The recently launched Homegrown Economic Reform Agenda aims to drive sustainable and inclusive growth to ensure the path to Ethiopia’s prosperity. On his argument of clarifying some misconceptions regarding the reform, Eyob Tekalign (PhD), Ethiopia’s State Minister of Finance stated that the agenda was prepared with the same decisiveness with which Prime Minister Abiy Ahmed (PhD) has championed reforms across the political and social spheres.
It was developed through a rigorous deliberative process to identify the binding constraints and drivers of economic growth in the country. Homegrown and heterodox, in its nature, extricates itself from any ideological attachment and employs a pragmatic approach to address emerging economic challenges and seize growth opportunities.
Ethiopia is launching its own reform program on the back of continuing growth success, with double-digit growth that any other developing country would envy. It creates a fundamentally different circumstance for rebalancing. It aims to sustain growth; it is neither to initiate growth nor to break a recession. It seeks to sustain the country’s double-digit growth through measures that address the headwinds that surfaced due to sub-optimal macro-financial policies.
The reform envisages a gradual move to a market-based system with government intervention in priority sectors and the sequencing of reforms in both the product and financial sectors, Eyob said.
Ethiopian chamber of commerce has conducted awareness creation forum recently in collaboration with the private sector and stakeholders regarding homegrown economic reform. Fantahun Belew, Fiscal Policy Consulor, Ministry of Finance explained about the outcomes registered in the sector in line with lack of fairness and macro-economic imbalance.
Fantahun said, “As a result of economic growth in the past 15 years, income per capita has grown more than six fold; over 15 percent citizens have escaped from poverty. The growth, however, is less successful in bringing about structural change.”
Government’s role and investment dominate the private sector in the nation’s economy. For the reason that the economy is wrapped by multitude structural barriers, situation that hinders growth sustainability is occurred.
“The nation’s economic productivity barriers are rooted on structural and institutional weakness,” said Fantahun. Among these are hard currency deficit, financial problem, lack of electric power and raw materials supply and limited amount of loan provision.
Fantahun further elaborated that the route chosen to finance government’s mega investment projects resulted in raising loan burden; forced local finance to be invested on state developmental enterprises and prioritized sectors and also failed to manage projects effectively induced macro-economic imbalance.
Rising need for imported goods and weak performance in export trade have highly contributed for widen trade imbalance and high forex deficit. Share of foreign loan burden is not that much high in relation to the nation’s gross production as per international measurement. Government’s wider local loan has narrowed loan gaining opportunity of the private sector, he added.
Fantahun underlined that the homegrown economic reform aims to address the aforementioned challenges in an integrated and significant way. Especially, the macro-economic reform strives to preserve fiscal policy that fits the current economic situation; improve income tax through enhancing tax management; advance effectiveness of government investment; apply privatization process of government developmental enterprises and finalize previously launched government projects.
In the macro-economic reform, several duties are given special attention. Among these are lessening foreign currency deficit, speeding up privatization, earning extended loans that do not impose burden, enhancing export trade, consolidating foreign direct investment and providing foreign currency efficiently to the private sector, he added.
The counselor said, “The macro-economic reforms become effective whenever they back the structural improvements in creating conducive situation for investment.” In this regard, ample of duties like advancing bureaucracy and controlling system; enhancing good governance; modernizing infrastructure provision; investigating incentives underway; prioritizing manufacturing sectors that utilize local inputs; supporting manufacturers that substitute import products and above all, enhancing industrial peace.
Some participants of the forum have also commented the economic reform. Daniel Mebrehatu, owner of Techno Craft, for his part stressed the necessity of job creation that fits economic capacity; building economy that facilitates growth opportunities; reforming processes and legislatives; preventing corruption; working laboriously, wisely and with endurance and in general, adjusting faulty thoughts.
Bekas Chemical Engineering PLC Managing Director BekeleTsegay for his part said that the chemical industry sector should be given the attention it deserves. Appreciating the way paved to make private sector in the frontline for the nation’s overall growth, he stressed on the clarity of the reform.
Engineer Melaku Ezezew, president of Ethiopian Chamber of Commerce, for his part said that homegrown economy is essential to surpass economic challenges and nurturing participation of the private sector. “Above all, minimizing government’s investment share and empowering the private sector uplifts our participation in all sectors,” Melaku said.
The Ethiopian Herald November19, 2019
BY BACHA ZEWDIE
