BY TEWODROS KASSA
The economic issue was one of the major areas of that Prime Minister Abiy Ahmed (PhD) dwelt at length during his latest address to the House of Peoples Representatives (HPR) on Tuesday.
The premier said that the export sector has been recording successive progress over the past three years amid Covid-19 and other hurdles. The sector has shown promising progress for the first time in the stated period. If we take this year’s performance, for instance, it has proven a 21 per cent increase.
Throughout the past 20 years, the economy has not been registering factual progress; nevertheless better signals of progress have been witnessed in the past eight months.
Surprisingly, the exports sector has shown greater improvement in the wake of the Covid-19, drought, and locust’s which many countries have taken as a daunting factor for economic progress.
As to the Premier, different gold extracting companies were shut down ahead of the reform. However, through conducting intensive dialogue with stakeholders, the reform government has been addressing defies of various kinds through employing new procedures. In doing so, the country’s gold export performance is now more than double.
In the coming few months, the number of investors who will engage in gold extraction works will intensify. In contrast, domestic remittances have declined due to global pressures. However, despite the pressure, we have increased exports under pressure.
Although the trade balance is measured in terms of total wealth, when we started the reform in 2018, the trade deficit was 14.7 per cent which is below zero. In 2019, it dropped to 13 per cent and it became 10.1 in 2020. In the reporting period, it has shown a 4.6 per cent change.
This is a big jump in economic growth even if the change is not restricted in export growth. Currently, the gap between imports and exports is narrowing by controlling imports. Still, it has shown a four per cent decrease. What comes next is, balancing the import-export trade.
If we look at government expenditures and revenues, it is often said that the country’s revenue is relatively low. But when we look at the change based on the plan for the homegrown economic reform, it shows how successful we have been.
Ethiopia’s total revenue in 2018 was 176.9 billion Birr. In 2019, we improved slightly and earned 196.5 billion Birr. In 2020, it was 228.9 billion Birr. Over the eight and so months, the country has gained 191 billion Birr in revenue. This means we have achieved better results within eight months than the task performed over the past three years. In short, the revenue collected over the past eight months is greater than that of 2019’s annual revenue by five billion birr.
Even if this is visible development, it does not mean enough. Having progress in mind, we have now developed a 10-year prosperity plan.
The country spent 97 billion Birr for capital expenditure in 2018; 101 billion in 2019 and 124 billion last budget year. The budget allocated for capital expenditure is by far greater than other years which is 160 billion Birr.
As revenue grows, the capital expenditure increases and there is ample opportunity to continue existing projects and respond to public demand. If Ethiopia injects 50 to 100 billion Birr into its economy, many things can be reversed. There are so many opportunities in Ethiopia that don’t require capital.
The country’s loan was in trouble during the past years. Due to the limited resources available at home, it is hard to manage as we wish. Yet, over the past three years, there has been promising growth and transformation.
The Prime Minister also pinpointed the country’s capacity to pay its debt. In 2018, its debt burden ratio was 37.6 per cent which was more than 50 per cent if the domestic loan was added. In this case, donors fear the country’s position as it might not repay its loan. In 2019, the loan was reduced to 29.4 per cent following effective policy measures taken by the government. In 2020, it dropped to 26.8 per cent which means a 10 per cent change within three years.
As the macro economy has made a big difference in the current situation, we will shift the country from a high debt burden countries list to the middle level within the next three years.
That is why international financial institutions are trusted and willing to toil with us. These international financial institutions have now adjusted the opportunity to lend more as the country makes big progress and can repay its loan.
In terms of monetary policy, the distribution of cash, savings and credit has shown an increase of 15 per cent, 25 per cent, and 38.4 per cent respectively. On the other hand, contraband and cash transactions have been affecting the country’s economy before the currency change. Accordingly, contraband and cash transfers have decreased while savings and revenue have increased due to the change of the currency.
Although many tasks remain to be done, contraband has decreased and 6.2 million citizens have opened a new account in banks and have saved 98 billion Birr. In a short time, farmers were introduced to the banking system as is directly related to savings.
In 2018, Ethiopian banks have collected a total of 730 billion Birr. They are expected to earn some 899 billion Birr in the next year. For the first time, last year they earned 1.04 trillion Birr. This year, it has earned 1.2 trillion Birr in just six months. An additional 200 billion Birr has been deposited in the banks. Overall, the three-year difference is significant in terms of lending and investment.
Banks lend 170 billion Birr in 2018. Of the total, some 45 per cent has gone to the private sector and the remaining left to the government sectors. To stimulate the private sector, the lending capacity of financial institutions has increased from 170 to 236 billion Birr. Of this, 61 per cent was given to the private sector, while the government sectors took the rest.
In 2020, some 271 billion Birr loan was primed, the private sector consumed 70 per cent of the allocated budget while the government organizations were used the remaining. The loan allocated for this budget year is greater than the capital primed in 2018 which is 100 billion Birr.
In just six months of 2020/2021, 155 billion birr loan was disbursed for private and government institutions.
The ongoing construction boom in Addis Ababa and the shortage of cement and iron were also a result of the country’s economic growth.
At the same time, there is a gap in supply and demand, although there are obvious problems. Despite overcoming these difficulties, we have achieved remarkable economic growth over the past three years. There is a problem that we have not solved inflation. It directly affects the low-income earners and low-income communities.
The Ethiopian Herald 27 March 2021
