According to the World Bank’s report on the global economic outlook, Ethiopia’s economy was critically affected by the two-year war in the northern part of the country. The Pretoria agreement signed in 2020 brought it to the war to end. But it has left its daunting impacts behind.
By the same token, the emerging market and developing economies will be buffeted by economic headwinds from multiple quarters: pressure on weak health care systems, loss of trade and tourism, dwindling of remittances, subdued capital flows, and tight financial conditions amid mounting debt.
It is highlighted that countries need to undertake comprehensive reform programs to improve the fundamental drivers of their economic growth.
On the other hand, when the economy is affected by the external shake, countries that rely on rain fed agriculture and importing goods and services from abroad like Ethiopia suffer a great deal because of the imported inflation and the public faces the brunt of high living cost.
Taking this reality into consideration, the Ethiopian government has launched a “Homegrown Economic Reform” agenda three years ago which aimed to transform the country from a largely agrarian low-income economy to an industrialized lower-middle-income economy by 2030. This will require the private sector to engage in the nation’s economic growth by minimizing the public sector’s financing capacity.
While explaining about the new economic reform agenda to the high ranking officials recently, Prime Minister Abiy Ahmed (PhD) said that the initiative aims to propel Ethiopia to become the African icon of prosperity by 2030.
The newly introduced initiative, among other things, outlined macroeconomic, structural and sectorial reforms that are said to pave the way for job creation, poverty reduction, and inclusive growth. The initiative gives special emphasis to sectors such as agriculture, manufacturing, mining, tourism, and information communication and technology (ICT).
To this end, having a well-organized homegrown economic policy will have a significant role in realizing Ethiopia’s sustainable development. In the past, the country’s economy was highly dependent on imports from overseas and donations. Even, the country had been importing food items from abroad while it could harvest locally. However, its suitable climate, wide arable land, and water resources allow the country to harvest abundant crops.
In the past, the agricultural sector contributed below the expectation of the nation. This had been so because of the less attention paid to the sector; very little agricultural investment and extreme climate condition. After assuming power six years ago, however, the reformist government rendered much attention to the sector and there have been an encouraging increment in the amount of yield over the last year. The expansion of irrigated dry-season wheat farm can be cited in this regard.
The irrigation farm practice is expanded year after year not only in the high land parts of the country but also in the low lands and arid places of the country such as Afar and Somali regions. Currently, the pastoral community residing in the two regions has been engaging both in sedentary farming and cattle rearing. The communities, in addition to producing wheat, they are harvesting the by-products of wheat for animals’ forage.
According to the Ethiopian Economists’ Association, Ethiopia is home to diversified natural resources. Nevertheless, it has been experiencing severe drought repeatedly though it is known as the water tower of East Africa. Being the water tower of East Africa has not benefited its development efforts in the past. However, supporting the agriculture sector with mega irrigation projects will enable the country to ensure food security and even export to its neighboring countries.
Apart from irrigating farms, , the country’s water resource is able to generate enough electric power to local consumption and to export surplus to neighboring countries. Due to lack of capacity to develop mega electric projects on its rivers, substantial number of citizens still lives in darkness. Recent reports indicate that more than 56% of the country’s citizens do not have access to electricity. That means, close to 58 million people in the country never use electric power.
The population residing in the rural parts of the country still heavily relied on traditional energy sources such as bio-mass for cooking and light. In order to meet their energy demand, they resort to cutting forest trees which in turn aggravates deforestation, soil erosion and land degradation. Building different hydroelectric dams like the Grand Ethiopian Renaissance Dam (GERD) and others can be taken as a way out for easing modern energy deficit.
Power generation capacity of the country from hydropower dams and other sources is huge. Thus, the government has gone long distance in exporting electric power to the neighboring countries side by side with addressing local demand. On top of connecting the region’s countries with electric power, this step enables the nation garner foreign currency which is badly needed for the importation of capital goods and vital industrial inputs. Besides, Expanding manufacturing industries is possible where there is ample electric power supply. It is also understood that it is impossible to attain development without expanding industries and technology. The service sector is also directly linked with electric power.
Besides, the supply of electric power boosts tourism, accelerates production capacity of manufacturing industries, improves health care, and the education sectors.
Proper utilization of water resources is essential for both electric power generation and expansion of irrigated farms. Most emerging economies like China utilized their water resource potentials properly to reach higher level of living standard. China has built numerous hydroelectric dams on its rivers during the 1980s and established small and medium manufacturing industries. These industries have ignited their endeavors towards industrialization. After this, industrialization blossomed in China, electric-based irrigation projects expanded and the agriculture sector has become profitable and gone beyond feeding the bulk Chinese population.
India has also shared similar stories with China regarding its development. India launched a green revolution campaign to develop its water resource sustainably and limit desertification. As agriculture prospered, the industry also prospered in India. The story of the US and other countries is not different from this. Exploiting the natural resource for stimulating the economy is the beginning of development for every country in the world.
Currently, Ethiopia accomplished more than 95% of the GERD construction. With no doubt, GERD Project will have enormous potential to intensify the country’s development endeavors after its completion.
The Ethiopian Economists’ Association surveyed how GERD will contribute to the country’s annual economic growth. The survey also assessed the extent to which it benefits Sudan and Egypt. The research study assured of the three countries immense benefits from the GERD. Even if, Ethiopia builds the dam investing huge amount of money from its own treasury, it will benefit not only Ethiopia but also the lower riparian countries.
Sufficient supply of electric power to manufacturing industries will make them provide products to market with fair price. The industries will also become competitive in the global market. GERD’s completion will mobilize the industry sector through increasing its employment opportunities, working hours, productivity, and finally promoting export. In line with this, GERD’s presence will have a significant role in ensuring sustainable water flow to Sudan and Egypt.
As mentioned above, the homegrown economic reform aspires to transform the nation’s economic sectors such as agriculture, service and manufacturing from the small productivity rate to the higher level which boosts the national growth. The expansion of manufacturing sector creates job opportunities to hundreds of thousands, helps import substitution so that the nation could save hard currency, boost export, transform the agriculture sector and encourage the inflow of foreign investment along with technology and knowledge transfer.
Moreover, on top of playing its role in ensuring food security, the agriculture sector increases production that could yield enough surpluses for export. The hotel and tourism industry will also attain the higher level of development.
BY ABEBE WOLDEGIORGIS
THE ETHIOPIAN HERALD FRIDAY 7 JUNE 2024
