Ethiopia has recently introduced a bold macro-economic reform policy aimed at stabilizing its economy, which has been strained by a severe foreign currency shortage, rising inflation, and other challenges. Known for being one of the fastest-growing economies over the past two decades, the nation is now embarking on an inclusive reform process to address these issues. As part of the reforms, the government has implemented a market-based foreign exchange rate system, allowing the private sector to play a larger role in the country’s economic development.
This market-based exchange rate system is seen as essential to relieving the persistent foreign currency shortages the nation has faced for years. The recent policy shift is also crucial in easing challenges that both the private sector and the broader economy have been grappling with. By improving access to foreign currency, the reform seeks to address macro-economic imbalances and increase foreign currency reserves. This could have far-reaching implications for Ethiopia’s economic future.
The macroeconomic committee recently reviewed the performance of these new policy measures, introduced as part of the Homegrown Economic Reform agenda. Prime Minister Abiy Ahmed (PhD), who presided over the meeting, noted in X: “In the two months since the policy’s implementation, we have observed a stable forex regime. Likewise, our revenue objectives are on track, meeting the set targets. Overall, the past two months indicate a successful rollout of the policy.”
Speaking to the Ethiopian Press Agency (EPA), an economist Emebet Melese (PhD) highlighted the positive effects of the reforms, which are designed to boost private sector participation. She emphasized that the newly introduced policies have played a significant role in stimulating the economy, ensuring efficiency, and creating a more stable economic environment. The expert noted that these reforms are key to addressing the foreign currency shortage and stabilizing the economy. They have also created new opportunities for the business sector, which has long struggled under restrictive financial regulations.
She added that the policy implementation has provided much-needed relief to both the private sector and the country by easing macro-economic imbalances. The visible changes in the economy, including a stable foreign currency movement, have been widely acknowledged. The reform has also been commended for its role in curbing illegal foreign currency transactions, marking it as a potential game-changer for the Ethiopian economy.
Governor of the National Bank of Ethiopia (NBE), Mamo Miheretu, emphasized that these historic reforms are designed to enhance private sector involvement and promote efficiency within a stable macroeconomic framework. The government has taken key steps that are already showing positive outcomes. The primary goal is to strengthen private sector participation by fostering a stable economic environment, encouraging exports, promoting investment, supporting import substitution, and boosting the manufacturing sector.
These efforts are expected to improve the competitiveness and efficiency of the private sector, leading to job creation and enhanced economic performance. Additionally, the reforms aim to correct foreign exchange distortions and create a healthier, more robust economy.
BY HAILE DEMEKE
THE ETHIOPIAN HERALD THURSDAY 3 OCTOBER 2024
