In its third extraordinary meeting, the House of Peoples’ Representatives has just raised various inquiries to Ethiopian Prime Minister Abiy Ahmed.
Appearing in person, the Premier has responded to queries of MPs in detail. The recent economic performance of the country is one area of concern. Here are some of the points touched by the premier.
As to the Prime Minister, this budget year Ethiopia could achieve the inflow of 1.63 billion Dollar Foreign Direct Investment and as compared to the last budget year, it showed a 23 percent growth. Ethiopia has a capacity of pulling foreign investment. Only the energy sector can attract 40 billion Dollars.
Among the energy sources water, solar, wind, geothermal, bio-gas and others can be mentioned. The Premier also indicated that the homegrown economic reform has put its millstone to build a resilient economy.
In the past six months though the economy was depressed under natural and manmade disasters, the country has collected 172.3 billion ETB in the form of revenue which is 92 Percent of the plan.
The achievement has a 15 percent increment as compared to last year’s performance. On the other hand, government expenditure in the last six months was 297 billion Birr; which is more than its revenue which surpassed by 39 percent as compared to last year expenditure.
The service sector has also registered a 27 percent growth and the industry shows a 25 percent increment. Over the last three months, the government has carried out different activities to improve the trade balance of the country.
In this regard, special attention was paid to increasing export earnings and import substitution. Hence, the export earning shows a 25 percent growth. So far, nearly 2 billion USD is secured from export, and 4 billion USD is expected to be obtained by the end of the fiscal year. Last year 3.6 billion USD was obtained from Export. For the past consecutive years export earnings stubbornly kept at three billion USD. As to him, one billion dollars was saved because of import substitution.
As an illustration; malt used as inputs for brewery has been substituted by 100 percent and military and students’ foot-wares were also substituted by 100 percent. Efforts are also underway to substitute textile used for students’ uniforms, he explained. Some 85 percent of raw material that is used as input for cement industries was also substituted by local products. “If the venture continues with this trend, we will achieve a lot in this regard,” he noted.
Abiy also underscored that the home grown economic reform has brought miraculous results. Improving monetary policy, establishing the capital market and reforming the financial sector are among the pillars of the registered economic growth.
Besides,700,000 jobs were created during the past six months. In modernizing the banking industry, the Premier also explained that it was able to attract more than eight million customers and transact more than six billion ETB through the mobile banking system. He also underlined that logistics also has a paramount importance in order to support economic growth.
With regard to completing the ongoing different mega projects it was the government’s major pre-occupation because they play a crucial role in stimulating the national economy. He also told the parliamentarians that the starting of power generation of the Grand Ethiopian Renaissance Dam (GERD) which is a massive hydropower plant on the River Nile, the Premier further underscored that additional project like Koisha resort which is a prestigious tourist site in the Southern region of the country will also be completed in next year.
While mentioning price inflation He said that the world economy is slowing down by 3 percent due to COVID-19 which has its own repercussions in Ethiopia’s economy. There are multiple factors that contribute to inflation manifested itself by various aspects such as food- related price hike.
The increment of price in imported items such as fuel, fertilizer and other aggravate inflation. The unbalance between demand and supply on various commodities also exacerbate the situation. The population growth which surpassed the economic growth has its own negative impact on the economy.
As to the Prime Minister, the role of brokers in distorting the normal functioning of the economy is immense. In addition to these, the cumbersome value chains which incur additional price on the commodities further aggravate inflation. Therefore, he appealed to both traders and consumers to play their significant role in fighting illegal practices rampant in the value chain.
While mentioning the price hike in the imported items which fueled inflation he mentioned a lot. For instance, the price of fertilizers increased by 176 percent, metal by 65 percent, petroleum by 85 percent, palm oil by 65 percent.
The price of containers and sugar were also raised by 283 and 35 percent respectively. He further elucidated that price inflation is a challenge for the world economy. In this case, Ethiopia encountered a budget deficit because of the repercussion of economic crises witnessed all over the world.
In order to mitigate the problems the government has taken purchasing treasury bills which have paramount importance to discounted short-term debt securities. The Treasury bills cover 80 percent of the budget, he noted. Such a measure is preferable because it reduces the money circulation in the market which also poses inflation.
As compared to the last fiscal year in the past six months, the price of food-related items has doubled. Last year, the country imported food worth 1 billion USD while in the past 6 months it imported 2.1 billion USD.
The country has also imported wheat though the local production showed an increase. The government also subsidized local oil production so as to reduce price hike. The government also has been subsidizing petroleum imports by up to 100 billion Birr.
And as compared to the neighboring countries it is very less. But some truck drivers are sabotaging the economy by transporting fuel to the neighboring countries to supply with higher prices only for their personal gain. It is better to work together with regional governments and the MPs to tackle this problem.
He also said that the nation’s debt burden is the other bottleneck of Ethiopia’s economic performance however; through diligent efforts the country’s debt has been reduced. During the beginning of the home grown economic reform, the country’s debt burden was 58 percent of the total GDP.
In the past three years, the figure has been reduced to 50 percent. On the other hand, the country’s external debt from GDP was 30 percent in 2018. Yet, currently, it has reached 26 percent. Besides, the other key point is the country’s external debt was 26.7 percent earlier and now it has dropped by 22.4 percent.
Even if the country is under various pressures, the government has not stopped paying off its debt. In the past three years, the government hasn’t taken any commercial loans from local banks.
In the coming six months, together with the stakeholders, the government planned to get involved in a “common framework”. It will be carried out in collaboration with IMF, G7, and G20 countries to transform countries’ commercial loans into concessional loan restructure. This debt restructuring will highly reduce the country’s debt.
All in all, despite many who were aiming to see the destruction of Ethiopia and Ethiopians, the government in unison with its people has made miraculous activity in order to build a resilient economy across the country and registered better results.
Though there are many ups and downs that the government has been facing, the Prime Minister has pledged the MPs and all Ethiopians to work hand and glove for further economic growth.
BY HIZKEL HAILU AND DANIEL ALEMAYEHU
The Ethiopian Herald 23 February 2022
