BY ABEBE WOLDEGIORGIS
Recently, the Ethiopian government announced that the total domestic and foreign debt of the country rose to 2.01 trillion Birr. The Ministry of finance report indicates that the total debt is counted up to December 2020.
The debt attributed to the loan taken by the central government and the guarantee given by the government to the public enterprises to obtain a loan and the total none refunded money rose to 54.7 billion dollars.
The exchange rate for the money that should be refunded is calculated based on the time when the loan document was prepared. Based on this calculation, the government local debt is around 945 billion Birr.
In an exclusive interview with The Ethiopian Herald, Eyesuswork Zafu, Hibret Insurance (CEO) said that repaying the debt would not be an easy task. Probably, it is the first time in its history that the country found itself in such a precarious situation.
He further said that he remembers that during the Derg era, though the government faced a huge shortage of hard currency, the nation delivered its debt service duty by whatever means.
“But the current debt is not an easy one. Hence, negotiating the matter with loan providers to prolong the payment schedule is essential,” he said.
If it is possible, requesting the loan providers to give amnesty should also be taken as a way out, as to him.
Ethiopia’s major hard currency earner commodities are agricultural products. The absence of value-addition on these commodities and the price fluctuation in the international market affect the nation hard currency earning capacity.
As to him, due to the political turmoil witnessed in the various parts of the country, the nation is preoccupied with managing the crises. As the result, this and the coming years’ agricultural products volume might fall. This would have its own impact on the volume of export severely affecting the export earnings.
Asked whether the loan provider countries would put pressure on Ethiopia to repay the loan on time, Eyesuswork said that Ethiopia will try its level best to repay the loan but as the debt is beyond its repaying capacity, nothing will happen. Probably they might try to block additional loans to Ethiopia.
Ethiopia is an agrarian economy in which the agriculture sector is responsible for 70 percent of foreign currency earning. The sector is rain fed and highly vulnerable to drought, pests and herbs and in time of adversity, the volume of the production experiences decline which in turn affects the quality and quantity of the products.
As to Eyesuswork, agricultural products are exported in their raw form with no or very little value addition and this again affects the competitiveness of the product in the world market.
The price fluctuation of the products in the market affects the nation foreign currency earning capacity. This again hampers debt repayment ability.
Not only this, Ethiopia is a major importer of foods, edible oils and other commodities which could have been substituted here.
For the importation of these items, the nation spends its scarce hard currency. Therefore, to enhance the nation debt repayment capacity, it is essential to export agricultural products with value addition and substitute imported agricultural products.
The other mechanism which supports the nation foreign currency reserve is drawing more money from Ethiopian diaspora in the form of remittance. According to the recent diaspora desk in the Ministry of Foreign Affairs, this year’s remittance coming from abroad has shown a decline due to the outbreak of COVID-19. Hence, this makes it necessary to look for other options.
As to Eyesuswork, The government intention to partially privatized Ethio-telecom in this regard plays crucial role in raising the nation hard currency reserve. The foreign companies who would win the bid will invest in hard currency to raise the institution’s efficiency and competitiveness. This provides the nation with multiple advantages including in raising its hard currency reserve.
With regard to repaying the 945 billion Birr domestic debt he said that, as long as the government wants to cover its expenditure and as long as the loan is avails borrowing and refunding will continue and the national bank reports the matter to the Prime Minister.
Most public enterprises accessed loan from commercial banks and did not refund the money. Billions of Birr provided in the form of loan to sugar projects is wasted and such situation further harms the national economy.
As to him, 90 percent of the money in banks belongs to the shareholders and the depositors and only 10 percent of it belongs to the bank and is used for paying interest and to cover administrative costs.
Asked whether the banks face challenges in case the depositors request to withdraw their money, he said that not all depositors take their money at a time; hence, there is no concern in this regard. But if it happens, the government might be forced to print additional money which has its own impact in terms of inflation.
Months ago, Prime Minister Abiy Ahmed explained the nation debt repayment capacity to the parliament. He said that had the government not introduced economic and finance reform scheme, the Commercial Bank of Ethiopia would have found itself in bankruptcy.
Among the measures that have been taken by the government are transferring the debt of the public enterprises from the Commercial Bank of Ethiopia to the government debt step by step.
According to some sources, the previous regime (Derg) borrowed money from the Soviet Union is not repaid. And the International Monetary Fund still regarded the money as foreign debt. The nation total debt is about 50.8 percent of the GDP. The debt repayment duration is 15 years.
The Ethiopian Heraled 17 January
