The implications of the Russian invasion of Ukraine for African economies: A CGE analysis for Ethiopia

Abstract

The Russian invasion of Ukraine contributed to soaring world market prices of many commodities with severe repercussions for many African countries. This study examines the implications of the 2022 world market price increases for wheat, fuels, and fertilizers for Ethiopia. Using a computable general equilibrium (CGE) model, the study shows negative impacts on GDP, wage rates, and households’ consumption in the country. The effects of fertilizer and petroleum price changes are notable and unequal across production sectors. With increasing import prices of inorganic fertilizers, crop growing activities substitute inorganic fertilizers with animal manure reducing the use of manure as cooking fuel. The effects on urban households are more severe than the effects on rural households. Policies supporting biofuels and biogas digesters may dampen the adverse effects stemming from petroleum price surges.