The national coffer was at risk of running out of forex with the problem reaching at its peak during the early days of the current reform, which already matured to one year of age this April. Most critical among the measures taken by the government was then to lift the country out of the abyss of forex crunch. To fuel the fire, the country’s debt obligation swelled to as big as 400 billion Birr. But in the wake of this grave problem, the new administration of Prime Minister Dr. Abiy Ahmed’s unprecedented political decisions prevented the domino effect of the currency shortage.
Similarly, the political achievements like the release of prisoners of conscious and thousands of political prisoners, unblocking of blogs, the reuniting of the two synods of the Ethiopian Orthodox Church, the rapprochement between Ethiopia and Eritrea, delisting political parties previously declared terrorists, among many others, have also brought huge returns to the country. Hence, subsequent diplomatic effort of the premier and his administration has not only received regional, continental and international acceptances, but it has also championed in relieving the country from facing acute currency scarcity.
It has been reported that the country obtained nearly three billion Birr additional currency in the form of loans and grant. The total foreign earning over the last eight months peaked to a record high 13 billion USD, as the premier said recently. The activities should be applauded indeed. Yet, the nation has huge potential to expand earnings. In the first place, the government has to draw policies that encourage more foreign earning.
Addis is the third diplomatic seat in the world, meaning there are many employees salaried in forex. Hence, if long-term deposit in forex is allowed, the crunch will likely be alleviated. In addition, the black-market runs significant amount of currency. The market is indeed illegal. But policymakers must see into ways of regulating this area. So far, various measures were taken on the operators. The fact is, however, the market still keep on existing.
The point is not to bend the law. But, marco-economists too suggest that providing laws to the formal operation of private forex bureaus is a low-hanging fruit to counter currency black market. Side by side with such activities, the government should tripled and quadrupled activities that could substitute imports. No doubt, at macro level, slashing imports amounts to public expenditure on infrastructure. The industrial parks that have already started operation and those in the pipeline can do the tricks when it comes to import substitution.
More importantly, encouraging innovation could prevent outflow of currency. The economic measures taken in short period have improved the country greatly. Now the clock is thinking and the second year of the reform have already started. The forex shortage should see lasting solution with wide array of measures that would be implemented in the short, medium and long-term.
To achieve this, pertinent public officials should create platforms for macro-economic scholars and other seasoned citizens’ to contribute their policy options. For instance, the recently held Addis Wog forum which the Office of the Prime Minister staged brought scholars together to deliberate on various issues. Surely, the platform enabled policymakers to diversify policy choices.
The Ethiopian Herald April 05/2019
