Recently, Ethiopia announced a new homegrown economic reform agenda that eyes sustaining the country’s economic growth via creating conducive business environment.
Ethiopia’s homegrown economic reform agenda is a well-coordinated response and blueprint to propel the country’s economic progress. Ethiopia has also invested significantly in physical infrastructure in the past two decades, according to office of the prime minster.
Melesse Minale, National Bank Senior Macroeconomic Advisor told The Ethiopian Herald that Ethiopia has been registering a promising economic growth for the past 10 years and that economic growth was mainly registered on infrastructural investment.
Even if it is undoubted that this huge infrastructural development and investment plays an indispensable role in the country’s prosperity, such economic growth has its own setbacks, he added.
As the country’s former economic growth was depended on macroeconomic imbalance it caused a higher constraint on business productivity and created bottlenecks to sufficient job opportunities.
Currently, the country is needed to set a proper economic reform towards sustaining its economic growth, creating an enabling environment for doing business and multiple job opportunities that could absorb the growing number of the educated youth population.
As to him, the new homegrown economic reform agenda has come up with these all objectives that could be a platform towards inclusive economic growth.
Easing these bottlenecks primarily target succeeding in economic growth by creating new business sectors and numerous job opportunities like in the ICT.
As to him, the home grown economic reform agenda prioritizes sectors such as agriculture, manufacturing, mining, tourism, and ICT.
“Modernizing the business law, establishing applicable institutions and replacing and/or modifying the country’s economic policy frameworks in different sectors are the main rationales to succeed the country’s objective of joining middle-income countries by 2025,” he stressed.
According to him, the homegrown economic reform includes three pillars.
The first is reforming the macro-economy: inflation, addressing foreign exchange shortage, easing debt, opening the financial sector. And the second one is creating a conducive business and addressing institutional and policy bottlenecks by introducing a proper framework which is the main requirement for business productivity and massive job creation.The third is identifying and fetching solutions to specific sector problems.
For him, the main causes of the current forex deficit are inflation and the growing cost in the past public infrastructure investment-oriented economic development that utilized huge forex but not generated sufficient amount.
In addition, mega projects like; electricity, sugar and fertilizer that were begun in the past sought to generate foreign exchange faced performance delay which exacerbate the current foreign exchange pressure on the country’s economic growth.
Some economic analysts said that the new economic reform agenda is ambitious, but Melesse counters this idea saying it is attainable in the short run. But, institutional capacity shortcomings will be the major challenge during the agenda implementation, he said.
For his part, Professor of Public Policy and Sustainable Institutional Reforms Costantinos Berhutesfa (PhD) told The Ethiopian Herald that the economic health based on the new homegrown economic reform agenda must hone on financial liberalization and instituting market fundamentals of credit and capital markets.
The shift in macroeconomic policy in the early 1990s decisively contributed to stability, raised growth rates, reduced the country’s external indebtedness and created new margins of maneuver for sectoral and structural policies. Nonetheless, in effect, Ethiopia’s growth potential is yet to be mobilized, mired by self-reinforcing dynamics barring the country in human development symmetry.
As to him, Prime Minister Abiy Ahmed (PhD) has now emerged to transform the human-insecurity situation almost after his historic speech focused on unity. The remaining homegrown agenda is to fix the economic and social governance, according to the PM’s promise to the nation.
The main concerns stem from trajectories that threaten Ethiopia’s macroeconomic stability, an alarm is predicated on heavy financing needs that have not been secured, insufficient prioritization; limited role envisaged for the private sector, high and rising inflation and entrenched negative real interest rates, the debt distress and unemployment, he stressed.
He also said that the push-pull factors in this globalized, technological 21st century demand Ethiopia to produce what it can absorb and/or export, as well as creating jobs by introducing investment incentives that facilitate brain circulation by refining learning systems (content, quality, international lingua franca, etc.,) that add value to migrant labor making them competitive in international markets.
Accordingly, a disciplined, healthy, nourished and motivated labor force is required to produce and distribute the goods and services needed for the homegrown economic reform agenda.
Ethiopia’s homegrown economic reform agenda must advance considering growth constraining factors that emerged in the course of implementation and external shocks resulting in shortage of capital, he recommended.
The Ethiopian Herald January 9/2020
BY TEWODROS KASSA
