It was repeatedly revealed that Ethiopia, for years, was under a serious budget deficit. Even it is a recent phenomenon that the country had no potential to pay salaries. Besides, the country was at high risk of debt distress that potentially incapacitates it to secure more loans for indispensable national projects.
Over the past few years, there were trying challenges that had entangled our economic growth and macroeconomic stability. There were a number of major bottlenecks for this, of course. To mention but a few, the foreign trade the nation has had didn't grow as expected following the mismatch observed between the demand and supply of foreign exchange; the price hike, high cost of living, the foreign debt burden and ever growing the domestic saving and investment gap, said Prime Minister Dr. Abiy Ahmed in his power inaugural speech at parliamentarians assembly.
"To deal with the multifaceted hurdles we have encountered, the government will take the necessary policy decisions and produce fast economic growth," he promised.
The government has now been taking various measures to improve the economic landscape of the country though there are shortcomings challenging the process.
Last year, the government launched a "Homegrown Economic Reform Program" which aims at transforming Ethiopia from a largely agrarian low-income country to an industrialized middle-income country and pushing it steps forward to become the African icon of prosperity by 2030 via exploiting all its possible development potentials.
During the launching ceremony, Dr. Abiy Ahmed stated that, in just over one year, the government took a series of measures aimed at shifting the economic growth landscape of Ethiopia. "We managed to find a short-term remedy to the entrenched macroeconomic and fiscal imbalances."
He also noted that the next chapter of Ethiopia's growth and development requires a more active private sector. To this end, the government opened up key economic activities to private investments and made the atmosphere conducive for the latter to contribute their share to the overall progress of the nation.
According to the Premier, the agenda, which was formulated taking the successes we have long aspired into account including an in-depth review of key bottlenecks and design of adequate remedies, outlines macro-economic, structural, and sectoral reforms that will pave the path for jobs and inclusive growth.
He said, "We, as a country, are tightening our fiscal belts, strengthening our public sector finances, shedding our debts, and increasing domestic resource mobilization to make ensure our homegrown economic reform agenda successful."
It was noted that the initiative has aimed at buttressing the macroeconomic, structural and sectorial reforms that are instrumental in paving the way for job creation, poverty reduction, and bringing about inclusive growth. It also eyes at bolstering agriculture, manufacturing, mining, tourism, and other sectors.
According to the International Monetary Fund (IMF) report, Ethiopia's Homegrown Economic Reform Program is designed to eliminate macroeconomic imbalances and lay the foundation for sustainable and inclusive growth.
Addressing the questions posed by Members of the House of Peoples' Representatives last July, Prime Minister Dr. Abiy Ahmed said the government has been taking measures by formulating economic reform agenda to solve the macro-economic imbalances and sustain the country's growth path.
He also accentuated that the economic reform agenda has had three basic pillars: correcting macro-economic imbalance, solving structural bottlenecks and empowering manufacturing sector.
According to him, there was macro-economic imbalance in the country manifested by currency shortage, bad export performance, debt distress, weak revenue collection system, commodity price fluctuation, incompetent financial sector and the likes.
The government is taking different encouraging measures for the private sector to help them play their part in due process of building the economy of the country, he said adding, in 2017/18 fiscal year the government allocated 90 billion ETB for the private sector, and the government allocated 160 billion ETB for the private sector this fiscal year. This portrays that the issue of the private sector has con the confidence of the government.
Describing government's support to the financial sector, he stated that the government has taken measures on financial institutions to improve the involvement of private sectors. The government also lifted the 27% NBE bond purchase restriction.
"The government has achieved many promising results. For instance, reducing budget deficit and debt distress are the main areas showing remarkable results in the economic reform agenda over the past two years," he indicated.
He also reported that the external debt of Ethiopia was 31% of its GDP but now the debt has come down to 25% following the successful and relentless effort of the government. Even most debts were commercial loans which are very expensive that must be paid within the shortest time possible.
Not only is Ethiopia reducing the debt stress but it is also invigorating diplomatic works to convert the commercial loans to concessional loans.
The government has provided farmers with favorable conditions to obtain loans from banks and purchase machinery. It has also facilitated conditions for the farmers to enjoy duty free agricultural machinery importation.
"Various supports have been provided to the manufacturing sector to help them focus on domestic and foreign demand. We have to capitalize our time, money, and knowledge on areas that create more wealth. If we do not utilize all our potentials in the manufacturing sector to increase production and productivity, we cannot solve macro-economic imbalances and sustain economic growth trajectory," he underscored.