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Month: July 2022

Qera: Sights, Sounds, Smell, Not to Mention Bulls

Posted on by Web Master

It was last Saturday. What would have passed as a routine morning turned into a reminiscence of the 1980s. I had to attend a graduation ceremony in Qera. It first brought some sweet memories with the proceedings of my own from college.

As I was heading to Qera, the thought of traversing for the first time the two-lane tunnel and the two interchanges brought wonderment; as it tumbles its notorious traffic congestion, that at times used to be so dense and thus beyond movement.

First came Sishu, the burger heaven, now almost assumed a landmark, and what the completion of the highway means to it. Being around only for some years there, it has attained a legend and it is immediately baffling why other businesses do not copy its model (especially the burgers).

Then, a nostalgic turn, as I bitterly started to get apprehensive about what may be left of the Qera I used to know, where I resided for a little while as a college student and for the first four years after graduating. It was also where my office was located.

This is what comes to mind when I think of Qera. It is the traffic and the disorderly and uncontrolled herd of cattle heading for the slaughterhouses, goaded by the mostly young cattle herders. There is dust, mud, noise and smell. Sometimes there is running away from agitated bulls on the loose. An abattoir’s hard to put in plain words terrible stench and the deafening blast within reach of Bole Airport during landings and takeoffs are all the makeup of Qera.

It was amidst the maze of continuous alleys fronted by a number of little restaurants whose windows vaunted raw meat that I started reminiscing about the lone secondhand bookshop I knew there. Some of the books of the place are so dear to the bookshelf in my house. It was a place that made me reverse the vow we had after school never to read as we had enough of it languishing under its brunt for school. It took me a year to thoroughly understand that I graduated but was not yet built. I then mostly spent the evening with a good book rather than the disquieting news from the radio.

Almost as if I had tears of happiness in my eye, we crossed one of the tunnels. Yet, immediately the news of the unacceptable number of fatal accidents involving animals and humans, and the need to weave the landmark with its surrounding societal fabric, especially with the nearby abattoir, its biological stock supply and the many lively hoods depending on it, woke me from my reverie.

The Tocqueville effect asserts that social frustration grows more quickly as social conditions and opportunities improve. Alexis de Tocqueville observed the history of France, Europe and the United States and concluded something along the line of the aphorism, “the appetite grows by what it feeds on.” Two millennia ago, the Greek mathematician and inventor Archimedes, claimed to be his time’s combination of Albert Einstein and Thomas Edison, devised the drill, pulley, windlass, and screw of Archimedes, among many other inventions. However, he reportedly thought little of these ingenious contrivances, even declining to leave most of them written records.

He instead preferred to be remembered for his great work in mathematics or for his founding of the science of hydrostatics, which his Archimedean principle made possible, overjoyed with its discovery that he forgot his clothes and ran out into the streets naked, astonishing passersby with his shouts of “Eureka, eureka!”

The human appetite for Eureka can never be satisfied and thus the business of making it will never come to an end. Qera has changed, probably into something better. But the nostalgia is strong and whatever new is built makes us want more. For the time being, I told myself on my way through, I would enjoy the sights and sounds.

How to Beat Developing-Market Debt Crises

Posted on by Web Master

Since the Latin American debt crisis of the 1980s, sovereign-debt crises have become a regular occurrence for emerging and developing economies. Today, Sri Lanka needs a bailout from the International Monetary Fund (IMF) after defaulting on its foreign debt in May, and a growing number of low-income countries are facing similar challenges. The World Bank estimates that around 60pc of all emerging and developing economies have become high-risk debtors. As many as a dozen might default over the next 12 months.

Unlike the advanced economies, where sharp increases in government debt following the emergence of COVID-19 encouraged a speedy return to trend growth, developing economies have been constrained by a shortage of vaccines and a lack of monetary and fiscal space. Unable to deficit-finance their way out of the synchronised global downturn, these countries now must contend with the economic fallout from the Ukraine crisis, which all but eliminates a near-term return to pre-pandemic growth rates.

