Why Kenya Is Betting Big on Ethiopia’s Economic Opening

Ethiopia’s and Kenya’s relationship has generally been stable and peaceful since the establishment of diplomatic relations in the early 1960s. Both countries have since built some of the fastest-growing economies on the continent and have become major economic players in East Africa. However, the various economic policies they pursued have led to varying results. Kenya’s early liberalization of its economy has allowed for its private sector to flourish, while Ethiopia’s more state-dependent economy has resulted in a large public sector with limited private sector growth. 

Things are changing, however, as Ethiopia is now opening up its formerly restricted markets to the world. And Kenya seems to be the first one to step up in answering Ethiopia’s invitation. In 2021, when Ethiopia liberalized its telecom sector, it was Kenya’s Safaricom that entered Ethiopia as the first private telecom operator. Similarly, Kenya’s KCB Group is poised to become the first foreign bank operating in Ethiopia. Although economic cooperation between the two countries has historically been low, these conditions point towards a new reality in which Kenya and Ethiopia have more intertwined economies.