Ethiopia's economy has been regarded as an agrarian economy for long. Agriculture still contributes the largest share in the economy but recently, other sectors are also taking roots in the economy. Foreign Direct Investment (FDI), construction, tourism and service sector in general are diversifying Ethiopia's economy. Therefore, the nation's economy has been making rapid growth for the past three decades.
But to maintain the status quo and accelerate Ethiopian economy, there are still fundamental assignments the Ethiopian government has to do. Among the activities the government should carry out; building basic infrastructure, producing skilled human power and energy provision take the leading. It is undeniable fact that lack of adequate energy is affecting every developmental activities of the nation. Being impotent in providing enough energy to industries and the construction of basic infrastructures is a major obstacle the Ethiopian economy needs to address quickly.
Therefore, Ethiopia has been looking every means to increase its energy production. Be it renewable or nonrenewable, every stone has been left unturned to fulfill Ethiopia's energy demand. Unfortunately, the country's total energy production capacity stands at approximately about 4,500 MW of installed generation capacity so far. According to international trade administration report on energy, Ethiopia's electricity generation capacity from the installed hydropower is approximately 90 percent, while the remaining 8 percent and 2 percent are from wind and geothermal sources respectively. However, demand for energy is steadily growing as Ethiopian population and its developmental desire continues to rise.
In the view of this, Ethiopia ventured to exploit its highest untapped resource for electricity production. In this regard, Abay River has a potential of generating abundant electricity to every Ethiopian livelihood, factories and even to export electricity to neighboring countries. Accordingly, the construction of the Grand Ethiopian Renaissance Dam (GERD), which is a 4.8 billion USD flagship project, is under construction aiming to address the country's energy shortage.
In the meantime, Ethiopia has a larger population that doesn't have access to electricity or another energy means. This means health care facilities, schools and other basic services are running out of electricity. It is obvious that the absence of electricity or power in general affects the quality of services rendered by these institutions.
In addition, government staggers to supply electric energy to factories, construction works and other similar activities with sizeable energy consumption. Investors are coerced to wait for a long time to establish or start their investments due to lack of energy. Therefore, production of energy plays a central role for Ethiopia's development to continue its run.
The Grand Ethiopian Renaissance Dam is now approaching to construction completion following some significant adjustments such as the contract changes and its technicalities three years ago. Water impoundment in the reservoir began in July 2020 and the second round filling is also happening this July to September. The dam has installed capacity of generating 6.45 Giga watts. It will be the largest hydroelectric power plant in Africa when completed. When operational, the dam increases the current electricity generation capacity of Ethiopia by four fold.
While approached by The Ethiopian Herald, economic and finance specialist, Hailemeskel Gazu said that the construction completion of the Grand Ethiopian Renaissance Dam will have multiple benefits. To begin with, the construction completion of the dam by itself positively impacts Ethiopia's economy as the project is capital intensive. Ethiopia has been injecting huge amount of foreign currency to this project. On top of minimizing its foreign currency expenditure thus, the completion of this mega project is expected to stabilize inflation via augmenting production and productivity.
Listing out the wider benefits of the Grand Ethiopian Renaissance Dam (GERD) when it starts service, Hailemeskel said that this dam may transfer Ethiopia from growth to development. "Energy is the very prerequisite for any nation pursuing economic development. It might be fuel energy, solar or hydroelectric power. As you know 60 percent of Ethiopian population has no access to electricity and still relies on burning wood for heat, cooking and light. So it will introduce these people with the electric light and power. That means we reduce expenditure for gasoline, increase productivity and quality of services," he remarked.
Hailemeskel also indicated that Ethiopia could be self sufficient in food production as the dam creates opportunity for vast irrigation. He added: "We shouldn't use the dam only for electricity generation. I think there will be vast irrigation farming as the dam is completed. It does have capacity to produce surplus agricultural products. Up on fulfilling our local demand, we can export electric power to the international market. So, the economic impact of the project is large as it affects many parts of the sector positively. "
The availability of sufficient energy boosts Ethiopian economy in the sectors of construction, industry, agriculture and others. As these sectors rise, Hailemeskel said: "Import and export of Ethiopia will also increase and the financial sector will also grow in a diversified manner and contributes for the growth of Ethiopian economy. Ethiopia's Gross Domestic Product (GDP) and the growth of per capita income will significantly rise. Inflation will reduce and the lives of people will be improved. Hence, we can assume the Grand Ethiopian Renaissance Dam to transfer Ethiopia from growth to development."
As energy supply rises by the GERD, "more local industries could emerge in the business. The GERD also attracts foreign direct investment. This consequently increases Gross Domestic Product and uplifts citizens' livelihood," Hailemeskel said.
Ethiopia's growth will also be a blessing in disguise for neighboring countries too. For instance Ethiopia's main outlet Djibouti is among the benefited as Ethiopia's import and export rises. Sudan will also be beneficiary from this dam. As ports of Djibouti and Assab become busy in relation with the acceleration of Ethiopia's import and export trade, both countries, Djibouti and Eritrea will also be advantageous. Moreover, the dam will build strong economic integration among the Horn of Africa in particular and East Africa in general. Neighboring countries can purchase electricity from Ethiopia and Ethiopia can access their port and other services in the return. This cannot be seen lightly as one of the country's heavy expenditure is port service cost, he added.
The economist further said that this dam could relieve Ethiopians' life from misery. He added that the dam continues to improve economic welfare as the Gross Domestic Product of the country augmented and the citizens' per capita income grown up.
"There might be pressure from the west be it is a must to withstand this challenge and make the dam and its operation a reality. Our bilateral and multilateral relation for the time being maybe affected but in the end everything could return normal," Hailemeskel hopes.