The establishment of the Ethiopian Securities Exchange (ESX) marks a pivotal shift in Ethiopia’s financial landscape, presenting both opportunities and challenges for economic growth. This paper examines the potential impact of emerging stock markets on Ethiopia’s economy, focusing on capital mobilization, private sector development, financial inclusion, and economic diversification. Drawing on comparative experiences from other African and emerging markets, the study evaluates how stock exchanges can facilitate investment, enhance corporate governance, and support structural transformation in a historically bank-dominated financial system. While the ESX offers significant benefit such as deepening financial markets, attracting foreign investment, and enabling private enterprises to access long-term capital it also faces risks, including liquidity constraints, regulatory weaknesses, and macroeconomic instability. The paper highlights lessons from Vietnam, Nigeria, and the West African BRVM exchange, emphasizing the need for strong regulatory frameworks, investor education, and strategic sequencing of listings to ensure sustainable market development. Ultimately, the success of Ethiopia’s stock market will depend on effective governance, macroeconomic stability, and inclusive policies that ensure broad-based economic participation. If managed well, the ESX could become a catalyst for Ethiopia’s economic transformation, fostering job creation, innovation, and resilience against external shocks. However, failure to address structural challenges may limit its potential, reinforcing inequalities rather than driving equitable growth. Policy recommendations include strengthening regulatory frameworks, expanding financial literacy programs, and incentivizing private sector participation to ensure sustainable market development.

Keywords: Ethiopian Securities Exchange (ESX), capital markets, financial inclusion, economic diversification, emerging markets, Ethiopia.