. Exigency of discouraging printing paper money
Ethiopia’s economic development over the past decades has not brought structural transformation and it has been highly driven by increasing the printing and supply of paper money and external loans, research reveals. Scholars and other economic forecasts indicate that the economic growth of this country remained moderate. Though extensive infrastructure spending and solid foreign investment flows could keep the growth healthy, bringing structural change could be a tough road ahead.
Professor Alemayehu Geda a Macro Economics Lecturer at Addis Ababa University on his research under the title Macro Economic Policy and Government’s Role on the Economy, notes that the amount of paper money has been growing per 27 percent annually, which is nearly 5 times above the normal growth rate over the past decades.
Even though the government spends high amount of money on infrastructure, due to the Nation’s weak productivity, the economic growth could not bring structural change, according to him. Dr. Attlaw Alemu Assistant Professor at Addis Ababa University for his part says Ethiopian economy has been dominated by import and external support, which puts the productivity of the Nation in a weaker status. “Our import is not even fully covered by the money we get from exporting our products. It has been dependent on external loan, aid and remittance,” he argues.
Attlaw also believes that the government’s economic policy did not focus on hard jobs like engaging the youth and local investors in production of the manufacture goods that the Nation highly imports. “We have been deeply involved in a service sector that is dependent on everything that is imported,” he says.
According to him, the paper money printing and high level growth also resulted in a galloping economic inflation in the Country. Scholars have been warning that inflation in this country is a demand side problem in the years 2014 and 2015. But government officials refused to listen because the nominal income increment is the result of high paper money printing and it was not wanted to be a center of discussion, adds Attlaw.
As to him, it is better that if the country places focus on encouraging the youth and local investors to learn the technologies and produce much of the imported goods here in Ethiopia. In this case, the Nation needs enabling economic policy that sets base for major structural change through the economy, he stresses.
Teshome Adugna , Assistant Professor of Economics, however argues that the major problem was lack of productivity in all sectors. On the other hand, wherever there is productivity, the market system has been inefficient. “We never had protective market that benefits producers, farmers in particular, to the extent that pays off their hard job,” he says.
Teshome agrees that the economy has been growing over the past few decades with intensive external loan but the share of the industrial sector was not visible. He stresses that the manufacturing sector was silent for the past decades, despite the fact that there are certain improvements over the past two years.
“Bringing structural transformation in Ethiopia is all about transforming the agriculture. Our agricultural sector has so far been satisfying local food consumption, not for the industries. That means the nation’s productivity has been inefficient,” he argues.
Therefore, the Nation must be highly focused on transforming the agriculture sector maintaining productivity of the industrial sector in order to bring the so claimed structural transformation; he says adding that “To do so, technology and knowledge transformation must be priority. The need to make farmers source of knowledge through adult education is inevitable”.
Teshome further criticizes the way industrial parks was built saying that they did not consider productivity potential and rather they are meant for delivering equity between states. “Industrial parks should not be birthed for equity but for efficiency. If one builds an industrial park where there is no sufficient input, that will compromise efficiency,” he says.
Meanwhile, the current growing foreign direct inflow of Ethiopia is one major prospect for the realization of structural transformation, notes Teshome. He indicates that FDI could be the source of market, technology and financial capital. As more multinational enterprises are engaged in the country’s production, there will be more high value product and competency in the international market.
The Ethiopian Herald, August 18/2019
BY HENOK TIBEBU
