After almost two months of deliberations, the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) has finally chosen a new prime minister to replace the much-criticised Hailemariam Desalegn, who had served since taking over in 2012 from the late Meles Zenawi, the EPRDF’s long-serving strongman and architect of a federal Ethiopia. Abiy Ahmed, who was inaugurated as prime minister on April 2, inherits a country that has been mired in crisis for almost three years: incessant public protests, escalating ethnic tensions and growing numbers of displaced Ethiopians.

Despite the breathtaking economic growth, the enrolment of millions of youngsters in hundreds of new schools and universities and an increase of more than eight years in life expectancy for an ordinary Ethiopian citizen just in the last decade, the 100 million plus population feels frustrated. For many Africans outside the country, these setbacks have come as a shock: over the past 10 years, Ethiopia has undertaken the continent’s most resolute effort at industrialisation and infrastructure expansion, generating hope that other African states may one day do so as well. Restoring order, trust in government and the sense of optimism about Ethiopia’s domestic transformation and regional ascendancy is surely Abiy’s most pressing challenge.

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To do so, Ethiopia’s new leader must urgently address his biggest problem: the internal fractures in the EPRDF, still widely considered one of Africa’s most formidable party machines, but riven with contradictions and personal rivalries that have deepened in recent months.

The protests that undermined the federal state’s authority and contributed to Hailemariam’s resignation as prime minister were never a simple story of “the government versus the people”. Instead, both Abiy and his comrades-cum-adversaries know that different factions of the EPRDF have mobilised popular anger in different regions of the country to increase their bargaining strength at the centre in Addis Ababa.

In fact, Abiy’s own Oromo People’s Democratic Organisation (OPDO), an ethno-regional party that is one of the four pillars of EPRDF hegemony, has reinvented itself by surfing the waves of long-standing grievances held by the Oromo population about their socioeconomic and political marginalisation. It has instrumentalised legitimate anger flowing from rising inequality amidst the boom in Ethiopia to demand a greater share of power for itself. While Tigrayan security hawks and Amhara politicians gnawed their teeth at so much OPDO audacity and pushed for a state of emergency to crack down on the streets, Abiy’s tacit alliance with hardline diaspora activists and sympathisers of the outlawed Oromo Liberation Front has paid dividends. Foreign diplomats have for months been pushing EPRDF officials to quell the surge in demonstrations after widespread strikes in the Oromia region brought economic life to a standstill. Abiy’s election as party leader by the EPRDF Council is a recognition that, for now, the political pendulum has shifted in the OPDO’s direction.

Although the rise of an Oromo to the pinnacle of governmental authority is a genuinely historic achievement -modern Ethiopia has historically sought to assimilate, including through violence, its more than 80 nations and nationalities into one Orthodox Christian Amhara identity – Abiy’s victory might well prove Pyrrhic. On the one hand, sensing the shifting of the political tide, the hitherto dominant Tigrayan party elite and army generals quietly resigned themselves to an Oromo PM months ago and have been preparing a staunch defence of their informal influence and privileges; their public endorsement of Abiy as EPRDF supremo carries a considerable price tag, which the new party chief will ignore at his own peril. On the other hand, the years of unrest and party infighting have exposed structural flaws in the design of both the EPRDF itself and Ethiopia’s ethnic federalism, which encourages the kind of risky ethnopolitical entrepreneurialism that catapulted Abiy to the top. Originally intended to decentralise power and to finally explicitly acknowledge Ethiopia’s socio-cultural diversity, building party and state structures around ethno-regional identities incentivises violent strategies that could pull the country apart.

Nowhere are these problems more in evidence than in eastern Ethiopia, which encompasses four regional states: The city-states of Dire Dawa and Harar and Ethiopia’s two biggest territorial entities, Oromia and the Somali Region, whose Muslim majority has long distrusted the government in Addis. In the past nine months, violence has displaced perhaps more than one million Ethiopians and killed hundreds. The region’s two most prominent universities, in Haramaya and Jigjiga, have seen thousands of students, faculty and staff fleeing their campuses following ethnic targeting of minorities. And the commercial centre of Awaday is a pale reflection of its former bustling self after the gruesome assassination of scores of traders in their homes.

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Eastern Ethiopia is not one of the country’s peripheral corners, which, although regularly characterised by violent instability, are ultimately of little consequence to the wielding of power at the centre. Quite the contrary: not only is eastern Ethiopia a demographic microcosm of the state as a whole – Somalis, Oromos, Amharas, Gurages, Tigrayans, Hararis and other groups living side by side – it is also the beating commercial heart of the country.

Eastern Ethiopia dominates the lucrative trade in khat – supplying markets with the narcotic as far away as Canada and the US – and brings in hundreds of millions of dollars annually in foreign exchange. It is the Horn of Africa’s hub for contraband commerce in electronics, textiles, building materials and much more. Many of these licit and illicit flows are at least partially taxed and managed by Ethiopia’s myriad security forces, including the army’s famous Eastern Command, headquartered in Harar. Moreover, landlocked Ethiopia’s main import and export routes – the railway and road to the port of Djibouti – run through the east, meaning that political, economic and security developments there are decisive in determining the fate of the country more broadly.

The spectacular upsurge of violence in eastern Ethiopia has many causes – some of them local, related to migration corridors, grazing rights and kebele (ward) level taxation – but the most important one is about the party and national politics. Over the past few months, the security forces of the Somali and Oromo regional states have incited ethnic cleansing and confronted each other in battle, triggering a huge exodus and a worsening humanitarian crisis. It is hard to overstate the irony of open fighting between different branches of the same government in a notoriously centralised state like Ethiopia, but the timing of this turn of events is not coincidental. The OPDO-led Oromia executive has been emboldened by the whiff of growing power in Addis and has challenged what it sees as Somali aggression on its territory. The Somali elite, for its part, has been eager to coercively create facts on the ground before an Oromo prime minister tilts the political scales in favour of their neighbours and destabilises the lucrative partnership the regional government of Abdi Iley has enjoyed over the past decade with the federal security forces.

The problem is not just that ethnic federalism has incentivised both regional states to seek domination at each other’s expense; it is also that these ethno-regional stratagems and divisions within the EPRDF party-state are proving extremely hard to resolve because of the two-tiered nature of the federal system. Whereas Oromia is an integral part of Ethiopia and the OPDO a crucial member of the EPRDF coalition, the Somali region remains outside the policy framework of most federal institutions and is governed through an approach perhaps best characterized as indirect rule at the hands of Abdi Iley’s Liyu Police and Addis Ababa’s Ministry of Federal Affairs. The Oromo vs Somali violence has terrified the long list of minorities that live across the east, highlighting the lack of formal and informal protection mechanisms for those not resident in their government-designated ethnic homelands. Diverging political interests and ideological rigidity regarding ethnic federalism paralysed the cabinet of the outgoing prime minister, who did not even visit the one million displaced in eastern Ethiopia, nor vow to protect them against marauding goons.

The central question facing Abiy Ahmed is therefore how to ensure sufficient unity in both the ruling party and the state while simultaneously overseeing their reform so the focus can shift back to poverty reduction, regional stability and democratisation. At his disposal to do so is Africa’s biggest civil service, the EPRDF’s impressive developmental track record since 2001 and the formidable repressive apparatus controlled by the party. Stacked against him are the doubts and bitterness of his own comrades, the weariness of a population divided by rising expectations and the ghosts of Ethiopia’s bloody past. Breaking the impasse in the east will be a test of his ability to build coalitions and of his courage to lead the OPDO and the Oromo nation into exercising national leadership with confidence as well as political concessions. Ethiopians – and Africans – are watching.

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.