On Monday, Prime Minister Abiy Ahmed presented ten month report of his government to the Parliament. On his report, the Premier touched upon several issues: peace, democracy, security, economy, diplomacy. Using this as a ground, The Ethiopian Herald hereunder presents the economic part of his report under various as follows…
For this fiscal year, the government has taken several economic measures to stabilize and recover the economy. Protecting the general economy, particularly, the financial sector, from crises was one of the focus areas of the government. The other focus was to transfer the economic sector plan from aggregate demand based economic growth to market based supply-side economic activity. And according to the PM, the economic activity has been lead through these two ideas, and the performance in each sub-sector of the economy goes as follows:
The Macroeconomy
The economy of the nation has been growing rapidly for the past years. This economic growth has played a key role in reducing poverty. For consecutive three years the economic growth of the nation was an average of 8.65 percent and in 2018 it was 7.75 percent. However, due to political and economic instabilities, this economic progress was threatened in the last three years, leaving its own adverse effect on the economy.
So, the major goal of the government has been to stabilize and recover the economy of the nation. With some exceptions, economic indicators have showed that the supply and demand side of the economy has recovered. Going by these indicators, the economy is expected to register 9.2 percent growth in the current budget year.
Job creation
The other huge challenge facing our economy is unemployment. So, creating job opportunity was the other area where the government had been working aggressively. Our economy doing well is only beneficial when it contributes to helping citizens change their lives for the better. In this regard, it has played a key role in lifting up the economy from deep rooted structural challenges. This can be taken as a success. If we keep on running with better speed and pace there will be better economic growth for the coming fiscal year.
As to the report, currently, the economy of the nation has a potential to create one million jobs every year. However, there are more than 11 million unemployed citizens all over the country. It is expected that every year, additional two million job seekers will be added to the unemployed group.
As a means to combat the problem in a sustainable way, a commission has already been setup, and an effort is already underway to create three million jobs for the coming budget year. So far, 1.4 million citizens have become beneficiaries from the jobs that have been already created. Micro and small scale enterprises take the lion’s share in this regard. In compassion with the previous years, there are an increase number of job opportunities. However, there is still gap taking the number of job seekers into account.
From this onward, we have to measure our economic performance
based on the job it is created. We have to expand opportunities for citizens. So far, public mega projects, micro and small scale enterprise and public service infrastructure have done most of the job creation. This trend has to be changed in the future. The private sector has to be encouraged to create jobs. What is more, we have to produce skilled man power that can work outside of the country and generate more income. Thus, in the coming times, our focus should be on how much job did our growth/development created.
Public Revenue and Expenditure
According to Abiy, within the last 11 months of the budget year, 178.5 billion birr is collected, which shows ten percent spike compared to the previous year. The report indicated that 189 billion birr [in total] is expected to be collected at the end of the fiscal year. In comparison with the previous year, it is greater by 176.1 million birr. In general, the expectancy is that we will collect more than 80 percent of our revenue goal.
In regards to expenditure, it will not be more than what was set in the beginning. The budget gap/deficit will not be more than what was planned when the budget was passed. In general, while the fiscal performance this year is fairly good taking into account what has unfolded; much works needs to be done, especially, when it comes to revenue collection.
Export Performance and Foreign Exchange
Regarding export performance and foreign currency earning, although huge efforts have been exerted to grow export in quantity and quality, the foreign currency earned from them (export goods) in the fiscal year is still low. However, as the revenue collected from the service sector in the past 10 month showed 25 percent growth, it has enabled to raise foreign currency earnings by 10.5 percent. In addition, as a result to the efforts exerted to improve foreign currency revenue from other revenue sources like money transfer, FDI, foreign aid, foreign revenue saving, 12.4 billion USD has been gained in the past 10 months.
This is a 20 percent spike compared to the foreign currency earned in the same period last year.
Going forward, the aim is to strengthen our foreign currency earning capacity. And to this end, we will work to come up with strategies that will allow us to solve the structural problems on our export trade in the short, medium and long term, boost service and money transfer earning, and strengthen our FDI attractiveness.
