It has been stated that Ethiopia has been registering rapid economic growth for more than 10 consecutive years. For instance, from 2004 – 2015 an average of 10.2 percent growth was registered. However, the targeted 11 percent couldn’t be attained rather it has detained to single digit in the second Growth and Transformation Plan since 2016 as draught was one factor.
The economy has shown recovery to some extent in 2017 by registering 10.2 percent growth. Last year the growth was 7.7 percent This was learnt when governor of National Bank of Ethiopia, Dr. Yinager Dessie explained about the current economic and financial situation of the country. “The nation’s economy has been growing in the past years.” Data indicate that there was economic growth every year in the years earlier to 2016.
Though there is growth since 2016 up to now, these are the periods in which economic deceleration and fluctuation happened, he noted. Changes in infrastructure, education health and poverty reduction have been recorded in the past years as a result of this economic growth, as to Dr. Yinager though there is controversy regarding the adequacy of the changes. The fact that economic growth has been registered is not relaxing since it is not liberated from set back and threat.
Multiple threats befall to the economy because of some processes the country had been going through in the past years and intended deeds especially those are related to export trade and failed to achieve. Dr. Ynager explained that the deceleration of export trade in the past four years has imposed negative impact on the economy. The deceleration of the export trade is basically occurred as a result of inadequate performance in the manufacturing industry and the income from minerals and agriculture sectors did not fit the expected limit.
Though it was planned to achieve an average of 30% growth of export trade in the second Growth and Transformation Plan period, it could not hit the target. The instability of world market and economy as a whole and the economic deceleration in China in particular, contributed their own share for the slowing down of Ethiopia’s export trade in addition to insufficient supply of products from manufacturing industry, mining and agriculture in quantity and quality to the foreign market, he further explained.
“As a result of slowing down in the export trade,” said Dr. Yinager, “forex scarcity has occurred and the export trade in the mining sector has severely declined.” The amount of hard currency gained from the mining sector is largely decreased because of contraband trade especially on gold mineral. For instance, the amount of hard currency gained by exporting gold in 2014 was 430 million Dollars but last year only 32 million dollars was gained.
The deceleration of export trade is directly linked to agriculture, minerals and manufacturing industry which is called “Real Sectors” as to the governor and over 73 percent of Ethiopia’s export trade is based on agricultural products like coffee, cereals and oil seeds. Adding, he said that the large amount of export trade is earned from agriculture. Though the manufacturing sector is enlarging its share from time to time, it is minimal yet.
Thus, when we talk about deceleration of export trade, we are talking about the growth of agricultural sector. As the current problem is highly tied with supply, the major way out is resolving this problem, he emphasized. In order to import any essential input to a nation’s economy and sustaining the economy, as to Dr. Yinager, the lasting cure is advancing the supply of foreign currency. This can definitely be achieved through navigating the export trade cautiously.
It is quite sure that hard currency dearth will occur if there is failure in performing export trade towards its scheme, he stressed. Pointing out the gateway, he said, “Forex can be secured not only from export trade but from different sources. These can be Foreign Direct Investment (FDI), loan and aid from different countries and international organizations. Proper utilization of forex obtained from these sources is thus, indispensable.
However, these are not compatible with the forex obtained from export trade rather they are supplementary options. Therefore, the already began deeds aiming at accelerating the export trade will continue fervently.” According to Dr. Yinager, it is hard to find any export trade sector liberated from vulnerability of contraband. This illicit deed weakened the sector by targeting livestock, gold, and coffee and in turn aggravated the scarcity of foreign exchange. Practical activities are underway from the government side to cut the problem from the grassroots aiming at regulating the movement of contraband.
In general, resolution ideas that enable safeguard export trade are provided and pragmatic actions are proceeding, he enlightened. The imbalance between the demand for hard currency from the side of beneficiaries and the amount banks can provide makes hard the accommodation of all requests, as to Dr. Yinager. The only option at hand is providing the available forex for importing basic goods. National Bank of Ethiopia is working with the association of banks in the way they utilize the limited amount of hard currency properly, he said.
Keeping up his explanation, Dr. Yinager said that government has refrained the application of especially new projects except the already began mega projects and certain road constructions.This deed is underway since last year and budgeting new projects is delayed, he noted. “The scarcity of forex is putting pressure on loan pay back too. The country has been receiving loan for many years and now is the time to pay back the loan. During the time of securing loan in the GTP II period, the average growth of export trade has reached 30 percent and it was assumed the capacity of loan paying back will grow in the same level.
The utmost way to minimize foreign debt is raising the acquisition of forex” said Dr. Yinager. Since Dr. Abiy Ahmed assumed the state power, as to Dr. Yinager, extending the debt paying time and reduction of interest is achieved as a result of negotiation made with China the major provider of loan which is 85 percent. In addition, many countries have shown willingness to support the nation’s economy.
As a result, 1 billion dollars from United Arab Emirates, 1.2 billion dollars from World Bank and 500 million Dollars from Saudi Arabia was gained. The financial support enabled the country minimize forex scarcity induced by deceleration of export trade. Other measures enable minimize debt burden are being taken as to Dr. Yinager and the nation’s loan condition should not continue in the same manner.
Therefore, earning additional short term loan with high interest is ceased until the current debt is significantly minimized, he explained. The export trade is being evaluated every 15 days by a committee formed and led by higher government officials and various activities are underway aiming at advancing the forex acquisition, he noted.
The Ethiopian Herald, March 19/2019
BY BACHA ZEWDIE