With few exceptions – Sri Lanka and Zambia, for example – most developing economies are not heavily indebted. Collectively, their average debt-to-GDP ratio has increased by just seven percentage points (to 65pc) since the start of the pandemic, much lower than the 20 percentage points increase in advanced economies where the combined sovereign debt now averages 122pc of GDP. The flow of funds that developing economies receive from global bond markets and banks has remained dismally low. According to the most recent estimates from the Institute of International Finance, their combined sovereign liabilities represent less than 30pc of global public debt.

Worse, following post-pandemic credit downgrades, many low-income countries cannot access international capital markets and now face acute liquidity constraints that could morph into solvency crises. And because these countries’ sub-investment-grade credit ratings have raised their borrowing costs, the fiscal impact of their sovereign liabilities has increased, and their governments’ reduced ability to roll them over as they fall due has raised the spectre of a developing-country debt crisis.

Ghana, for example, planned to issue a bond to refinance its foreign currency-denominated debt earlier this year. But with a wave of rating downgrades driving up international bond yields, Ghana has effectively been shut out of international financial markets, and its ten-year sovereign bond yield has risen above 22pc. After resorting to painful internal adjustments (tax increases and cuts to discretionary spending) during the pandemic, Ghana is now contending with soaring food prices, and its government is seeking IMF assistance.

Two other factors are combining to increase the risk of a liquidity crisis in developing markets: the currency of lending and the shift toward variable interest rates in a context of increasingly complex lending structures and growing reliance on international capital markets. Between 2000 and 2020, the number of low-income countries with variable-rate external debt rose sharply from 13 to 31. And now that systemically important central banks are normalising monetary policies to fight inflation, these countries will incur significantly higher costs when servicing their external debts.

While reliance on foreign currency-denominated debt can reduce the risk of runaway inflation, it can also increase the risk of sovereign default, especially when a sharp exchange-rate depreciation suddenly raises the costs of servicing external debts. This is especially the case during episodes of heightened global volatility and tightening financing conditions, which are often associated with large-scale capital outflows from emerging and developing economies.

Historically, sovereign defaults have been driven by markets’ unwillingness to roll over existing debt or to do so only at prohibitively high-interest rates. Across emerging and developing economies, over-inflated risk premiums, driven by distorted perceptions, have amplified the fiscal impact of sovereign debt and been a major driver of liquidity crises and default risk.

Advanced economies with the “exorbitant privilege” to issue reserve currencies usually do not face such risks. Because their currencies are regarded as safe havens, they can sustainably attract foreign investment in government treasuries and bonds, continuously roll over their debts at low costs, and run deficits without tears.

Consider the European Central Bank, which recently adopted exceptional measures to reassure investors and stem bond-market volatility in response to renewed concerns about “fragmentation risks” within the eurozone. Under the “anti-fragmentation instrument” it adopted in March, the ECB now “reserves the right to deviate in the future from credit rating agencies’ ratings if warranted, in line with its discretion under the monetary policy framework.” The short-term impact of this move has been remarkable, with yields on the bonds of weaker eurozone members falling sharply immediately thereafter.

But systemically important central banks should be no less concerned about the disproportionately large spreads between advanced and developing economies – what we might call “global fragmentation risk.” The tightening of financing conditions by the US Federal Reserve and other major central banks has exacerbated developing economies’ macroeconomic-management challenges, by heightening exchange-rate volatility, increasing liquidity risks, and widening spreads.

In the past, systemically important central banks have successfully extended some of the benefits conferred by their exorbitant privilege to other countries. At the height of the pandemic downturn, for example, the Fed reinforced its currency-swap arrangements (first introduced during the 2008 financial crisis) and broadened the geographical coverage of its support to include a few emerging economies. That move led to currency appreciation, improved credit-default-swap spreads, and lower long-term interest rates in beneficiary countries. And, beyond alleviating liquidity risks, the extension of dollar-denominated swap lines reassured investors, thus stemming capital outflows and enhancing those countries’ ability to roll over their debts.

