Following the breakneck reform in Ethiopia almost a year ago, Prime Minister Abiy Ahmed and his administration have been striving to establish robust diplomatic ties with various strategic partners across the globe.
As the new administration received the country with an empty treasury, particularly in terms of hard currency, the diplomatic activities have mainly prioritized the economy. Accordingly, the Premier and his diplomatic team have been successful in conducting economic diplomacy and convincing various countries to up their economic ties with Ethiopia.
Ethiopia has been playing its card well to gain the support of the West, East Asian countries, the Arab world, and the Diaspora community. As a result, the country has gained some 13 billion USD since the Prime Minister assumed office. The Diaspora trust fund, grants, loans, interest cancelation, and other development agreements with the Arab countries are considered among the outcomes of the vigorous diplomatic engagements.
The loan interest cancelation and the two concessional loan agreements amounting 264 million USD (equivalent to 7.6 billion ET) to supporting power and irrigation development efforts that were recently signed with China and Republic of Korea respectively are the most notable recent ones.
One of the agreements with Korea is to finance Southern Extension of the National Electricity Grid Power transmission Project that aims to supply surplus power in the northwestern part of Ethiopia, provide stable power to the OmoKuraz Sugar Factory currently under construction, the Arba Minch Industrial park to be built in the future and residents in the area, contribute to export-oriented manufacturing infrastructure, balanced regional development and quality of life in the southern region.
The project loan amounts 170 million USD and is expected to be completed within five years. The second agreement is to finance Ground Water Irrigation and Rural Development Project amounting 94 million USD with major objectives of contributing to a sustainable increase in agricultural production, construct stable irrigation infrastructure, increase farm household income and alleviate the absolute poverty covering the area of Ada’ a –Becho Plain in Oromia Region Wosensseged Assefa, economist and consultant, tells The Ethiopian Herald that ever since Ethiopia entered international trade, it has been encountering trade deficit.
“That is why the Derg regime had left the country with nine billion USD national debts. Then after 27 years, the national debt has reached 26 billion USD.” In the 2017/18 fiscal year, the value of Ethiopia’s imports is reported to be 12 billion USD while its exports were three billion USD. “Thus, to fill the nine billion USD gap, loan and grants are the last alternatives.” “However, the country was on the verge of being prohibited from loans and grants.
It was in this critical situation the new Prime Minister assumed power. Thus, investing in economic diplomacy particularly concessional agreements has paramount importance. The government of Abiy Ahmed has gone far to fill the country’s export trade value which is less than the remittance gained from the diaspora. Wossenseged further says that the recent accords signed between Ethiopia and China are grand achievements as one can see it from the Ethiopian side. But what lay beneath is what the Chinese have gained in return.
Ethiopia had been a country stretching its hands for loan and grant in the names of government and public and then irresponsible individuals embezzle it. For instance, according to the National Bank 2017/18 report, 3.5 billion USD was looted from the country, he added. Abiy’s administration has been devoting to erect the county’s economy.
However, to judge its fruitfulness, it is essential to make sure that the agreements will not violate the country’s national interest. Wossenseged finally suggests that along with international diplomacy, the government is needed to launch deals with Ethiopian nationals who have deposited money in foreign-based financial institutes.
The Ethiopian Herald, May 9/2019
BY LAKACHEW ATINAFU
