Ethiopia stands at a critical juncture in its economic development, with bold plans for growth and reforms that reflect both ambition and pragmatism. On his first speech on the opening session of the two Houses as Ethiopia’s newly appointed President, Taye Atske-Selassie laid out ambitious goals for the 2024/25 fiscal year and outlined the country’s economic achievements during the last fiscal year. (Taye’s appointment was approved last Monday during a joint session of the House of People’s Representatives (HoPR) and the House of Federation (HoF), replacing the former president Sahle-Work Zewdie).
According to him, Ethiopia aims to achieve 8.4% economic growth while focusing on job creation, export revenue, foreign direct investment, and infrastructure development. These initiatives are part of a broader strategy to sustain high growth rates, reduce poverty, and build a resilient economy capable of weathering external shocks. Here are major economic achievements and new plan mentioned by the president.
Government revenue and economic goals
The President emphasized that one of the core objectives for the current Ethiopian fiscal year is to increase government revenue to 1.5 trillion Birr. This is part of a larger effort to enhance Ethiopia’s fiscal stability and reduce reliance on external debt. Increased government revenue will provide critical funding for ongoing infrastructure projects, social welfare programs, and education initiatives. Achieving this target requires strengthening tax collection mechanisms, expanding the tax base, and improving the efficiency of public expenditure.
It has been also addressed that there is also a plan to generate over 10 billion USD from export income and more than 5 billion USD from goods trade which is pivotal to Ethiopia’s efforts to diversify its economy. Historically reliant on agriculture, particularly coffee, Ethiopia has been working to broaden its export portfolio to include industrial goods, textiles, and processed agricultural products. The focus on expanding exports is a key to reducing Ethiopia’s trade deficit, stabilizing the Ethiopian Birr, and building up foreign exchange reserves.
In tandem with increasing exports, Ethiopia seeks to attract over 5 billion USD from Foreign Direct Investment (FDI). This focus on FDI aligns with the country’s strategy to promote industrialization through initiatives like industrial parks and special economic zones. Ethiopia has seen some success in attracting multinational corporations, particularly in the textile and garment sectors, due to its competitive labor costs and improving infrastructure. Further growth in FDI is expected to provide the necessary capital, technology, and skills’ transfer needed to modernize the economy and spur job creation.
Job Creation: Addressing unemployment and economic inclusion
Ethiopia faces a significant challenge in providing employment opportunities for its rapidly growing population, particularly its youth. Therefore, Taye stated that the government has aimed to create 4.3 million new jobs in the current fiscal year, with a particular emphasis on 700,000 jobs abroad, likely targeting the Ethiopian Diaspora and international labor markets. These efforts are not only intended to reduce domestic unemployment but also to harness the economic power of remittances from Ethiopians working overseas.
Moreover, he mentioned that the Addis Ababa corridor development project has created over 43,000 jobs, demonstrating the potential of large-scale infrastructure projects to drive employment. Moreover, Ethiopia is making strides in the manufacturing sector, where productivity growth has reached 59%. This sector is expected to play a crucial role in job creation, particularly in industries like textiles, leather, and agro-processing, he noted.
In order to accompany the job creation by efforts to improve the quality of jobs and ensure fair wages, Ethiopia is working to foster an inclusive economy, where the benefits of growth are shared across the society, reducing poverty and improving living standards. As the country continues to industrialize, there is a need to enhance labor skills, particularly in manufacturing and technology, to meet the demands of a more diversified economy.
Arresting inflation and macroeconomic stability
Inflation has been a persistent issue in Ethiopia, driven by supply chain disruptions, currency depreciation, and external economic shocks. The government recognizes the need for strict macroeconomic controls to prevent inflation from undermining economic progress. This includes managing the fiscal deficit, stabilizing the currency, and addressing inefficiencies in the market chain.
Efforts to control inflation will focus on improving agricultural productivity, ensuring stable food supplies, and addressing bottlenecks in the distribution of goods. In the past fiscal year, Ethiopia recorded 6.9% growth in agriculture, with significant improvements in wheat production, where 230 million quintals were harvested. Expanding food production will be critical in controlling food prices, which are a major contributor to inflation.
The Grand Ethiopian Renaissance Dam (GERD): A pillar of development
One of the cornerstones of Ethiopia’s development strategy is bringing the GERD into operation. President Taye Atske- Selassie celebrated the fact that 96.7% of the dam’s construction has been completed. GERD is not only a source of national pride but also a vital infrastructure project that will provide Ethiopia with a reliable source of electricity, reduce energy costs, and contribute to industrial growth.
Once fully operational, GERD is expected to generate over 6,000 megawatts of electricity, enabling Ethiopia to become a power hub for the region. This will reduce the country’s reliance on expensive fossil fuels and provide cheap, renewable energy to fuel industrialization. Moreover, Ethiopia plans to export electricity to neighboring countries, further boosting foreign exchange reserves and fostering regional integration.
GERD also plays a critical role in reducing the risks associated with the Nile River basin, contributing to better water management and reducing the likelihood of floods. This has the potential to foster greater regional cooperation, particularly with downstream countries like Sudan and Egypt, and strengthen Ethiopia’s geopolitical influence in the Horn of Africa.
Infrastructure and connectivity
Infrastructure development has been a central pillar of Ethiopia’s economic strategy. In recent years, the country has made significant investments in road networks, energy, and telecommunications. Road coverage has now reached 169,600 kilometers, linking rural areas with major cities and facilitating the movement of goods and people. Expanding the road network is critical for improving market access, particularly for smallholder farmers, and reducing transportation costs.
According to the President, telecommunications infrastructure has also seen rapid growth, with 83.3 million mobile phone users and widespread adoption of mobile banking. Ethiopia’s banking sector has seen an explosion in digital transactions, with 9.6 trillion Birr transferred digitally. Mobile banking users have now reached 39.6 million, reflecting the increasing role of technology in financial inclusion. These advances are part of the broader effort to digitize government services, with 737 services now available electronically.
Agricultural growth and environmental sustainability
According to the President’s speech, Ethiopia’s agriculture sector continues to be a major driver of growth, contributing to food security and export earnings. In the last Ethiopian fiscal year, over 26.2 million hectares of land were cultivated, and high production levels were recorded in all regions. These achievements are the result of improved agricultural practices, better access to inputs, and government support for smallholder farmers.
Environmental sustainability is also a key priority, with Ethiopia planting 40 billion saplings over the past six years as part of its Green Legacy Initiative. This ambitious tree-planting campaign is aimed at combating deforestation, reducing soil erosion, and mitigating the effects of climate change. Through promoting sustainable agriculture and environmental conservation, Ethiopia is working to ensure that its growth is both inclusive and sustainable.
All in all, Ethiopia’s economic journey is at a pivotal moment. The country is poised to achieve 8.4% economic growth while addressing challenges such as unemployment, inflation, and the need for greater diversification. The completion of the GERD marks a major milestone in the country’s development, providing a reliable source of energy and positioning Ethiopia as a regional power hub.
With ambitious goals for exports, FDI, and job creation, Ethiopia is moving toward a more industrialized and inclusive economy. The government’s focus on social development, infrastructure, and environmental sustainability underscores its commitment to long-term prosperity. As Ethiopia continues on this path, it will need to remain vigilant in addressing macroeconomic imbalances and ensuring that the benefits of growth are widely shared across the society.
In the coming years, Ethiopia’s success will depend on its ability to maintain economic stability, foster innovation, and build strong institutions capable of supporting the dynamic, and diversified economy, it was addressed.
BY HIZKEL HAILU
THE ETHIOPIAN HERALD WEDNESDAY 9 OCTOBER 2024
