Ethiopia has recently a ‘home-grown economic reform’ agenda with an objective to solve the major challenges in the economic sector, and able to sustain the double-digit economic growth for the next three years.
Deputy Prime Minister Demeke Mekonnen stated that the home-grown economic reform is part of the country’s comprehensive reform strategy. According to the Deputy Prime Minister, although Ethiopia registered remarkable economic growth over the last two decades, there was a macro-economic imbalance that confronted with the question of fairness on one side and the rapid development on the other hand.
The economic sector was certainly challenged by macro-economic problems, as well as structural and social factors, he added.
Weak export, agricultural and manufacturing performance, shortage of foreign currency, and the overall macro-economic imbalances became the reasons for weak economic outcome during the Second Growth and Transformation (GTP-II) period. Hence, the reform strategy is set to solve all the existing challenges.
Presenting a paper during the discussion, State Minister of Finance EyobTekalign(PhD) stated that during the past 15 years, the country’s economy has grown by double-digit, it’s per capita income has increased on average by six-folds, and poverty level has also decreased by 15 per cent. Also, primary education has increased by 100 per cent, whereas secondary education from eight to 78 per cent.
Likewise, child mortality was decreased by half while life expectancy increased by 10 years. Moreover, access to electricity, water and infrastructural developments has shown double performance over the last 15 years, he stated.
According to Dr Eyob, the national deposit covered 24 per cent of the GDP and foreign debt was limited to eight per cent. Adding that, the foreign currency was overvalued in recent years.
But, still, to become a middle-income country by 2025, the country should boost per capita income by three folds, should decrease its poverty line by half. Now, 45 per cent of the country’s population still demands access to water and energy, the State Minister retreated.
The manufacturing sector covered only 10 per cent of the country’s GDP. Compared with other middle-income countries where the minimum contribution of the manufacturing sector with their GDPreaches 40 per cent, it is too far to meet the target in the projected period.
Even during the past 15 years, inflation was almost a common headache to the economy which remains 15.5 per cent on average.
The key drivers for this success were mainly the investment and service sectors; and through a national campaign, the country could increase its deposit by 15 per cent within 15 years.
During such economic growth period, the poor structural transformation, poor quality and productivity were among the most potential impediments. During the journey towards rapid economic growth, our economy was dependent on private capital accumulation than increasing productivity, which needs sound and serious intervention of the government.
During this economic growth of the country, forex shortage, corruption, bureaucracy, limited finance to the private sector, energy interruption and access to the internet were the main identified challenges. These all led to macro-economic imbalance affected by foreign debit, forex shortage, inflation and weak private sector.
Aiming to solve all these challenges of the economy, three pillars are identified by the new home-grown economic reform strategy to implement for three years. Macro-economic, structural and sectoral reforms are the three pillars of the holistic and comprehensive reform agenda, Eyob noted.
The macro-economic reform focuses mainly on macro-financial stability and re-correcting past imbalances by correcting foreign exchange imbalance, controlling inflation, improving access to finance and ensure debt sustainability.
Meanwhile, limiting government investment in selected investments, maintaining a prudent fiscal policy, implementing the privatization plan to make the private sector backbone of the economy are also among the key focuses of the reform.
All bureaucracies, frameworks, laws and regulations will be evaluated and set to attract more private investment and foreign direct investment. The private sector’s investment will also be supported by research and by implementing public-private partnership, the participation and engagement of the private sector will increase.
“The new economic reform strategy is all about creating enabling situations making the private sector the leader of the economy. The government is now committed to create conducive investment climate and to solve all the problems, challenges and bureaucracies with modern service delivery”, Eyob said.
During this reform period, building the digital economy and e-commerce structure is a serious and the pressing issue in the reform to boost all-rounded economic activities, according to Eyob. At this time, all sectors will get due attention but also it gives due emphasis to the main sectors like agriculture, mining, tourism and manufacturing to exploit the available potentials.
By implementing all this, the end goal of the reform is building a suitable economy to the investment and creating an enabling environment for job opportunities by widening the economy and creating inclusive and sustainable industrialization, building all-inclusive digital economy, and maximize huge private-sector owned economies.
Finance Minister Ahmed Shide on his part said that Ethiopia is on comprehensive development reform in political, social, economic and image building of the country by curbing the existed constraints. The new economic reform is to implement under the secretariat of the Ministry of Finance.
According to Ahmed, Ethiopia is preparing a 10-year economic growth roadmap which will be commenced soon; and the three-year economic reform is also part of the roadmap set to transform the country’s economy that will realize fair and balanced wealth distribution.
The Ethiopian Herald August 31, 2019
BY DARGIE KAHSAY
