IMF Warns Eastern Africa Faces Economic Risk as Fuel Supply Pressures Hit Ethiopia

The International Monetary Fund has warned that Eastern African economies, including Ethiopia, remain vulnerable to external shocks due to their strong trade and financial links with Gulf countries, even as new fuel shipments arrive in Djibouti.

In its latest assessment released on March 30, the IMF noted that countries in the Horn of Africa face growing risks linked to reduced service export demand, logistical bottlenecks, and potential declines in remittance inflows. The institution emphasized that ongoing geopolitical tensions affecting global energy routes could increase inflation pressures and slow economic growth.

Fuel Shortages Disrupt Transport and Supply Chains

Ethiopia is currently experiencing fuel supply constraints, particularly shortages of diesel, which plays a critical role in cargo transport across the country. Industry sources indicate that reduced truck movement is already affecting the supply of perishable goods, leading to spoilage of agricultural products and financial losses for producers and traders.

Transport operators report that trucks remain idle while waiting for fuel, delaying the movement of goods from rural production areas to urban markets and export hubs. Exporters warn that disruptions in logistics could weaken foreign currency earnings as transportation costs rise due to higher fuel prices and increased insurance premiums linked to geopolitical risks.

Strait of Hormuz Supply Risk Raises Concerns

The IMF highlighted the strategic importance of the Strait of Hormuz, noting that roughly one-third of global fertilizer shipments pass through the corridor. Any prolonged disruption could increase food production costs and contribute to higher inflation across import-dependent economies.

Energy-importing countries in Africa and other regions are already facing higher import bills, compounded by limited fiscal buffers and tightening global financial conditions.

New Fuel Shipments Arrive in Djibouti

Between March 28 and April 1, three vessels delivered approximately 143,000 metric tons of fuel products to Djibouti, offering partial relief to supply pressures.

Key deliveries included:

• 31,544 metric tons of diesel and 17,991 metric tons of jet fuel were transported from Sikka Port in India
• 52,000 metric tons of jet fuel shipped from Duqm Port in Oman
• 41,734 metric tons of gasoil delivered from Jeddah, Saudi Arabia

Analysts indicate that the inflow of jet fuel should help sustain international flight operations of Ethiopian Airlines, one of the country’s primary sources of foreign exchange earnings.

Trade and Agricultural Impact

Logistics disruptions are also affecting the movement of agricultural inputs, including fertilizer, which could impact production levels in the coming planting season. Experts note that transporting goods through alternative channels, such as rail via the Ethio-Djibouti Railway, may increase operational costs.

The upcoming Easter holiday period is expected to increase demand for goods and passenger transport, raising concerns about potential supply shortages and price increases in local markets.

Outlook

The IMF warns that prolonged geopolitical tensions could keep global energy prices elevated, placing sustained pressure on countries heavily reliant on imported fuel. Rising freight costs, insurance premiums, and supply chain disruptions could further strain external balances in vulnerable economies.

Experts indicate that government efforts to diversify fuel sourcing from alternative suppliers may help mitigate risks, though the situation remains sensitive to developments in global energy markets.

source: capital