24 February 2013

Ethiopia: Govt Undertakes Review of Five-Year Growth Plan

The Administration of Prime Minister Hailemariam Desalegn has instructed senior experts at the Ministry of Finance & Economic Development (MoFED) to prioritise public infrastructure projects under the five-year Growth & Transformation Plan (GTP), whilst carrying out a mid-term review, sources disclosed to Fortune.

Called by an aide of the Prime Minister as a "no-brainer" move for the administration, Abraham Tekeste (PhD), state minister for the MoFED, is entrusted in overseeing a mid-term review team inside the Ministry, exploring options to reconsider the plan and prioritise projects accordingly, sources disclosed to Fortune. A panel of five experts, under the supervision of Temsgen Walelign, director of development planning in the Ministry, are hard pressed to produce a reconsidered document for senior administration officials to make decisions, these sources disclosed.

They are instructed by senior administrative officials to crunch public expenditures that are "off budget," Fortune learnt.

"It'll be a comprehensive review of the plan's targets, including macro-economic and sectoral indicators," said an expert in the MoFED.

The GTP has to, within its macro-economic target, increase Ethiopia's per capita income to 354 dollars by 2015, from 235 dollars in 2010; national saving to GDP to 17.4pc from 9.4pc; share of tax to GDP to 15.3pc from 9.7pc; and reduce the size of the population living below the poverty line to 22.2pc, from nearly 30pc.

In real terms, the administration has pledged to enhance the nation's power generation capacity five-fold, to 10,000Mw; see through the construction of 2,000Km of railway lines; carry out the construction of all weather roads, connecting all kebeles (over 40,000) across the country; and increase the nation's tarmac road coverage to over 78,000Km.

The plan was launched in October 2010, following a rather symbolic event held near the burgeoning industrial town of Gelan, 24Km east of Addis Abeba, when the late Meles Zenawi cut ribbon setting off the Addis-Adama toll way road, under construction by the Chinese contractor, China Communications Construction Company.

Scheduled to be completed in April 2014, a few months ahead of the conclusion of the GTP, the six-lane modern highway, projected to cost 612 million dollars, is one of the many publicly financed projects that the administration has initiated under the GTP.

Described by the World Bank as "ambitious", the growth plan requires a total investment of 57.4 billion dollars (over a trillion Birr), in order to achieve full completion. This fiscal year, the federal government hopes to spend 7.8 billion dollars financing mega projects, such as; electric power, roads, rail and public housing.

Finding the finance has been an uphill struggle.

"Finance has become a challenge," Abraham, of the MoFED, told Bloomberg last month. "As we intensify implementation of the plan, finance is increasingly becoming a critical constraint."

Reassessing the GTP is inevitable, according to macro-economists who have been following its progress. Despite its positive intentions to lift the country out of poverty and set the economy onto an industrial structure, the administration has been "very ambitious" in its ability to finance these projects, according to a macro-economist who previously worked for the government.

"The trouble is they haven't given as much thought to developing the finance modality as much as they did to designing the projects," the macro-economist told Fortune.

The IMF has been urging the administration of Prime Minister Hailemariam to reconsider the GTP, although often falling short of naming which projects ought to be folded or postponed. There is a fine line interpretation among macro-economic advisors to the Prime Minister and economists outside of the administration on just what exactly "prioritising" actually constitutes.

Whilst the first advocate a rearrangement in channelling available finance, according to the projects game changing nature in economic structure (such as the Renaissance Dam); the viability of completion (such as the road projects) and the requirement of little investment to reinitiate them should they be temporarily suspended. The latter argue that "prioritising" is an indication that reconsideration to the timing and importance of some of the projects, such as sugar mills and fertiliser manufacturing plants, is due, and thus acts as a prerequisite to shelving some projects altogether.

"There should be no project shelved," said an aide to Prime Minister Hailemariam.

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