Ethiopia has been undergoing a significant reform process and experiencing steady economic growth since 2018. The government has implemented bold economic measures to make the economy more inclusive, including the liberalization of key sectors like telecommunications and finance. With a projected economic growth rate of 8.45 percent for the coming year, these reforms have yielded positive outcomes such as inclusive and sustainable growth, increased government revenue and investments, reduced debt, enhanced competitiveness of state-owned enterprises, foreign exchange gains, a more competitive finance sector, and improved sectoral productivity.
Privatizing state-owned enterprises and opening the economy to the private sector are central to the government's liberalization strategy. To support this process, the Ethiopian Securities Exchange (ESX) was established two years ago as part of Prime Minister Abiy Ahmed's (PhD) push to attract greater private investment. The ESX aims to serve as a platform for the privatization of state-owned enterprises and to help Ethiopian businesses, including small and medium-sized enterprises, raise capital.
Recently, the ESX signed a Memorandum of Understanding (MoU) with the Nairobi Securities Exchange (NSE) and iCapital Africa Institute to strengthen the growth and development of capital markets in Ethiopia and the broader Horn of Africa region. ESX CEO TilahunEsmael (PhD) stated that the partnership between Ethiopia and Kenya, two of the region's leading economies, would drive economic integration and boost investment opportunities. The strategic collaboration will enhance the growth of capital markets in both countries through various initiatives, fostering a more competitive business environment.
The collaboration focuses on integrating the capital markets of Kenya and Ethiopia by leveraging the expertise of the NSE and Capital Africa Institute. It will prioritize knowledge exchange, capacity building, and the promotion of cross-border investments. This partnership is expected to accelerate the growth of Ethiopia's capital market and position the country as a key player in the regional financial landscape.
The ESX, designed to educate the public on the benefits of regulated securities investments, is set to play a crucial role in Ethiopia's economic transformation. By promoting financial literacy and a culture of investment, it empowers Ethiopians to actively participate in the capital markets.
The MoU represents a significant step towards strengthening financial markets in Ethiopia and the wider East African region. It includes several initiatives, such as joint training programs for market participants, the establishment of a robust regulatory framework, and the development of innovative financial products. The ESX is a key component of Ethiopia's financial sector reform, enabling companies to raise capital and offering new investment opportunities to the public.
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Capital Africa Institute CEO Gemechu Waktola (PhD) emphasized the importance of the MoU in fostering the development and integration of capital markets in Kenya and Ethiopia. He highlighted the focus on knowledge exchange, capacity building, and promoting cross-border investments as critical to enhancing financial inclusion and market growth in the region.
NSX CEO Frank Mwiti also praised the partnership, stating that it is crucial for driving cross-border investment and regional integration. He noted that the collaboration would unlock significant opportunities for issuers and investors in both countries, making the region more attractive to both domestic and international investors.
