Scholars insist the government to take practical measures on the economic reform and debit burden reduction directions passed by the ruling front, Ethiopian People’s Revolutionary Democracy Front (EPRDF), Central Committee supplementing essential points to be included.
Recently, the EPRDF Central Committee (CC) identified major focal areas which included modernizing tax system, enforcing tax laws, eradicating contraband structures, cancelling high interest debt, forwarding debt payment time, boosting foreign trade in type, quantity and quality, focusing on agricultural productions and, natural resource utilization and protections which scholars called on immediate implementation with further causes and measures needed to be taken for the enhancement of quality economic development.
Prof. Fissehatsion Mengistu, Taxation and Economics Expert, says that what should be focused on is facilitating quality economic development which involve sustainable economic growth that could be made true if it addresses the fundamental issues of the society. Therefore, Prof. Tesfatsiyon insists, “There should be clear economic policy to be achieved and the economic sectors need to be based on the need assessment of the people; consequently, economic policy should not be copy paste of foreign nations.
We need systematically and intelligently adopt policies that match the Ethiopian circumstance, or else we are on the wrong track. Policies are ought to be knowledge based.” Quality investment provides quality growth if it fulfills the promises made during the project formulations. Agricultural investments must be toward solving the problems of the local farmers, which could base on problem solving studies universities like Jimma, Ambo and Haramaya conduct, not only on the profitability of the foreign investors, Prof. Tesfatsiyon elaborated.
“The massive unemployment also has a great impact on the economy; and the youth should not be exposed for poverty and drugs; but they have to be provided with better education and jobs. The government officials of every sector need to be selfless, committed and visionary to facilitate and forward the economic development.” Dr. Andualem Goshu, Addis Ababa University (AAU) Economics Department Assistant Professor, on his part said that quality economic development requires supply and demand balance.
It should include all the market systems: good, money, labor and open economy markets. “The Ethiopian economy is in four critical problems which are inflation, foreign currency shortage, and trade deficit and debt burden.” There is high inflation of 13.1 percent currently, as confirmed by the EPRDF CC though it has fallen from about 15 percent four months ago. Therefore, the commodity market is essentially in a problem.
This happens when the demand increases on a stagnant supply or cost push that is caused by the production of goods. The construction materials cost has increased due to low production or lack of foreign currency, Dr. Andualem indicated. The previous year’s money devaluation has also influenced the inflation in that it reduced the purchasing value of the Ethiopian Birr to earn the foreign currency. This challenged the purchasing capacity of the people and pushed the cost of imported goods or raw materials.
Black market and the stolen public money saved abroad, studies indicate 26 billion USD, have also played critical roles in inflating the economy; therefore, Dr Andualem suggests “the government must act on these with both the local and international financial institutions. The illegal money in the market is estimated to be one third of the GDP.” Trade deficit has as well impacted the economy in that the import is high while the export is very low leaving them unbalanced to keep the equilibrium.
“It is a must to increase the export with high standard and better price to earn extra foreign currency. Attracting foreign investment needs much work with a strategy to benefit the nation not only with job opportunity but also with better foreign currency inflow,” Dr Andualem suggested. The debt burden has extremely influenced the nation’s economy as it is on the verge of leaving the economy in the hand of the loaners.
It is 59 percent of the GDP, according to some researches. Therefore, at least to minimize the debt distress, the government should not relay on debt; but search for local and international development partners as started with the ‘Beautifying Sheger Project’ and dealing with the Chinese Government in debt [restructuring], Dr. Andualem mentions. And development projects need not to be owned only by the public, Dr. Andualem added noticing: “However, in privatizing development projects, it is essential to be committed in controlling and deciding the profitability of the sectors.”
There should be limit with better development strategies on domestic loan; as the government has limited its debt from banks to the maximum of 3 percent of the GDP, according to EPRDF CC report, and commercial banks loaning amount needs to be limited in ensuring the safe economic development. Income policy requires reinvestigation to balance the purchasing capacity of the citizens to supplement the economy; Dr. Andualem augments that it is important to rescale salary and add tax on businessmen with limiting the market to the reasonable prices.
The scholars called on the government to boost the economic development, it must revisit the taxation system and scale, debt strategies, price policy, income policy, monetary policy economic intervention strategies and diplomacy with the international financial institutions.
The Ethiopian Herald, May 17/2019
BY DIRRIBA TESHOME
