Ethiopia: The Economy That Is Accelerating Copping Up Pressures

Although the Ethiopian economy is under pressure from various man-made and natural disasters, including coronavirus, it is clear that it remains still strong and resilient. During the first three months of the fiscal year, the Federal Government's fiscal policy implementation, economic cooperation, public and private partnerships, privatization, and the implementation of homegrown economic reform are indicative of the country's strong and resilient economy.

The Minister of Finance, Ahmed Shide, briefed the media on the implementation of the first quarter plan of the 2020/21 Ethiopian budget year. In his statement, he said the Ethiopian economy has not been affected at the magnitude of coronavirus' impact. He added that the Ethiopian people and government are resilient of the pressure as indicated by implementation of the federal government's fiscal policy, economic cooperation, public-private partnerships, privatization and homegrown economic reform.

Regarding foreign cooperation, Ethiopia has strong development cooperation jointly established with many countries and multi-stakeholder institutions and the cooperation sustained firmly, he said.

According to the Minister, in the first quarter of the fiscal year, 474.6 million USD was obtained from loans and grants from countries and multi-sectoral institutions. This is high in terms of the plan. In terms of cash flow, 465 million USD was recorded. This has played a significant role in boosting the country's foreign exchange earnings.

Collecting of loans and grants has been underway to cope with the economic pressures of corona. Noting the prevalence of COVID-19 pressure yet, he added that collecting of foreign aid and loans from a number of multidisciplinary and bilateral institutions had been underway. Last year, 131 million USD was gained for corona aid alone.

He further explained that out of the aid to protect corona, 117 million USD came from the German government and 13 million USD from the Japanese government. Mobilizing support for the protection of coronavirus will continue along with other partners, he added.

He noted that Ethiopia's export trade is performing well. Ethiopia's export trade that has been declining for the past six consecutive years has been rising since the 2019/20 Ethiopian budget year. The good performance observed in 2019/20 has continued well in the first quarter of the current fiscal year. Adding, he indicated that 499.5 million USD was earned from export trade in the last three months alone.

The Minister noted that 25 public-private partnership projects are identified and preparation to implement is underway. Noting various preparatory works in the last three months, he said that preparations to finance 5 wind power projects, housing development, and medical and railway logistics projects by public and private partnerships are underway. The projects will be put up for bid soon.

He also said preparations are underway to finalize a 300 million USD deal this physical year to finance the 250-megawatt solar power plant projects, which was signed last year.

In terms of government revenue, it has shown good performance over the past three months. 80.8 billion Birr revenue has been collected. Out of the total revenue, 61 billion Birr was collected from taxes and 13.4 billion Birr was collected from non-tax. He also explained that that 6.4 billion Birr has been raised through grants and loans.

This result has been achieved through hard work. He said that the result has been achieved through the implementation of excise tax, customs, tax incentives and strong coordination at the center.

In terms of government expenditure, over the past three months, 97.7 billion Birr has been spent on federal government offices as well as states budget. The amount spent was 22.9 percent of the approved budget for the fiscal year, he noted.

The difference between income and expenditure, as to him, is a budget deficit. The budget deficit was financed by a domestic loan from Treasury bill. No advanced loan has been taken from the National Bank in the past three months. It has been financed by treasury bills from banking and saving institutions in Ethiopia, he said.

He pointed out that inflation and currency shortages are the biggest challenges facing the country's economy and basic and structural problems. Efforts are being made with extreme caution to prevent inflation. Treasury bill financing the budget deficit over the past three months has been one of the ways to prevent further inflation in the economy. This will help prevent inflation, he said.

According to the Minister, the implementation of an integrated fiscal and monetary policy to control inflation will continue. At the same time, issues related to production and productivity as well as trade issues will be performed cautiously.

He further explained that the main manifestation of macroeconomic imbalances is inflation so that the main purpose of homegrown economic reform is to adjust this imbalance. Various activities have been carried out to control inflation. The government has been providing food aid to cope with the pressure.

Wheat, sugar, edible oil, and baby flour are imported tax-free. Wheat has also been purchased and imported. He pointed out that about 100 million metric tons of wheat purchased last year is now being imported and distributed. The hard work of the government in terms of food supply has contributed to control the aggravation of inflation. He indicated that further efforts would be made.

According to Ahmed, privatization, which is part of the homegrown economic reform, has been focused and extensive preparation was underway. In particular, preparation of privatizing ethio-telecom has been carried out with extreme caution and two more foreign companies have been licensed. One more company has been made to work with ethio-telecom. Therefore, three more companies have been introduced to work with Ethio-Telecom.

Preliminary work of Privatization and partial openings has been intensified. In particular, Preliminary preparation, capacity building and asset valuation activities to be completed within the legal framework have been done and the final decision to enter the bidding process is being underway, he said.

The Minister noted that consultations are underway with the participation of various professionals, sector actors, public representatives, civil society organizations and political party organizations with active social and economic potential. A forum will be held in the next few days and it will be put into action. The transferring process will be conducted in a way that is accountable and transparent and will benefit the economy and the people, he said.

In the areas of privatization and partial transfer of Ethio-Telecom to the private sector, consulting, deciding and upgrading its services have been underway in the last quarter of this budget year. He said the historic process of telecom privatization and partial opening will be completed by next quarter.

According to the Minister, the privatization of sugar projects, wealth and business evaluation, policy making, and preliminary works have been underway for the past three months. Privatization of selected sugar factories will take place in the remaining months of the current budget year.

Extensive work regarding financing strategy has been done in the last four months, especially in the area of energy sector reform and this will be strengthened. Since the role of the government alone is not enough to sustain the country's economic growth, the role of the private sector and the public needs to be enhanced. The privatization work is underway as more investors need to come from abroad in addition to local ones, he said.

In particular, as a result of macroeconomic imbalance of the Ethiopian economy, its foreign exchange burden is high. Thus, a large amount of investment is needed to solve this problem. Mainly, the purpose of privatization is to boost Ethiopia's economic growth and competitiveness, he said.

Adding, he said that privatization and partial opening will bring more potential and investment to the Ethiopian economy. He also said that it will increase the country's foreign exchange capacity.

According to the Minister, the Ethiopian economy has shown strong performance and resilience in the face of general pressure of coronavirus. In order to sustain this strong performance, the implementation of the homegrown economic reform will be strengthened.

He said the decision was made to partially privatize Ethiopian Airlines. In the process, however, Ethiopian operates in a competitive global environment without partially privatizing. It also created immense treasure. It owns the largest business share in Ethiopia and in Africa.

In addition, the airline is a well-managed, well-organized, and flying promoting Ethiopian brand. It was feared that even during the corona season, it could be in serious trouble, but it is one of the few airlines in Africa that has successfully coped with the Corona virus.

According to the Minister, currently, partial transferring of the airline is not trustworthy. Thus, Preparations for partial transferring of the Ethiopian Airlines is temporarily suspended. Instead, attention should be given to other sectors.

More From: Ethiopian Herald

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