Countries have been implementing various forms of reform to address the challenges they face. The recent outbreak of COVID-19, for instance, has significantly affected the world economy. Ethiopia, a country with a total population of over 120 million people, was not able to escape the economic challenges during this season.
During such a daunting challenge, the country identified various alternatives for the smooth operation of the economy to prevent the possible crisis. At this critical juncture, it was the first economic reform that helped the country devises a strategy to stand on its feet. Ethiopia was one of the countries that benefited more from the economic opportunities that COVID 19 brought to the world.
Any economic reform does not bring immediate solutions to long-standing economic challenges. Prior to the launch of the new economic reform program, the government of Ethiopia did not foolishly expect to miraculously change the bankrupt and unfixable economy.
At that time, implementing a new economic approach was not seen as a solution for the visionary government that was performing various miracles in its daily activities. In order to make the issue participatory, it was discussed with various stakeholders, leading to the development of a Homegrown Economic Reform.
A Homegrown Economic Reform Agenda is a comprehensive plan with primary objectives: ensuring macro-economic stability to sustain rapid economic growth, rebalancing the roles of the public and private sectors in the economy, and unlocking new growth potentials. Following the launch of the new economic reform, Prime Minister Abiy’s Government made economic decisions and took measures on various mega projects that were previously sluggish due to poor management.
Projects like the Grand Renaissance Dam (GERD) were underperforming and draining the country’s resources, requiring wise decisions from the government. The new government critically analyzed the issues and explored various options for improvement.
Thanks to the reform, significant progress has been observed in projects like the GERD, showcasing the positive impact of ongoing economic reforms. Once completed, the GERD will generate foreign currency for the country by exporting electric power to neighboring countries, strengthening cooperation and partnerships apart from responding to the high level electric power demand of manufacturing industries.
Indeed, without the homegrown economic reform, the country would have struggled to sustain itself. Previously, the country’s economy was closed to foreign engagement, acting as a bottleneck. Now, international companies like Safaricom are entering Ethiopia and collaborating with the state-owned Ethio-telecom. This opening up of the economy is attracting more foreign investment and boosting the country’s economic growth.
The homegrown economic reform has also addressed various challenges in the export trade system, attracting more investors to sectors like manufacturing and reducing unemployment rates. Ethiopia has seen significant earnings from exporting agricultural products like coffee, oil seeds, pulses, and livestock, as well as minerals like gold and tantalum. Despite internal and external challenges, the First Homegrown Economic Reform has been productive in various areas.
The second phase of the Homegrown Economic Reform plan will be implemented from 2024 to 2026. The additional national economic development plan is required to build a resilient economy that can withstand new challenges. One of the four pillars of the reform is strengthening and stabilizing the macro-economy.
Better resource mobilization, successful government spending, and investment governance are given much attention in the plan. The plan also focuses on sustainable debt management, realization of strict fiscal policy, financial sector reform, and accessibility.
Improving the investment and business environment is the second pillar of the reform. Improved market accessibility, swift logistics service, motivated macro-, small, and medium enterprises, as well as attracting quality FDI, are crucial to realizing the plan.
The third pillar of the reform focuses on increasing capacity, productivity, and competitiveness of sectors, with priority given to improving agricultural productivity and investment, better housing and construction development and investment. Additionally, enhancing mining productivity and investment, boosting export trade, image building, tourist destination development, and boosting the digital economy are all part of the plan.
Developing the implementation capacity of the government is the fourth pillar of the economic reform. Creating a capable and productive civil service, providing better service by overcoming mal-administration, and implementing coordinated civil service digital information management are vital to realizing the plan.
The World Bank is critically analyzing and providing financial contributions towards Ethiopia’s ambitious homegrown reform agenda, including fiscal, financial, and monetary policies, as well as social safety net interventions, as part of the pro-poor reform measures.
The World Bank has expressed its commitment to support Ethiopia’s efforts to establish a foundation for an inclusive economic recovery and transformation, aimed at benefiting all citizens of Ethiopia. It also assures its readiness to support Ethiopia’s universal access to energy ambition and its national program in the human development sector, including quality of education and private sector development, in view of the current favorable environment for private investments.
Likewise, other development partners are expected to encourage Ethiopia’s economic reform measures in order to make the second homegrown reform a reality.
BY GIRMACHEW GASHAW
THE ETHIOPIAN HERALD THURSDAY 31 OCTOBER 2024
