Amid the recently introduced homegrown economic reform, the country is seeking the highest engagement of the private sector and other international partners to meet the very objectives of the reform. The program has already received attention from partners, most of them pledging to help its realization. Among these is the International Finance Corporation (IFC).
Upon holding meeting with Deputy Prime Minister Demeke Mekonnen on earlier this Month, IFC Vice President for the Middle East and Africa Sergio Pimenta said homegrown economic reform agenda is helpful to build stable and strong economy.
Pimenta appreciated the government’s move to boost the participation of the private sector in the country’s economy adding that the corporation will continue to provide capacity building support to Ethiopia’s agricultural sector and to create market linkage between the manufacturing and private sector, FBC reported.
The homegrown economic reform is also set to mobilize national saving and international financial sources to spur the economic growth.
The implementation of the homegrown economic reform will require mobilization of domestic savings and privatization proceeds as well as significant international financial support, Eyob Tekalegn told journalists lately. Additional external financing is expected to be mobilized from multilateral development partners in the form of concessional and/or de-risked financing, he added.
On the other hand, the program also aims to enhance private sector engagement as the country poised to open up the economy and privatize some selected public enterprises. Sugar factories are among the state-owned enterprises to be privatized this year.
Recently, as per of this, the Commercial Bank of Ethiopia (CBE) has disclosed that it allocated 22.5 billion Birr and 2 billion USD for the private sector, the highest in years. This move was part of the national effort to stimulate investment and create jobs, the bank disclosed. The capital allocation is aimed at financing private business projects.
To meet the growing financial demand of the private investors, the government has cut public spending and funneled capital supply to the private sector which exceeded pervious same period by 50 percent.
To address financial constraint, the government also allowed capital lease financing where business can have access to credit services by using their equipment, including movable asset, for collateral.
Besides, domestic saving and finances, the government also plans to pull more finance from donor and international financial institutions.
World Bank and International Monetary Fund (IMF) have been among the leading providers of financial assistance and credit to the country. Last year, both institutions have also bankrolled huge share of foreign currency.
On the other hand, the two financial giants have been encouraging Ethiopia to adopt more market-oriented policies which the country is already doing. With the economic reform also aiming to revive the country’s private sector and spur investment and job creation, the financial institutions remain strong partner.
The institutions have been pushing the country to ease its restrictive business environment which is now the country good at doing, Dr. Hailu Elias Assistant Professor of Economist at Addis Ababa University tells The Ethiopian Herald.
Donor countries and global financial organs can help Ethiopia’s economic reform in many ways. And it is up to the country to strike a balance between its interests and the help it requires from the financial bodies, according to him.
Most of the economic measures the country taking are very much aligned with the reforms the institutions have been advocating for long time. And the country’s new reforms are said to overcome some of the main economic hurdles.
Homegrown economic reform is a more programmatic and realistic approach towards economic challenges. And there is a part to be played by donor countries and global financial institutions in supporting the reform by supplying financial and technical supports. While international organizations push for more economic liberalization and privatization, the country needs to carefully handle the transition and the process.
There are ways where the country and the donor countries as well as global institutions can collaborate to sustain the country’s economic development and its challenges, he adds. However, he noted that part of the government’s responsibility is to make sure that no financial institutions are able to patronage it as imposing polices and interest.
Financial mediators perform a significant role in the development of the country. And, the homegrown economic reforms, if executed effectively, will address the major economic hurdles. And the execution requires the concerted efforts of the government and other partners such as global financial institutions, said Dr. Tadele Ferede, President of Ethiopian Economic Association.
Unlike previous times, the World Bank and IMF are not in the position to impose their policies and interests. The approach is changing these days, countries design their development programs and the institutions support them. According to him gone are the days where the institutions set preconditions to provide finance to other countries as the alternatives increase.
For the reform to hit its target, the government needs to revise its existing institutions. Enforcing tools are yet to be identified to execute the reform program. Unless, the institutions are transformed, the reform could face setbacks, he said.
The Ethiopian Herald October 18, 2019
BY DESTA GEBREHIWOT
