Ethiopia: Reform Measures Augmenting Private Banks' Capacity

ADDIS ABABA - The various reform measures implemented in the financial sector have bolstered private banks' capacity with the latest being the bank note change which would bring the unbanked community to the sector.

In an unprecedented meeting that housed cabinet Ministers, security heads as well as bank board chairs and CEOs together on Monday, Prime Minister Abiy Ahmed assured of the financial sector's improvement resulted from the reform measures taken thus far. "By any standards, the financial sector has improved hugely." administration rescued the economy from spiraling downward. It is to be noted that the government was unable to pay public servants' wages and the country had been listed under a high risk of debt distress, not to mention the dwindling of bank reserve and export revenue.

"For about one-and-half year, we attempted to rescue the economy. Debt alone represented 31 percent of the national GDP which is currently made to drop to 25 percent. As a result,we won the increasing interests of international creditors."

The series of measures that were taken by the government had resulted in redeeming the national economy indeed. The home-grown economic program implemented thus far had not only championed in arresting the downward spiraling of the economy but it also helped us regain the growth trajectory.

A showcase to this assertion is that at least a 10-billion USD additional finance has been channeled to the economy. The 10-year Perspective Plan drawn recently is also an instrument to lay the foundation of prosperity.

There are two contradictory measures in the banking sector. In one hand, Ethiopia claimed to protect the banking sector to only nationals. The growth of the sector had been crippled by various policy measures, on the other.

"That was a point being raised in an ice-breaking meeting that I had with bank board chairs. Consequently, the government lifted a previously mandatory requirement of a 27-percent bond purchase to every loan they give. [The finance raised as a result of the bond purchase, which matures in a five-year period, was meant to finance government priorities; but private banks were made to receive interests far less than what they pay].

Additional liquidity has also been availed to private banks. "We would not open the sector to foreign firms until you come together with joint ventures and build your competitiveness. As such firms with vast expertise and experience would overwhelm the sector which is at its infancy here."

The premier also expressed belief that these enormous measures would properly be understood by the private banks.

The other important issue is that there was macro imbalance owing to delayed projects, he said. "We have jumped various hurdles and brought about remarkable changes. To cite, around3.2 million people get jobs over the last fiscal year."

If one asks: how was this made possible? It was because of the ardent measures taken in bringing to end delayed projects of both private and public ones, the premier explained. He supported his argument by referring to the construction sector.

"Two years ago, we used to export cement to neighboring countries, but now there is a huge economic activity at a local level and we even cannot satisfy our rising demands. This also proves true that the economic activity at home has come back to normalcy."

The other accomplishment that has also resulted in rescuing banks is the recently restructured debt of 600 billion Birr to government enterprises. Most flagship enterprises excluding Ethiopian and Ethio Telecom were highly indebted. They were supposed to resettle over 100 billion Birr of debt only this fiscal year.

The premier also instructed participants to execute their responsibilities ethically and legally. Failure to do so would be met with dire consequences, he hinted, adding that pertinent bodies would intensify the fight against illicit money flow across the country including at all borders and airlines checkpoints.

More From: Ethiopian Herald

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