Ethiopia has been diligently working on its Homegrown Economic Reform (HGER) agenda, with significant achievements made in infrastructure and human capital development over the past decade. Building upon these foundations, the country is now focused on leveraging these platforms to foster private sector growth, generate high-quality jobs, sustain economic growth, and create fiscal space for further investments in infrastructure, human capital, and institutional development.
Recently, it was announced that HGER 1.0 concluded successfully, paving the way for the launch of HGER 2.0. This new phase of the reform agenda reflects Ethiopia’s commitment to continuous improvement and progress, as it seeks to address economic challenges, seize opportunities, and propel the country towards sustainable prosperity.
HGER 2.0 encompasses a comprehensive set of objectives, including the maintenance of macroeconomic stability to sustain rapid economic growth, rebalancing the roles of the public and private sectors in the economy, and unlocking new and existing growth potentials. The agenda recognizes emerging challenges that need to be overcome and transformed into opportunities, such as addressing macroeconomic imbalances, alleviating structural bottlenecks, and creating new sources of growth. To achieve these goals, policy and institutional frameworks need to be upgraded, facilitating the development of a modern and stable financial system and ensuring the efficiency and transparency of institutions that support Ethiopia’s aspirations of building a modern economy.
In a recent video message, Eyob Tekalign (PhD), State Minister of Finance, emphasized the necessity of launching Homegrown Economic Reform (HGER) 2.0 to consolidate and build upon the achievements of the previous phase. The 10-year development plan set by Ethiopia requires significant effort and reform to accomplish its ambitious goals. HGER 1.0 successfully sustained economic growth in the face of global challenges, yet serious gaps remain, necessitating a new set of reforms to ensure the realization of the 10-year plan.
Eyob acknowledged that HGER 1.0 brought about a fundamental change in Ethiopia’s approach to the economy, implementing major reforms in both macro and sectoral areas. The introduction of modern monetary, financial, and fiscal policies marked a significant shift, leading to the establishment of a vibrant Treasury Bill market that facilitated government financing and created diverse investment opportunities. Agriculture also received substantial attention, with initiatives like cluster farming, duty-free privileges, and improved access to water pumps fostering a change in mindset regarding agricultural productivity.
Recognizing the untapped potential of Ethiopia’s tourist resources, HGER 1.0 highlighted the importance of tourism as a source of growth. Efforts in this sector have yielded significant progress, but further reforms are required.
HGER 2.0 focuses on four key pillars: macro stability, improving the business and investment climate, enhancing productivity and competitiveness in sectors, and civil service reform. The reform also incorporates cross-cutting issues such as climate resilience, adaptation, and inclusivity. Clear goals have been set, including achieving food security, self-sufficiency, and reducing dependency. The State Minister emphasized the importance of individual capability, advocating for a change in approach to productivity, food security, and safety nets.
Productivity and competitiveness take center stage in HGER 2.0, with the aim of nurturing vibrant and competitive domestic enterprises that can compete regionally and globally. The reform also places emphasis on entrepreneurship, Micro, Small & Medium Enterprises (MSMEs), and startups, envisioning Ethiopia as a recognized startup nation. The role of the state is redefined, with an entrepreneurial approach that invests in innovation, research and development, and aims to enhance the nation’s productive capability for the country’s prosperity.
Civil service reform occupies a significant position within HGER 2.0, as it became evident in HGER 1.0 that overhauling civil service capability and capacity is essential for effective implementation. Lessons learned from the previous phase have guided the development of HGER 2.0, including the need to anticipate potential risks and implement measures to mitigate them. Alternative financing plans and expanded partnerships are included to ensure continuity in the event of expected financial resources not materializing, as well as to address unforeseen natural disasters or conflicts.
Dr. Eyob highlighted the inclusive nature of the reform process, involving various stakeholders through a systematic consultative approach. Inputs and viewpoints from sectoral ministers, the private sector, and partners have been incorporated, making HGER 2.0 a more inclusive and participatory endeavor compared to its predecessor, HGER 1.0.
Institutions like the Ethiopian Economics Association (EEA) and the Policy Studies Institute (PSI) have expressed their readiness to support Ethiopia’s path to economic growth and the HGER agenda. The PSI, in particular, has announced its preparedness to conduct research aimed at supporting the second phase of Ethiopia’s Homegrown Economic Reform Agenda, which will be implemented from 2024 to 2026.
According to a report from the Ministry of Finance, the ongoing reform agenda is expected to have a significant impact on Ethiopia’s macroeconomic outlook. The reforms aim to sustain rapid economic growth through intensified efforts to finalize ongoing public investment projects and increased private sector investment facilitated by the reform agenda.
Also, the sources of growth will be rebalanced and diversified, leading to a stronger and more resilient economy. While the strong recovery in imports may temporarily widen the current account deficit, the report anticipates a reversal in the medium term as exports pick up, reflecting the positive impacts of the reform agenda.
The implementation of prudent monetary policy will play a crucial role in controlling inflation, ensuring price stability, and supporting overall macroeconomic stability. Additionally, public sector reforms will focus on ensuring debt sustainability while continuing to support economic growth.
Looking ahead, the report outlines the developmental goals for the next 10 years. These goals include sustaining rapid economic growth and building a resilient and diversified middle-income economy. Key strategies to achieve these goals involve raising agricultural productivity and improving incomes for small-scale farmers, promoting diversification, technological upgrading, and innovation, fostering inclusive and sustainable industrialization, and nurturing an inclusive digital economy.
Furthermore, the reform agenda aims to eradicate extreme poverty and hunger, with a target to reduce the proportion of people living in poverty by half. It also seeks to provide universal access to affordable healthcare and ensure quality secondary education for all school-age children. Access to safe drinking water, affordable and reliable energy, and efficient transportation services are essential components of the agenda. In addition, building a modern policy and institutional framework aligned with emerging market economy standards and a well-functioning financial market system that provides affordable access to finance for investors and consumers are prioritized.
The Ministry of Finance’s report highlights the comprehensive nature of the reform agenda, encompassing various sectors and focusing on both economic growth and social development. The successful implementation of these reforms is expected to drive Ethiopia’s progress towards becoming a resilient, diversified, and prosperous nation.
BY EYUEL KIFLU
The Ethiopian Herald October 5/2023
