isn’t what to import, it’s how to pay for it.

A system that lets Ethiopia settle trade in birr especially with COMESA neighbors like Kenya, Djibouti, and Sudan could take real pressure off the forex market. It’s basically like keeping your dollar savings and still being able to buy stuff abroad. Miraculous.

But of course for birr to be easily convertible, there needs to be greater trade within Africa. Intra-African trade is small. Only about ~15% of our trade is within the continent. Intra-COMESA trade is still tinier. Depending on the source and year, only ~7–9% of COMESA exports stay within the bloc.

So with roughly 85% of Africa’s goods and money going to other continents, both governments and exporters will probably still prefer to get paid in USD to then import products not readily available in the continent.

…This Is (Still) Africa

In theory, this all sounds like the “Africa Unite” slogans and banners are coming to life. In practice, there are still a few obstacles like currency volatility, technical gaps and the small matter of T.I.A. This is Africa, after all.

Frank’s Take

• We’re still light years away from Europe’s seamless single market but this is the first time Africa’s trade and payment systems are pulling in the same direction.

• If this works, small traders and manufacturers could trade regionally without dollar accounts, without bank delays and without bleeding fees.

• It means more money circulating within Africa and less leaking out through dollar dependency.

ፍራንክ Picks 

🚶🏽 Event: Ethio Poultry Expo 2025 [Oct 30 - Nov 1, 2025 @ Millennium]

🗞️ In the news: Gold teeth just got expensive as commodity jumps to ETB 25k

♟️ Innovation: Ethio Telecom Launches ETB 3,000 Smartphone-lite

Ethiopia’s Reform Program Hits a Creditor Wall

Economy

Liberalize forex? ✅
Cut subsidies? ✅
Open up key sectors? ⏳
Convince creditors we can pay them back? Yeah…about that…

For the past few years, Ethiopia’s been busy reinventing itself with an ambitious macro economic reform program supported by the International Monetary Fund (IMF) Extended Credit Facility (ECF) and the World Bank. While several reform milestones have been achieved, a significant obstacle looms as stalled debt restructuring negotiations last week threatens to derail the broader effort.

The Debt  Challenge

Ethiopia’s hopes of restoring full financial credibility have taken a blow. Negotiations with private bondholders over the country’s December 2023 defaulted US$1 billion Eurobond have “reached an impasse”.

Although Ethiopia had earlier reached a Memorandum of Understanding (MoU) with its Official Creditor Committee (OCC) reportedly granting a deferral in repayment, private creditors remain hesitant, citing doubts over the government’s export claims which is an important indicator of its debt servicing capacity. By now, we all know that government published data should be taken with a pinch of ጨው.

Bondholders argue that Ethiopia’s claim of US$8.3 billion in export revenues in 2024/25 is not mirrored in the IMF’s forecasts, undermining trust in the restructuring terms. The consequence: private creditor negotiations are frozen, even legal action is being considered and Ethiopia remains in default.

The deadlock has ripple effects:

• Ethiopia’s debt sustainability outlook. With external debt still classified under “debt distress”, it increases its borrowing cost elsewhere.

• Shake investor confidence. Reform is inherently built on trust. If creditors perceive inconsistency or delay, future foreign direct investment (FDI) will be difficult to attract, besides አጎቴ Dangote.

• Amplify social and political risk. A default or disorderly restructuring may force the government into harsher austerity by removing tax breaks and hiking public service fees; weaken social programs & subsidies; and reduce the space for reform.

Balancing a Credible Reform Agenda

• Transparency and data credibility: Strengthening the link between official export and revenue data and the forecasts used for restructuring will be key to rebuilding creditor trust

• Weak Institutional Capacity and Execution Risk: Many of Ethiopia’s public institutions remain under-resourced or politically constrained to implement reform policies

• Managing FX and external pressures: The liberalization of the FX regime has progressed, but distortions still linger (parallel market spreads) and structural weaknesses (low reserves, narrow export base) expose Ethiopia to external shocks.

• Fragile Political and Security Environment: Internal conflicts (e.g., in Amhara, Oromia, and other regions) pose a serious threat to reform continuity.

• Private Sector Constraints Remain: Despite reform language, access to finance, land issues and bureaucratic red tape remain major barriers to private-sector-led growth. State dominance in key sectors continues, slowing competition and innovation. Yes, we’re talking about you Telebirr

Argentina’s Crisis

Contrasting Ethiopia with Argentina’s case offers a cautionary tale when recurrent macroeconomic instability, heavy reliance on external financing and lack of significant structural reform is in store.

Financial intervention for Argentina were recently announced amidst acute liquidity pressures. Argentina is experiencing sharp currency depreciation, depleted forex reserves and heavy debt service obligations.

• The IMF approved a 48‐month Extended Fund Facility (EFF) arrangement in April 2025 for approximately US$20 billion, supporting Argentina’s stabilization and reform agenda.

• More recently, the US Treasury publicly entered discussions to establish a US$20 billion currency swap line with Argentina to purchase U.S. dollar denominated Argentine government debt as part of stabilization efforts (more like keeping the US ally President Milei in the top seat).

However, unlike Ethiopia, Argentina’s history is marked by high volatility, repeated defaults and heavy external financing needs.

If Ethiopia fails to come to agreement with its current bondholders and (not so) surprisingly as it seeks further financing from IMF and WB, the difference between the two nations will start to blur.

Big Picture

Ethiopia’s reform trajectory has strong foundations. IMF support and better than expected results from policy reforms as the government recognizes the need for structural change. But the debt restructuring impasse throws a large shadow over the path ahead.

Liberalizing the FX regime has had a positive impact on export performance but also contributed to inflation and unpredictable import prices, which directly hurts businesses and low-income households. Over-reliance on multilateral financial support makes economic reforms vulnerable to shifts in global policy.

This in turn leads to reform conditionality fatigue and domestic political backlash. As seen in countries like Argentina, once short-term pain kicks in (unemployment, subsidy cuts, tax hikes), public and political support can evaporate. There's a risk of reform reversal, especially ahead of elections or in response to public protests. Ethiopia is not immune to such backlash.

To top it all off, there are climate shocks, global commodity prices swings (coffee and gold) and geopolitical risks (tensions with Eritrea and Egypt). Commodity price volatility and supply chain disruptions could undermine hard-won macroeconomic gains and scare away much needed FDI.

The coming months will be critical. Whether Ethiopia can convert reform commitments into a durable deal with all its creditors will significantly determine if this is a sustained transformation or another episode of reform hope cut short by external fragility.

Thanks for sticking with us, ፍራንክ family! Keep those wallets smart and your inbox open - we’ll be sliding in next week!