Growth is expected to have remained cool in the last couple of years, constrained by a wide current account deficit, drought and security concerns. Recent data revealed that the trade deficit widened, as exports dropped, while imports rose slightly. Besides, low water levels led to electricity rationing for some months disrupting economic activity.
Approached by The Ethiopian Herald, Gutu Tesso (PhD), an economist and President of the Oromia Economic Association says the government passed a decision opening up the financial sector to allow citizens who have acquired other nationalities to be able to invest in banks and lend money more easily.
Also, the government granted a foreign company a financial-sector business license for the first time. This is among the steps towards enhancing the economic development and opening up the financial sector for private sectors. All of these activities depend on peace and security, he pointed out.
As to Gutu, “We know that the first prerequisite of any government, of any society, is security. Without ensuring sustainable peace and security, it is difficult to do any activity. Now, the incumbent has faced challenges related to safeguarding peace and security”.
The Ethiopian economy has experienced impressive growth performance over the last decade with an average GDP growth rate of 11 per cent which is about double of the average growth for Sub Saharan Africa. The Ethiopian government has introduced a home-grown economic reform as part of a solution to rectify the macroeconomic imbalance that the nation has recently faced with.
Briefing about the new economic reform which the government intends to execute over the coming three years, state Minister of Finance Eyob Tekalegn (PhD) said the government’s inability to execute grand projects as per their schedule coupled with the poor capacity of repaying foreign debt has led the nation to face macro-economic imbalances.
The economic development model the nation pursued over the past two decades has contributed to better infrastructural development and poverty reduction, but it lacks to consider the private sector.
Ministry of Finance has disclosed that the country has faced critical macro-economic imbalance which is being exhibited through a burden because of high debt record. For the past few years, the country was markedly successful in terms of maintaining macroeconomic stability and fiscal management as witnessed by inflation falling to a single digit, which had been a major challenge in the past two years, shortage of foreign currency and rising inflation.
The medium-term outlook shows that the growth will continue through at a slow pace than the previous years. To attain the national vision of achieving the MDGs by 2015 and becoming a middle-income country by 2025, the country faces some challenges that could impede on the growth and transformation agendas. These challenges include a possible financial risk associated with growing stock of external debt, foreign exchange shortage and limited financing options for the growth and transformation plan.
According to the economist, also, a decline in export value due to vulnerability to international commodity price fluctuations and few commodity choices for the export market are among the factors for the problems.
Dr Gutu says that, the need to nurture a competitive private sector to drive the growth and transformation agenda.
As to him for the last couple of years, the country is being challenged by a security issue. Hundreds of thousands of peoples were displaced from their homes. More than 85 per cent of Ethiopian populations is rural residents. Their economy as well depends on agriculture.
If there is no peace and security in the country it is difficult to properly manage agricultural products. This directly hinders the economic development of the country. Oromia, Benishangul and South Nation and Nationalities are among the major sources of agricultural products which are sources of foreign currency like coffee, maize, khat and sesame.
Producing items alone is not enough; rather it is important to make sure that the products have reached to the consumers on time. While delivering those agricultural products from its production areas to an industry they were challenged by security on their way to their destination areas, Dr Gutu says.
When products are waiting for the dealer to deliver to the society the products may expose to the expiration date or there are perishable products which are unable to wait for more than a week. If the products are not delivered timely they may be rendered useless leading to inflation. The main cause of inflation that happened now is lack of government commitment to follow up and strengthen its connection, Gutu elaborated.
Focusing on key and potential sectors such as agriculture, manufacturing, and mining is very important to ensure viable economic growth. He pointed out that productivity will be enhanced through the provision of modern inputs and prioritizing strong small-scale manufacturing such as agro-processing and leather products. To deliver the required inputs for agriculture timely the security and related issues matter, Dr Gutu noted.
Peace contributes a great role in the economy both in declining the economic growth and development as well. When we see what happened recently in the country there is a soaring inflation rate. As a solution, he says if there is sustainable peace and security ensured it will help the government to easily fix the soaring inflation rate in addition to controlling illicit trade, Gutu says.
Gutu believes that the intervention of illegal brokers caused a shortage of supply for consumer goods, conducting transactions illegally and weak capacities of associations identified as causes for the rise in inflation rate for consumer goods.
There is no shortage of supply of consumer goods but traders are increasing prices by imagining that there is a supply shortage. As a solution, the economist believes that controlling illicit trade, import substitution and supplying the market with adequate locally produced consumer products are capable of fixing the soaring inflation rate.
Communication Director at the House of Federation Gebru Gebreselassie, for his part, said that lack of ensuring peace and security across the country hinders the development of the country for the past couple of years. To overcome the problems, the youth, religious leaders, intellectuals, and society at large must join their hands.
As to Gebru, although there have been major economic improvements in the past few decades, the issue of violence and conflict remained as an inhibiting factor to lag behind the expected outcomes. Economy and conflict are intimately linked.
Sustainable peace within and between societies can only be possible if the government ensures fair access to sustainable livelihood and asset accumulation opportunities, combined with general well-being, justice, and security in a context of good governance.
Gebru stated that on the other hand, public figures must discharge their role in promoting and preaching tolerance and peace among society. Especially, religious leaders must do more in peace building. Peace is the collective effort of all citizens it is not only the responsibility of the government.
The government plays a big role for the last couple of years in ensuring the supremacy of law and still much effort remained and the government is doing its level best, Gebru says.
The Ethiopian Herald September 7, 2019
BY HAILE DEMEKE
