Recently, the 6th House of People’s Representatives conducted its 4th year’s 3rd regular meeting. On the occasion, Prime Minister Abiy Ahmed (PhD) gave a response to questions raised by the parliamentarians focused on myriads of economic, political, and social issues of the nation.
With regard to the ongoing economic reform, he said that in the first phase of the fiscal year, the government completed reforms in different sectors and started working on national revival. Therefore, in the fiscal year, the nation will see drastic changes in all sectors and will move forward to tomorrow by leaving the ideas of yesterday.
He also said that in the last fiscal year, Ethiopia recorded 8.1% growth. This is a great achievement worldwide. In this year’s fiscal year, it is expected that 8.4% growth will be recorded. Among these, agriculture is expected to grow by 6.1%. By cultivating 30 million hectares of land, 1. 4 billion quintals of crop are expected to be harvested.
With regard to “Yelemat Tirufat” he said that it has become a sector with promising growth in a short period of time. In the budget year, the sector has recorded growth of 5.4%. For instance, 12 billion liters of milk are expected to be produced annually. 8 billion chicken eggs, 218 thousand tons of meat, and 297 thousand tons of honey will be produced annually.
The capacity to produce is also created. He also said that compared to the past years, 1 million quintals of production has been recorded in coffee. Currently, extensive work is underway to make Ethiopia the 2nd coffee producer in the world.
He further said that in the past years, a lot of work has been done to stimulate the industrial sector by the Ethiopian Manufacturing expansion endeavor. Especially, a better work has been done in solving the problems that were arising with the power supply. Currently, the production capacity of industries has been grown by 67%. It is expected that the industrial sector will grow by 12.8% in the budget year.
As it is known, agriculture is the main stay of the economy in which about 80% of the population has taken the sector as means of living. The majority of the population is engaged in small scale farming. As the sector is vulnerable to climate change and global warming, scale upping farming through irrigation system is essential. The sector’s contribution to the nation’s Gross Domestic Product (GDP) is 45% and still the sector plays pivotal role in the economy. But the growth witnessed in the sector plays insignificant role in transforming the economy. To attain sustainable development, building self- sustaining industry led economy is vital.
To achieve economic transformation, government has tried its level best through expanding of manufacturing because it is the base for the industrialization. Manufacturing can absorb the stranded rural labor force, boost export, substitute import, creates conducive environment for innovation and linkage with agriculture. That is why the government underlined the value of industrialization.
With regard to the Ethiopian airlines, part of aviation industry, the Prime Minister said that movement has been started to build the biggest airport in Africa. This new airport will also accommodate 100 to 130 million passengers per year. At present, the government has decided to buy 124 new airplanes. This will make Ethiopian Airlines not only the largest airport owner in Africa but also the largest airline. The service sector’s contribution to GDP also will increase 7.1% in the budget year.
In the past macro-economic imbalance was a challenge for the nation including, shortage of hard currency, debt service, inflation unemployment and illegal trade. One of the objectives of the recently introduced economic reform focusing on the floating of exchange rate, Dollar against Birr is to cure the economic malaise.
Economists and Ministry of planning and Development endorsed that after the introduction of the new exchange rate to be determined by market, the inflow of remittance is increased by 20%, the inflow of Foreign Direct Investment is increasing, the volume of export is growing and illegal trade is reduced.
”Our economic system was much closed in the past. This has been making Ethiopia not to use as much as it should in foreign trade and foreign direct investment. By now, the macro economic reform will lay the foundation for Ethiopia,” the Prime Minister reiterated.
He further said that following the reform of the macro economy, the government revenue has increased significantly. 180 billion Birr has been collected in the last three months. This is a better growth compared to the same period of the previous fiscal year. In the first three months of the 2023/24 fiscal year, the revenue collected was only 109 billion Birr. But Ethiopia earned these only from the total domestic product. In comparison, it is still a low income country. This should continue to improve.
In the past three months, 1.5 billion Dollar of revenue from export trade has been received. If we continue with this performance, at the end of the fiscal year, more than 5 billion Dollar of income will be received. This is an increase of 1 billion Dollar compared to the previous year. Especially the macro economic reform has brought a big difference in the gold production and export. In the last three months, 500 million dollar has been earned from gold trade. This shows how much gold trade is lucrative. In coffee production, 2 billion dollar is expected to be obtained in the budget year.
In addition, foreign direct investment has increased by 6.4%. The works that have been done especially by creating an environment conducive for investment is creating enabling environment to attract investment.
Ethiopia’s abundant natural resources including, land, renewable energy sources, water and man power have made it the best option for investment. The macro economic reform has also opened a way to utilize this investment potential.
According to Prime Minister Abiy, 3.4 billion Dollar has come over the past three months from foreign countries to Ethiopia in different ways. Compared to the same period of last year, there is a huge increase. In the first three months of the last fiscal year, the amount of money that came from foreign countries to Ethiopia was 400 million dollars. In total, 27 billion dollars have come to Ethiopia through the macroeconomic reform.
The macroeconomic reform also enabled the nation to build its capacity to serve its debt burden. A few years ago, international financial institutions showed reluctance to provide loans to Ethiopia, but after the introduction of the new exchange regime, they began to provide loans to the country.
The government also banned drawing loans from local and foreign financial institutions. Reflecting on this issue, the Prime Minister said that the government has not taken any commercial loans in the past six years. Ethiopia’s debt burden has been reduced from 30.6% to 13.7% in comparison to the total national production. In the coming years, a lot of work is ahead to reduce this figure to below 10%. In the past six years, excluding airline and telecom, 13 billion dollars of debt have been paid. This is not a cure, but it supports the government’s efforts to pass on wages to the next generation.
In line with these, the reform in the macro economy has saved the Commercial Bank of Ethiopia from collapsing. The commercial bank has gotten a 900 billion dollar extended bond. The success of Commercial Bank of Ethiopia is motivating all the local banks. Currently, the banks’ deposits have reached 3.5 trillion Birr. The number of banks has reached 32; 50 million customers in Ethiopia have mobile phones. Banks have just taken advantage of it. The government also opened the financial market to foreign banks, and the situation creates an opportunity to attract more foreign investment, and local banks need to be competent.
With regard to overcoming the skyrocketing living cost, the Prime Minister said that the government can overcome the cost of living sustainably by increasing productivity. Upgrading the business system is also of great importance. The government has allocated 300 to 400 billion Birr subsidy to prevent the cost of living burden on the low-income citizens.
Sharing of meals, school feeding, and Sunday markets are part of the government’s effort to help the needy. Nationwide, 249,000 houses have been transferred to disadvantaged citizens. This is a work done by the government through browsing finance from investors. The inflation rate has been reduced to 17% by now; bringing this down to single digits is a priority of the government, the premier stressed.
BY ABEBE WOLDEGIORGIS
The Ethiopian Herald November 3/2024