Even though low-income countries do not pose a systemic risk to the international financial system, a concerted effort to mitigate liquidity risks should be a high global priority, not least because debt restructuring has huge costs. According to the World Bank, it leads to lower output growth in the short term. For countries that lack the protection of systemically important central banks, default-driven borrowing rates undermine macroeconomic stability and reduce the supply of patient capital over the medium and long term, without which developing economies cannot undergo the transformation needed to break the negative correlation between growth and commodity-price cycles.

In the long term, the most sustainable solution to recurrent liquidity crises is to develop deep, efficient, well-regulated domestic capital markets in emerging and developing economies. Under an integrated financial-market framework, a vibrant repo market will enhance the money- and bond-market nexus, enabling liquid capital markets to emerge. Taken together, these highly integrated markets will help build proper yield curves to improve investment decisions.

The world already has effective, well-tested tools to prevent recurring liquidity crises, which is a prerequisite for building these integrated markets. Democratising the global financial system to maximise its positive impact on development is perhaps the most important challenge on the road to international debt sustainability.

Lessons from Sri Lanka

Posted on by Web Master

A tragedy is unfolding in Sri Lanka. Citizens must queue for food and pharmaceuticals, vehicle owners cannot fill their tanks, and there have been rolling power outages. The economy is paralysed, and because the country’s debts are already unsustainable, it cannot borrow. The country is suffering the world’s worst economic crisis since World War II.

The situation is so dire that millions of people have taken to the streets. The president has fled the country, and now parliament has elected a new, but unpopular, replacement. If all goes smoothly (a big “if” given the events of recent weeks), the International Monetary Fund (IMF) can come to Sri Lanka’s aid with a rescue loan package (allowing for the purchase of essential imports) and a programme to achieve sustainable fiscal, monetary, and exchange-rate policies.

Sri Lanka’s plight serves as a lesson to other governments. When a country’s economic problems are obviously becoming insurmountable, postponing a reckoning through various piecemeal measures will only make matters worse in the end.

For years, Sri Lanka was a “donor darling,” owing to its relatively high standard of living, good social services, and robust economic growth. In the first half of the last decade, it boasted a 6.5pc average annual growth rate – one of the world’s highest – and very low population growth. Though economic growth slowed after 2015, it still averaged well over three percent through 2019.

But at the end of that year, a new government came to power and immediately announced a large tax cut. In both 2020 and 2021, the government ran a fiscal deficit of more than 10pc of GDP. The annual inflation rate rose from an average of under five percent in previous years to 39.1pc in May, and then to 54.6pc in June.

Worse, even with inflation already accelerating, the government announced in the spring of 2021 that it was banning all chemical-fertiliser imports. Predictably, rice production fell by 20pc, tea exports fell to their lowest level in more than two decades, and more than one-third of the country’s farmland was left fallow.

The COVID-19 pandemic came on top of these self-inflicted wounds, causing a sharp decline in tourist revenues, which then deepened Sri Lanka’s foreign-exchange shortage and further curtailed its ability to purchase imports. By late 2021, the situation was spinning out of control; and in May, the government defaulted on its foreign debt.

Now, Sri Lanka cannot obtain essential inputs to restart the economy until it has restructured its debt and installed a working government. Restructuring the country’s debt will be unusually complicated because a significant portion is owed to China, which does not participate in the multilateral Western-led restructuring exercises for overly indebted sovereign borrowers.

Again, the lesson for other debt-distressed countries is clear. While a country’s economic authorities can delay some of the consequences of ill-advised policies for a while through import rationing and prohibitions, price controls, fiscal deficits, foreign borrowing, and printing money, the music eventually will stop. When a government’s only remaining choice is to implement serious reforms or pursue desperate and economically irrational measures, doing the latter will merely deepen the misery and human suffering caused by the earlier policy mistakes.

