The latest economic reports are contradictory. Different narratives are presented. The one presented by the IMF is a positive portent. It says 2019 will be a fine year for Ethiopia’s economy as it is expected to lead the pack of economic success stories. According to latest the projections, the Ethiopian economy is expected to grow by more than 8 per cent this year.
The IMF scenario is based on conventional measurement criteria such as GDP growth and other macroeconomic indicators. Many people started to doubt the veracity of IMF growth projections particularly when it was recently made evident that the so-called growth scenario over the last ten years or so was largely financed by a colossal foreign debt.
Aggregate loan has ballooned to such an extent that the country has no become one of the highly indebted countries in Africa if not in the world. Proof of this is that Chinese debt to the tune of 120 billion USD has financed the construction of new highways, bridges, high rises buildings, railway lines and the likes. These projects were taken as showcases of a “booming” economy on the basis of which the EPRDF State claimed political legitimacy and went as far as stealing elections repeatedly.
It was lured by the wrong notion that its authoritarian rule would remain unshakable as long as the economy was “growing”. The IMF on its part was partly responsible for feeding the illusion of growth to a usurious and parasitic EPRDF State determined to stay in power for the coming forty or fifty years. The trouble however was that the “boom” was not a genuine one, generated by domestic economic expansion.
It was partly financed by earnings from exports of basic commodities that enjoyed favorable prices in the world market for a long time. It was partly sponsored or camouflagedby heavy indebtedness and Chinese financial largesse that has its own hidden story. When the lid was lifted and the truth about the so-called mythical “developmental state”, was revealed, the bubbles burst and what we have now is the opposite narrative of economic gloom and doom by the same EPRDF State.
It brought home another incontrovertible fact: no true economic development can be sustainable without genuine freedom or true democracy. So, until democracy becomes a reality, the economy is apparently condemned to limp along and not rebound vigorously because the energy needed for real growth is not yet fully released. Democracy brings stability, confidence and trust to the economy and launches it on genuine growth trajectory. The economy at present is suffering from growing inflation.
The previous TPLF-dominated regime boasted about keeping the rate of inflation at the single digit as if it was by itself and in itself a miraculous or talismanic achievement. The country achieved debt-based growth over the last ten years or so without the benefits of the growth trickling to the poor. The ‘pseudo-growth’ rather created a tiny strata of super rich people and led to the pauperizations of tens of millions of poor people as land was monopolized by the TPLFdominated State.
Hence, the surplus accruing from land transactions in towns and rural areas was lining the pockets of the TPLF-aligned political and business elites. The economy is long suffering from high unemployment rates as surplus creation by the people and appropriation by the ruling elites was given precedence over job creation. Even the so-called 10 billion birr package allocated for the so-called job creation schemes to the young unemployed is now lost and forgotten.
Apparently, it disappeared in the wreckage of the sinking ship of the former TPLF regime. For the first time in recent memory, Ethiopia’s export performance has fallen by 38 percent according to recent parliamentary revelations. This reality gives food for thought. How will a country that is basing its growth scenario on proceedings from the export sector continue to grow while the volume of exports and earning have sharply declined? Both the regime’s expectations and the IMF’s recent projection should therefore be subjected to critical inquiry.
The thesis about the so-called continued economic growth repeated year after year by the EPRDF State has become anachronistic if not a colossal deception No doubt that commendable reform measures have been taken in the last few months to redress the imbalance but as the reforms need a rather long time to be implemented and bear the desired results, time is against the economy. One can hardly expect the economy to improve soon after the policy reforms.
Inflation, unemployment, the ever increasing cost of living…etc. are things that require speedy solutions now. You cannot tell tens of millions of jobless youths to wait until some foreign investors come and give them jobs and bread. How are we going to believe growth projections as real, now that growth figures have burst like soap bubbles? Mega projects have become mega hoaxes. Some of the flower growers have left vast horticultural farms.
Suffice it to look at the barren and ramshackle premises of the once booming flower businesses on your way to Holeta town the Karaturis built in the heydays of the horticultural infatuation and are now abandoned. Look at the vast construction sites and condominium projects that stretched along the Addis-Adama expressway. The nation is sagging under enormous debt burden. Billions of dollars have been take out of the country by former revolutionary democrats turned Mafiosi.
Last but not least, how is a country going to take the top rank in economic performance when almost all citizens are dangling on the hooks of ethnic politicking? The notion of Ethiopians being hard working folks needs to be closely scrutinized. In many state-run enterprises, employees are working less and productivity is being compromised. They are “helped” in this by the electric corporation because power cuts are more regular and the “free” time is being filled with rumors and empty talks.
The population explosion is far overtaking rural productivity and food is becoming scarcer, adding to the growing inflation in food prices. As wages and salaries cannot catch up with the spiraling inflation, poverty is growing in rural and urban areas further exacerbating unemployment and underemployment. Population explosion is becoming the single most explosive economic challenge over time. It does not require one to be a graduate of the London School of Economics in order to realize that the economy is in a kind of slow motion free fall and that there are still a few options left that need a fast and pragmatic approach to mitigate some of the above challenges.
The State is pouring more money to revive sclerotic or dysfunctional mammoth enterprises that it launched when loans were easily available and money flowed like water. Conventional wisdom or pragmatism would advise us to keep those enterprises on hold and divert the money for job creation schemes. The State that is controlling the lion’s share of financial sector could advise its managers to stop building skyscrapers and use the money in investments for job creation and productive and profitable undertakings.
Building spectacular high rises may be a sign of prestige that may enhance visibility but does not create wealth by itself or alleviate some of the most glaring economic challenges. Instead of trying to revive failing enterprises, the State could shift priorities to job creating alternatives.
What is the use of pouring on more money on dysfunctional mega enterprises like METEC, the sugar conglomerates and the like after they have been ransacked and laid to waste? The State could sell these enterprises to foreign buyers, even at cheaper prices and use the proceeds to small-scale job providing enterprises for unemployed youths. The State could react fast and return the land taken away from landless peasants and provide young farmers with loans in order to encourage production on plots of land that are still idle.
It could start paying compensations to aggrieved poor farmers in and around Addis Ababa and in the regional towns so that they could become productive citizens instead of spending their time complaining about past grievances that are not addressed anyway. These farmers were the agents and catalysts of the ongoing economic reforms but have so far benefitted nothing from the regime change.
There is no reason why they wouldn’t turn their backs on the reforms if one day they feel ignored or abandoned. The economy in a way still turning in a vicious circle; alternating between a glitter of hope and despair. In the past, EPRDF politics was dysfunctional and that led to riots and change of the regime within the ruling party. Nowadays, the economy is dysfunctional and no one knows where this would lead unless a quick fix is discovered sooner than later. First and foremost, we should start by doing away with the narrative of economic growth that has proved hollow and served only as smokescreen for the crisis that was building up silently for many year
Herald FEBRUARY 3/2019
BY MULUGETA GUDETA
