Being endowed with a range of means to generate income, ensure food security thereby seeing poverty off for good from the soil, Ethiopia has been working hard peculiarly focusing on potential sectors such as agriculture.
The country has been foreseeing a 7.9% economic growth in this current fiscal year. Besides, the government has repaid 9.9bln USD commercial loan, as to the words of the Premier.
Responding to the questions and queries posed on him from members of the House of People’s Representatives at the 3rd year 14th Regular Session of HPR Tuesday, Prime Minister Abiy Ahmed (PhD), stated that the ongoing reforms have been channeling Ethiopia’s economy in the right direction and the country is expected to register a 7.9% growth in the current fiscal year.
According to the Premier, Ethiopia is amongst the world’s fastest-growing economies, and the reform in the country is also of paramount importance in maintaining the performance of the export market that the country is amassed some 4.5 billion USD in exporting goods and services to the global market in five months. Also, the country imported goods and services with a cumulative value of 7.5 billion USD in six months.
In the reported period, about 265 billion Birr was collected from domestic sources and the figure surpassed that of last year’s same period by17%. Moreover, around 1.5 billion USD was generated in five months from Foreign Direct Investment (FDI) and the projects have created over one million jobs.
He said, “Over the past five years, Ethiopia has repaid over 9.9 billion USD in commercial loans and it has not taken any additional loan in the stated period. In this regard, the rumors that have been circulating about the country’s loan repayment inability are baseless.”
As to the Premier, the government allocated 83% of the 170 billion Birr loan it had been disbursing in the half-year to the private sector and Ethiopia’s thriving financial sector keeps its auspicious progress. Currently, the commercial banks’ aggregate saving has reached 1.2 trillion Birr,
Under the ‘Let Ethiopia Produce’ campaign, the country has managed to boost its industrial production and similar successes have been witnessed in the agriculture and service sectors, he added.
The Premier further emphasized that the government’s involvement in supporting startup businesses would further boost the performance of the industry sector and the good results witnessed in the transport, telecom, ICT, and other sectors would positively contribute to Ethiopia’s economic growth.
Furthermore, the establishment of a capital market would attract more investors as it put illegal actors on the right track. Currently, Ethiopia’s tax-GDP ratio is below 10% and a reform must be undertaken to enhance the tax collection system and boost the country’s revenue.
The soaring inflation, internal conflicts, climate change, global crisis, as well as external pressures have posed significant setbacks on the Ethiopian economy. Failure to produce sufficient products is the primary reason for the rampant inflation, which is also a global challenge. The illegal market chain is another factor contributing to the mounting inflation.
The government is implementing the ‘Ethiopia Produces’ initiative so as to address such challenges and enhances productivity in wheat, rice and other agricultural commodities. In so doing, Ethiopia has been one of the countries recording rapid growth in the current year; an economic growth of 7.9 % is expected.
Particularly, the agriculture sector has shown very effective performance, adjustments made in fiscal and monetary policy are also registering significant changes.
He further highlighted that consolidated efforts are underway in employing fiscal policy to ease the debt burden through subsidizing public enterprises systematically from various sources. “For instance, we have cut the Ethiopian Petroleum Supply Enterprise’s loan of 180billion to 100 billion USD and we are expecting the loan would be shrunk to zero within four to five years.”
As to him, gaps have been witnessed in the implementation of the monetary policy and measures that are being taken to settle the inflation are somehow affecting money transactions.
True, effective Climate-Resilient Green Economy (CRGE) strategy is of paramount importance in fostering inclusive rural development in the agricultural sector in Ethiopia. Besides, the government is working to strengthen the interconnectedness of the social, economic and environmental dimension as essential to sustainability.
It is well comprehended that Ethiopia is one of the African countries that has adopted a green economy strategy, and it consists of effort of achieving middle-income status and building climate resilience. Under the auspicious of such promising trajectory, Ethiopia is planning on tapping into international climate finance, that is necessary to achieve economic growth. The effort geared towards fostering holistic rural development in the agricultural sector in the country.
According to the Premier, the much anticipated monetary policy introduced in August 2023 to tackle inflation has fallen short of expectations. Besides, the government has been working towards meeting country’s ambitious vision for curbing inflation and to date various measures have been taken in stabilizing the market.
As to him, a modest improvement in addressing inflation is being recorded and efforts are also exerted to reduce inflation further.
It is to be recalled that though there are challenges compromising economic growth like inflation is expected to remain in double digits in 14 countries, including larger economies in the region such as Ethiopia, Ghana, and Nigeria.
He has also emphasized a significant gap in monetary policy implementation as a major factor contributing to the effort geared towards addressing all the problems.
Additionally, the Prime Minister highlighted that controlling and reducing inflation has become the foremost challenge, not only for Ethiopia but also for many African countries and even developed nations.
“One of the contributing factors to rising prices is our inability to produce in accordance with demand,” he explained. “Given that the country cannot satisfy its own demand, we are compelled to procure numerous items from the international market, where prices are currently experiencing unprecedented increases.”
In addition to inflation, the Prime Minister outlined a range of macroeconomic challenges facing the country, including a substantial current account deficit.
Another lingering macroeconomic issue mentioned during the parliamentary session is the insufficient improvement in government revenue collection, which does not correspond to the size and growth of the gross domestic product (GDP).
He referenced the experiences of African countries such as Morocco, which successfully raised the tax-to-GDP ratio to 30%, and noted that even some East African countries achieved a tax-to-GDP ratio of 15%.
The Prime Minister emphasized that for a country like Ethiopia with a GDP of eight trillion birr, the current tax-to-GDP ratio, standing at less than 10%, is insignificant. “In a country with lower government revenue collection, significant economic development is not feasible.”
As to the Prime Minister, due emphasis will be placed in all sectors to achieve 7.9 percent economic growth during at the end of the current Ethiopian financial year. By increasing government revenue collection, it is planned to collect 441 billion birr from tax revenue.
In a nutshell, economic development transforms an economy from one step to another. If Ethiopia follows a normal pattern of high growth, the agricultural sector will have increased more than three-fold. Since agriculture initially dominates the economy and employment, there is an issue as to what its role should be in getting from here to there. In the normal process of economic growth, nonagricultural sectors grow more rapidly than agriculture, particularly in rapid growth contexts. The rapid economic growth Ethiopia has been registering has to be well consolidated and acknowledged. In so doing, realizing the agricultural productivity is possible and that agricultural growth plays a key role in economic growth across the nation if utmost effort is exerted and citizens are quite determined to do so. Yes, the government of Ethiopia has taken a position on this matter as it is committed to well foster rapid growth of agriculture as a means of accelerating the economic transformation.
An agriculture led transformation of the economy of the country needs to be provided with due emphasis. Here, to change the low-productivity of agriculture to the higher level exploiting potentially highly productive resources and efforts and accelerating economic development is vital. To that end the government is making large investments in roads, education, health institutions expansion and agricultural productivity.
BY MENGESHA AMARE
THE ETHIOPI0AN HERALD THURSDAY 8 FEBRUARY 2024
