It is well recognized that budget is an important economic instrument of national resource mobilization, allocation and economic management. It is also an important tool for facilitating and realizing the vision of government in a given fiscal year. A budget has to be well-designed, effectively and efficiently implemented, adequately monitored. Based on such widely acceptable maxim, the government of Ethiopia has allocated some 971 Billion Birr for the next fiscal year and a number of activities have been undertaken to help companies and industries boost production thereby withstanding the impacts of high cost of living and other related economic hurdles.
Having this in mind, The Ethiopian Herald had a stay with Serawit Taddesse, an economist graduated from Addis Ababa University. He said, “True, budget is an instrument for measuring the performance of the economy a given nation. This is because it provides adequate control for monitoring expenditure for proper financial management. It is also used to measure the performance of the economy by indicating the performance of the economy in the previous year, making it possible to account for any gap between the expected and exact targets projected under the budget.”
As to him, budget allocation and control would be fruitful if the government keeps focusing on a well-defined budget as it can potentially attract shiny marketing strategy and successful monetary trek. Such a lucid trend helps promote accountability, encourage responsibility, foster a culture of data-driven decision-making, and reduce wasteful spending.
Besides, this trend would be of significantly useful in allowing authorities to continuously monitor and adjust budget based on performance and current circumstances. It also drivesstrategic decision-making as good budgeting forces concerned bodies to make strategic choices.
Truly speaking, he said export-led growth has been successfully used by the nation and has been becoming newly industrialized nation. The significance of export promotion in economic growth in Ethiopia is to increase the market share for local products and services in foreign nations.
Import substitution is also essential for it increases trade independence in nations like Ethiopia. It develops different sectors within the domestic market.The import substitution is also a strategy to move from substituting short-term consumption goods by domestic products to diversification of export and import trade step by step, he added.Food and beverages, textiles and garments, leather and leather products, chemical and construction materials as well as metal and engineering products are identified as sectors that can be fully produced locally.
As to Serawit, currently, the manufacturing sector has been given due emphasis as efforts are being exerted to change this dependence on foreign products with the help of strategy.According to him, the development of the agricultural sector will create a favorable opportunity for the production of food and beverage products in the country and the issue of value addition will be worked upon.Natural resources, the large number of trainable manpower and energy supply options are among the potentials that help achieve the plan, while lack of infrastructure, shortage of foreign currency, financial supply and security are the main challenges.
Serawit further elucidated that the new policy is built on two main pillars. It has in the first place aimed at enabling the manufacturing sector to produce inputs required by manufacturers of finished products. It has also sought to boost domestic manufacturing output to reduce reliance on imported goods.
Recognizing the pivotal role of local investors in industry growth, the policy prioritizes their involvement. With a shift towards market-led manufacturing industry development, the policy has been revamped to emphasize productivity and competition, necessitating stable macroeconomic conditions, adequate financing, and access to land, infrastructure, and logistics.The country is implementing manufacturing industry promotion means to shore up production channels for each stage of a product’s development. Besides, import substitution industrialization is a trade and economic policy that advocates replacing foreign imports with domestic production. It is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialized products.
The significance of export promotion in economic growth is to increase the market share for local products and services in foreign nations. With an increase in market share for the foreign nation’s local products, the value of a country’s exports will increase. Export promotion allows the nation to diversify its revenue streams by venturing into international markets. Export promotion initiatives often lead to the creation of new jobs and employment opportunities within the domestic economy. As businesses expand their operations to cater to international demand, they require a larger workforce to handle production, logistics, marketing, and other related activities. This, in turn, reduces unemployment rates and contributes to the overall socio-economic development of the country.
“Export-oriented industries often require higher standards of quality, efficiency, and innovation to compete in global markets. To meet these demands Ethiopia must in technological advancements and innovation.Export promotion can also attract foreign direct investment into developing economies as enterprise, companies and factories from developing nations like Ethiopia often seek opportunities to establish manufacturing facilities or form partnerships with local businesses in countries with export potential. These investments bring in capital, technology, know-how, and access to international markets,” he added.
According to Serawit, export promotion also provides businesses with access to new markets, which translates into increased sales. By tapping into new markets, businesses can gain access to new technologies, resources, and expertise that can help them improve their products and services. Additionally, by operating in different markets, businesses can learn from their competitors and adapt their strategies accordingly.
Exporting goods or services to other countries can expose businesses to various risks such as non-payment, political unrest, and natural disasters. These risks can be detrimental to the financial health of a company and can lead to the loss of hard-earned profits. Export insurance is a type of insurance that helps mitigate these risks, providing peace of mind to businesses that engage in international trade. The benefits of export insurance are numerous, and they can be viewed from different points of view.
To speed up economic development in developing countries like Ethiopia, is required to import of machinery, technical knowledge etc. from abroad. The three main sources of foreign exchange are: Foreign exchange reserves and gold reserves, foreign loans and aid and exports promotion. Foreign exchange reserves in the country may not be enough to pay off overseas payments. So it cannot be completely dependent on this source. Foreign currency can be earned through foreign loans and aid, but there are various conditions and uncertainties associated with this aid. Therefore, this source can neither be a viable solution to meet the foreign exchange requirement.
The strength of exports has a large role in determining the current account deficit. A permanent solution is possible to the current account deficit of the country’s transaction balance through using the foreign exchange earned through export expansion to meet the cost of imports export promotion.
Reducing the burden of foreign debt, Ethiopia needs a lot of foreign exchange to meet the interest and principal of foreign loans. Export growth has become essential for the repayment of interest-bearing loans as the debt burden is huge. If this is possible, the country will be free from the humiliating conditions of foreign loans. Increasing exports facilitates the compression of the expenditure of mass production. The increase in exports also increases the foreign exchange reserves in the country which in turn increases the import capacity. As a result of this, it is possible to increase the production of import substitute goods and export commodities by importing raw materials, machinery, technical knowledge etc.
As to him, if the import capacity increases, it will be possible to import sophisticated equipment and techniques, which will accelerate the development of the country’s economic situation. Growth in exports can create employment. If exports expand then the volume of domestic production will increase and if production is to increase it wants a lot of manpower which will increase employment. So in a hugely populous country like Ethiopia, unemployment is a serious problem and the solution to the problem is possible through export promotion policies. If exports expand, there will be a need to increase production. To increase the volume of production, a large quantity of input is required which can be obtained from the domestic market. Therefore, it is possible to increase the speed of national income and economic development by increasing production through proper utilization of domestic resources.
Above all, it appears that export trade or export promotion policies help Ethiopia’s economic development in many ways. Export expansion will not only increase the income of the country, but also the overall development of the country. The economy of Ethiopia is full of problems of unemployment, poverty, proper utilization of national resources, industrial sickness, etc. Many of these problems can be overcome through massive export expansion. If we look at the developed countries, we will see that one of the main reasons for their economic development is the policy of export expansion.
In a nutshell, as budget allocation can balance revenue and expenditures, it has to be well defined, managed and pumped accordingly to hit the target set.
BY MENGESHA AMARE
THE ETHIOPIAN HERALD SUNDAY EDITION 16 JUNE 2024