The Financial Sector
In regards to the financial sector, the capital reserve of every banks showed 22 percent growth compared to same time last year. In similar vein, new loan given out by the banks is 35 percent higher compared to last year. Out of this loan, the share of the private sector (including associations/cooperatives) is 65 percent, and the total loan directed to the private sector is 54 percent higher than last fiscal year. The loan given out to the public sector is 35 percent, which is higher by 10 percent compared to that of which was given to public development enterprises in the last fiscal year.
In general, it can be said that the banking sector is doing fairly well, and the fact that most of the loan went to the private sector goes out to show that it follows the strategy that is put in place to strengthen and encourage the sector.
Inflation
Regarding (price) inflation, there was a plan to lower inflation rate to a single digit in the current fiscal year. Various efforts have been exerted to stop the inflation rate, which reached 16.8 percent last fiscal year, and make sure that it does not jump this ceiling, and further decrease the rate to the planned goal. While inflation for the most part of the year was under 12 percent, it jumped to 16.2 percent in May.
On top of its negative impact on investment, we understand that it hurts the poor and those with low income level. So, there will be an integrated effort to control, and reduce inflation rate. And as it is important to take measures by conducting thorough analysis on the May spike, a task-force that is made up of high government officials and experts has already started to work on it.
Privatizing State Enterprises
With regards to privatizing key state enterprises, the PM reported that works are already underway to prepare the enterprises that have been chosen for partial and full privatization. Establishing the sector’s monitoring entities, determining the value of assets of the companies to be privatized, and undertaking reform works to improve the value of companies to be privatized is being done.
As a result, as per their preparation level, they are put in accordance with whether they are privatized fully or partially. On the front row, the companies identified for privatization includes telecommunication and sugar development factories. And next, energy, train corporation and logistics institutions are given attention, while industry parks and Ethiopian Airlines are found in the last row.
Looking at the macroeconomics’s performance in the 2018/19 fiscal year, it can be said that it was satisfactory, compared to the goals we set on the beginning of the budget year. Our goal of making sure the financial sector or the overall economy do not enter into more problems has been successful. In addition, as the economy is looking to bounce back, we should further elevate it to another level by sorting out its productivity and structural problem.
The Way Ahead
With regards to the economy, it is impossible to maintain the consecutive economic development that has been achieved through the previous development finance model. So, it is necessary to come up with an alternative financial model by involving every development actors.
More than anything, the macroeconomic distortions the economy faced should be fully arrested in order to maintain growth in the coming years and get better results. If not, inflation that is out of control and other related crisis may be unleashed.
As our economy’s productivity is low, we will initiate activities that would lead us to increased productivity, and solve the supply issue we see in the economy. It is important to support the private sector and make it an active participant in the economy. And in order to do that, we should create conducive environment for investment at federal and state level.
We will work closely to ensure peace and security, and make sure everyone is focused on development endeavors. When citizens are displaced as a result of instability, it is not only about them having nothing to eat or drink, but also about not having the product they would have otherwise produced under normal condition, or not having the product at the market due to lack of security. This will exacerbate inflation. So, securing our peace has huge contribution to our growth and development. Strengthening the works initiated to modernize the agriculture sector will be another focus area going forward.
Tourism and the Environment
Regarding tourism – Huge works will be done to increase tourism attraction. In addition to improving our tourist attraction (sites), and making the destinations suitable for tourists, the effort to create new tourist destinations will bear fruits. The work to renovate the national palace and making it an [urban] tourist site will be completed by September, while the work to develop the city’s rivers will commence. In addition to attracting tourists, it can also serve in making the city more suited for its residents and Ethiopians.
Environment protection is another area where the PM focused on during his report. As to him, using the rain we have to cultivate more crop and protect our environment is the way to go. In light with the drought and famine that hit us repeatedly, the country has planned a strategy to plant four billion seedlings for this Ethiopian rainy season, which has never been attempted before. He noted that the environmental protection and seedling plating needs active participation of all citizens.
As part of this plan, the nation has set July 29 for seedling plantation where every Ethiopians will participate to plant 200 million seedlings within a single day. This environmental protection and seedling plantation must be a coordinated and sustainable effort where everyone will take part.
As part of environmental protection, beautifying and cleaning towns will be the other major task of every Ethiopians. The PM has also conveyed a message to create prosperous Ethiopia through synergy and positive thinking.
The Ethiopian herald July 3/2019
BY STAFF REPORTERS