Had Sri Lanka approached the IMF late in 2021 (or even earlier) and implemented the painful reforms needed to rein in inflation and reduce its current-account and fiscal deficits, at least six months of suffering could have been avoided. The country’s external debt would not have risen quite so high, and the road to recovery would not have been quite so long. More to the point, the country’s descent into complete political chaos might have been avoided altogether.

Since the start of the pandemic, the international community has appropriately been directing more attention to the plight of heavily indebted developing countries, with the G20 rolling out a Debt Service Suspension Initiative that extended some 13 billion dollars of relief to 48 countries in 2020-21, but that was a drop in the bucket relative to needs.

Worse, there has been very little differentiation between countries whose underlying economic policies were sustainable and those whose policies would have become unsustainable without reform, even in the absence of COVID-19. Lending to a country in the latter category without ensuring that it has or will implement sustainable economic policies is not doing it any favours. On the contrary, such “support” merely postpones the day of reckoning and leaves it with an even higher debt-service burden when the time comes.

Policymakers in other economically struggling countries should take heed of Sri Lanka’s tale. The lessons can be paired with those from Brazil, which, following its 2002 debt crisis, quickly adopted the necessary policy reforms and went on to enjoy years of sustained growth. Brazil, too, had a choice between swift painful action to create the conditions for recovery, and denial and delay to put off the inevitable. Its leaders proved wiser than those who have since high-tailed it out of Sri Lanka.

Street Vendors Deserve Dignity Too

Posted on by Web Master

I was getting off the taxi a week ago when I saw two law-enforcement officers holding what appeared to be a small box for charger cables and ID holders. In front of them was a street vendor pleading with them. He looked sad.

Why would he not be?

Imagine grinding all day looking to make a sale only to be stopped in one’s tracks by the authorities. More officers followed from behind. Something told me this was not the first time the man got busted. Taxis and street vendors have that in common; they will never stop their mischief (the crime of selling trinkets and electronics without a license) even if they get caught. It is ‘get rich or die trying.’

There is no harm in informal street vendors, except they block the road in busy areas and sometimes get hurt in the process of running away from law enforcement officers. It would be better to be formalised but the cost of renting a shop is prohibitive, especially for those on the low-income spectrum. There have been efforts by the Addis Abeba City Administration to give them space but this has not always been in parts of the city where there is foot traffic.

The formal business environment is simply not suitable for vendors who want to sell their products with a small profit margin to earn a living. Maybe after years of saving, they might come around. If one was to follow the regulations, then they might as well wait for another decade to make something of themselves. This is of course for those people with bare minimum capital. The process can be disheartening.

I had many business ideas that I wanted to start but the whole idea of renting an office, on top of other costs in promoting and developing the product, is discouraging. Business is all about taking risks, but how much? If that risk requires years of saving and there is a chance I could fail, then I might not take the risk. But if the risk is minimal and the profit margin is large, most people would go for it.

The struggle reminds me of a little girl selling tissue paper – the small ones on the street. She is often asking passersby to buy from her, even begging them. Her mother sits somewhere near, keeping an eye.

I once bought tissue paper from her, which looked very cheap. I told her she could keep the money and keep her merchandise. To my surprise, she refused and threw it at my feet.

“No, I don’t want your money. I just want you to buy soft from me and you did,” she said firmly.

Most people in her situation would have taken the money and sold the tissue paper, not the little girl. Another time, I found her eating leftover potato chips from the floor. Feeling bad, I gave her 10 Br. She refused to take the money and instead insisted that I could buy tissue paper from her for 10 Br.

I insisted that I did not need one; instead, I just wanted to buy her chips. She followed me and gave me the paper. I could not stop admiring her mother, who taught her integrity and honesty at such a young age. The small girl only wants what she earns.

She came to my mind while watching the street vendor begging the law enforcement officers to give him a pass.

