23 August 2018

Ethiopia's Macro-Economy Status At Era of Change

The Ministry of Finance and Economic Cooperation recently presented a report to the media on the overall macroeconomic situation of the country. On the occasion, it was noted that as per the plan and capacity, the government has been striving to keep inflation and its impact on the economy in check through increasing the supply of goods and services, and implementing fiscal and monetary policy.

During the 2017/18 fiscal year, the country's exports have generated some 2.8 billion USD, attaining 78.9 percent of the plan. The performance has dropped by 2.8 percent from that of the previous year. On the hand, the country's has spent some 55.5 billion USD for its imports, exceeding the previous year expenditure on imports by 24.6 billion. All in all, imports of industry inputs, petroleum and motor oil, and foods and beverage have shown 369.8, 614.4 and 20.8 percent increment respectively from the previous fiscal year.

To narrow the huge difference in the trade balance, the country has been extensively working to add values to its exports. For this, one of the key venture that received due attention by the government has been the establishment of industrial parks, particularly manufacturing industries.

Haji Ebsa, Communication Director at Ministry of Finance and Economic Cooperation told The Ethiopian Herald that the quantity of imports and international price of industrial inputs have been significantly increasing from time to time.

Noting that the foreign currency shortage prevented industrial parks to commence production with full capacity, Haji also added that currency devaluation and increasing the value and volume of export have been taken as solution to improve the situation of foreign currency shortage.

The national foreign debt has also been growing from time to time. While it remained at low risk between 2012-2015, it status was rated moderate risk the following year. In 2017, it is labeled high risk, as to the Ministry's report.

Now, the country's external debt is some 26.3 billion USD. While the country has reimbursed 16.97 billion USD local and foreign debts, it has also planned to repay some 22 billion USD this budget year.

Previously, the amount of foreign remittance has been significantly low, but after the coming to power of Prime Minister Abiy Ahmed, things are getting better as it was managed to fill the gap using alternative sources of finance, Haji said.

Revival of remittance by the Diaspora, currency devaluation, and the support of partners are also enabling industrial parks to commence production. This would gradually help solve the foreign currency shortage, he added.

Revenue from export covers a small portion of the expense for imports. Apart from FDI inflow, and official grant, foreign loan is the major source of finance for national budget.

The reduction in national revenue forces the government to look for loans to cover the budget. This has impact on the national economy in terms of inflation, competitiveness of the private sector (private sector crowding out), good governance. In this regard, to ease the burden, it was decided to delay the construction of some mega projects, the Director indicated.

Moreover, reforming the tax policy would have a positive impact to ensure fair wealth distribution, encourage investment, boost export, and create job opportunities. This will in turn make sure that there is a healthy relationship between the government and its citizens.

Accordingly, the current tax system is under reform and a new one expected to replace the existing tax policies and rules starting from next year.

As to Haji, the constructions of some of the mega projects in the country are being delayed because of gaps in follow up and monitoring.

Currently, the government is exerting various efforts to improve and modernize project monitoring and evaluation as well as procurement systems, and hence making sure accountability.

Currently, more than 65 percent of the country's national budget is spent on procurement. There are efforts to avoid illegal and unplanned procurements. And, the government is working to perform its procurement twice a year to avoid procurements at deadline day.

Ethiopia

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