ADDIS ABABA- The huge allocation of foreign and domestic loans to infrastructural projects slows the returning of debts thereby increasing Ethiopia’s level of indebtedness, economics expert said.
Economics Associate Professor at Dilla University, Dr. Dawit Hayeso told The Ethiopian Herald that the prime allocation of loans to infrastructure projects has caused difficulty to the country to pay back the loan it has secured from both domestic and foreign sources.
Noting the indispensable role infrastructural development in enhancing the overall performance of the economy and nurturing private investments, the Associate Professor stated that structures need too much time and they are dependent of other variables to generate revenue.
Though it is crucial, downsizing the huge infrastructure investment is significant, he said, adding that the government needs to share the loan to other areas such as public industry development that could increase country’s export revenue and boost loan repayment capacity.
Dr. Dawit stated that the industry development is also crucial to create more jobs and additional income for citizens thereby bolstering government’s tax collection capacity and Inland Revenue, an instrument to finance domestic loan. “If the government shifts portion of the loan to build industry and ensures the private sector’s access to the money, it would significantly reduce Ethiopia’s dependence on foreign borrowing.”
Stating 60 percent of Ethiopia’s GDP is public debt, the expert noted that the country is in debt trap and the number is significantly higher than the healthy below 25 percent. As to him, over expansion of public expenditure, ineffective allocation of budget for intended purposes as well as overheated economic growth contribute for Ethiopia’s indebtedness.
The Associate Professor said that economic liberalization and restructuring the existing agriculture -service economic transformation to agriculture- industry and minimizing the public expenditure are viable measures to curtail the growing indebtedness. Ensuring the private sector’s access to loan, allocating the loan for targeted purposes, controlling capital flight and reducing the pace of loan questions are also worth equal consideration.
Prime attention should be given to form public debt management system to answer how the country reduce loan through professional analysis, Dr. Dawit said, adding that consolidated diplomatic efforts at bilateral and multilateral levels are also crucial to get debt relief and debt cancelation. According to Ministry of Finance disclosure, Ethiopia’s total debt hits over 50 billion USD, equivalent to 1.4 trillion
The Ethiopian Herald, February 5/2019
BY BILAL DERSO
