BY ABEBE WOLDEGIORGIS
After internal struggle with in the previous EPRDF ruling party four years ago, Prime Minister Abiy Ahmed (PhD) became victorious but the reality he faced was not an easy one as he started a rocky road. In addition to a heavy foreign debt burden he inherited from the previous regime, he was coerced to face a conflict that displaced hundreds of thousands of civilian population and left a remarkable number dead.
Right after his power assumption, he introduced the reform program which has various dimension in terms of politics, economic and social aspects.
To that end, the Prime Minister took various measures and the first one was forwarding his appeal to the central committee of the ruling party to privatize the crucial public profit making institutions. Among the suggested public enterprises which were identified to be privatized partially and fully were the Ethiopian Airline, Ethio-telecom, huge sugar industries, industrial parks, railway enterprise and power generation plants. According to the home grown economic reform, the objectives of privatizing public enterprises were to increase the efficiency of service delivery, and transfer technology among others.
Among the implemented privatization program based on home grown economic reform is partial privatization of Ethio-telecom to foreign company can be mentioned here in which formerly was state monopoly. The first foreign private company which won the bid to engage in telecom service provision is the Kenyan based company, Safari-com. The company is operational by now. It paid 850 million Dollar to get license and currently it has more than one million subscribers.
Many intellectuals hesitantly perceive the viability of the home grown economic reform plan. However, multinational financial corporations such as IMF and the World Bank gave a positive response to the program. They also pledged to support the program financially.
Nevertheless, right after the beginning of the implementation of the home grown economic reform program two years ago, the outbreak of war in the northern part of the country hampered the program. The multi-national financial institutions which pledged to provide money in support of the program changed their mind and suspended the money.
While making an interview with the local media recently, the economic advisor of the Prime Minister, Teklewold Atnafu said that due to the outbreak of the war in the northern part of Ethiopia, IMF and the World Bank cancelled their pledges to provide the money. He further said that for instance, IMF pledged to provide 2.9 billion Dollar to support the home grown economic reform program but it only gave 300 million Dollar and it delayed the rest 2.6 billion Dollar making the conflict a pretext.
Though the World Bank pledged to provide 3 billion Dollars, it totally halted it.
“Totally, it was expected to obtain 5 billion Dollars from the two financial institutions but it left in vein,”. Teklewold Said.
The home grown economic reform also set a mechanism to prolong the nation’s debt repayment schedule by reaching to consensus with the mentioned financial institutions. To that end, it was planned to utilize money obtained from privatizing public enterprises for debt services.
Based on the (G20 Framework), the government’s negotiation program with the Paris Club loan provider countries debt payment reschedule was interrupted due to the outbreak of the war. The nation’s foreign debt is said to be the highest as compared to other developing countries and unless it is paid, obtaining additional loan from multinational financial institutions can be said hard. The nation’s revenue collecting capacity from tax, as compared to other African countries is the lowest and unable to cover its economic development endeavor. Hence, according to experts, unless the government fulfills its debt repayment duty and secure additional loan from the financial institutions, it is hard to meet its financial needs which support the development plan.
Thus, while celebrating their new year, loan provider states and the international financial institutions are expected to reconsider Ethiopia’s need to obtain more loan and extension of debt pay back taking the peace agreement and activities that followed as good measures.
According to the National Bank of Ethiopia, when the government was at war during the last two years, the nation had been paying two billion Dollars for debt annually. As per the report from Ministry of Finance, currently, the nation’s foreign debt is rose to 29 billion Dollars in which approximately more than 50 percent of its Gross Domestic Product (GDP).
Therefore, it is fair to say that due to the outbreak of the war in the northern part of the country, attaining the goals of the home grown economic reform program is not fulfilled. Worse to these, billions of Birr, that would have been allocated for development endeavor was consumed by the war. Based on the international criterion, to close budget deficit the government is only allowed to borrow not more than 3 percent of the GDP. However, according to the Ministry of Finance, in 2021 budget year, the government borrowed 4 percent of the GDP.
Recently, when he reported plan accomplishment of the first quarter to the parliament Budget and Finance Standing Committee, Yinager Desie (PhD), the Governor of the National Bank of Ethiopia, said that in relation with the current national situation, it was unable to pursue strict finance and budget policy.
The war that was underway in the last two years in the northern part of the country heavily demolished infrastructure in addition to breaking social fabric.
While he briefed the diplomatic community members residing here in the capital a month ago, the National Security Advisor of Prime Minister, Redwan Husein, said that it is estimated that 20 billion Dollars is needed to repair the damage. The Pretoria agreement between the government and TPLF paved the way to settle the problem through peaceful means and this again created new opportunity to reinvigorate the home grown economic reform. The new additional bid to sell 40 percent of Ethio-telecom testified this.
On the other hand, campaign is underway to impose pressure against the international finance institutions to open their gets which were closed during the war. A month ago, the Ethiopian high government delegation led by Ahmed Shide, Minister of Finance, attended the annual joint meeting of the International Monetary Fund and the World Bank.
On the occasion, the Ethiopian delegate made negotiation to secure loan and to reschedule the debt payment. According toa member of the delegate, Teklewold Atnafu, an Economic Advisor of the Prime Minister, the discussion made with the two financial institutions was successful.
He further said that members of the delegation also informed the financial institutions’ officials that the government’s resoluteness to implement the peace deal agreed with TPLF and demand to obtain additional money to resume the interrupted development programs due to the war.
He also said that the new financial support demand is intended to continue the development projects in the coming three years and after studied in detail the amount of money needed is also explained. The type of loan submitted to the financial institutions also prepared based on the accomplishment level of the home grown economic reform program.
“Therefore, if things are improved, we discussed various economic issues and will make a three years plan and after negotiation we will implement it,” Teklewold said.
The negotiation with the Paris Club countries with regard to rescheduling debt payment has continued. It is supported by the IMF and the economic growth plan is prepared by considering the nation’s debt amount.
If the prepared plan gets acceptance by IMF board, the government appeal forwarded to the Paris Club countries will get positive response. In addition, it helps to lobby other financial institutions to open their get to provide loan.
The shortage of foreign currency aggravates the inflation witnessed day to day. Hence, if the foreign finance institutions begin providing loan to Ethiopia, it addresses the shortage of hard currency and will stabilize the economy.
The other direction which is taken as a mechanism to boost foreign currency reserve by home grown economic plan is increasing exports. In this regard manufacturing and agriculture sectors should play their respective parts. Crop such as coffee, oil seeds, Kchat, pulses and others are the major products and last year the nation could garner 1.2 billion Dollar from coffee export and the Coffee and Tea Authority is rigorously working to increase the volume of the export coffee product. In addition, boosting the fruit and vegetable products has been taken as additional means to obtain hard currency. The manufacturing sector also will continue to export leather and leather products, textile products, glove and shoes.
Obtaining foreign currency enables to manage inflation; one can easily import goods and stabilize the market. Importing inputs utilized for industry production also will be unhindered which again strengthen the economy. It also helps the National Bank of Ethiopia to scale up its foreign currency reserve. The negotiations conducted with the international financial institutions help to cover the government’s budget deficit. If the peace agreement reached in Pretoria is implemented as it is required, it will help continue the reconstruction and rehabilitation works which in turn enables to attract Foreign Direct Investment and to recover the economy in a short period of time, it was underscored.
THE ETHIOPIAN HERALD SPECIAL EDITION 1 JANUARY 2023