Two men behind him were arguing whether or not the officers should let him go or not. The older man said the street vendor should learn the lesson of not complying with the law.

“His kind usually has been through the process before so many times that they know nothing will happen to them and after few days you will see them on the streets again,” the old man made his argument.

The other guy did not think taking the guy’s belongings was fair, although what he did was wrong.

“It probably took him many years to save money to buy the items and start the business. If his belongings are taken from him now, then he won’t have anything to do,” the other guy retorted.

He thought it was better the street vendor was working and not going around stealing stuff. I happen to agree with the latter’s perspective. Until our living conditions are better, it would not be the end of the world to put up with struggling people who are a little derailed.

Repair but Not Compare: The ‘Right’ Marriages Say

Posted on by Web Master

Before tying the knot, my husband and I spent over a year in premarital counselling with several couples. We also read books about marriage, but nothing compared to the lifetime advice those couples walked us through. Knowing that so many things will be new to us in marriage, we had various questions and expectations that we wanted to be answered by those who have endured and persevered for decades.

Our counsellor couples were three. Two were Ethiopians and the other were from Canada. All of them had diverse life paths, giving us unique perspectives.

In two of the relationships, the men are in charge of cooking, cleaning, and raising children. In the other, the woman carried out these same tasks. The two men and the woman took away so many burdens from their spouses. Their way of life is not gendered roles. It was not about who does what but how they can collaborate.

The lessons we had involved seeing them do their routines of cooking, cleaning, taking care of their children, and spending family time at their respective homes. Then the couples will sit with us to explain the depth of the covenant bond of marriage that should be kept for life while working through problems.

Their marriage that looks perfect now results from years of hard work and grit. They proved to us marriage gets sweeter as the years go by. They dealt with loss, grief, infertility, and even financial difficulties but these things made them a lot closer and stronger.

They showed us forgiveness is an indispensable part of the glue that makes the marital covenant work for life. We were taught to make our spouse the priority more than our parents, siblings, friends, and even children. Apart from the marriage books, such people’s teaching taught us more than we had anticipated. I had assumed marriage is only about intimacy and adventure. The couples showed marriage is also about consistent work, responsibility, and sacrifice for the good of our spouse. It is not a union that we walk out from when the going gets tough.

In Ethiopia, with rare access to such advice, many learn about marriage from movies or books. I know several friends and relatives whose marriages could have been spared had they received similar counselling and approached that chapter of their lives with care and kindness instead of comparison.

I observed this play out recently. I am incredibly grateful for my husband, but I see so much danger in people who compare him with theirs – or if I was to compare him with others. These individuals lack the necessary knowledge of relationships and marriage, basing their frustration on their spouses being unable to be as “good” as others they idolise.

Going through premarital counselling gives us wisdom, teaching us that every man and woman has different qualities and shortcomings. The first challenge to overcome is accepting them as they are and trying to influence them toward a life approach that can benefit both. Such efforts sometimes require professional help when abuse or addiction are involved.

Several factors can affect people’s personalities and outlook in life, especially upbringing. Some say that knowing a person takes only six months. If time is taken to know the people we tie the knot with, instead of exaggerated expectations, many could be spared the heartache that could come later.

Learning from others has the potential to equip us with the necessary skills that can help us manage it properly. We should not decide under the assumption that we know what a relationship is about – a seriously reductive view. Sometimes it is not up to us to fix with the belief that we know how. It is better to be informed and seek advice from the right people.

People suited to advise us are not the ones who have dated many or married and got divorced but those who have worked hard and prioritised their relationships to keep it going despite the challenges life brings. Improvements are not an overnight endeavour.

Ethio telecom Execs Laud 61b Br Revenues

Posted on by Web Master

The state-owned Ethio telecom closed off the financial year with 61.3 billion Br in revenues.

Although it is an 8.5pc jump from the previous year’s performance, the telecom operator’s executives, led by CEO Frehiwot Tamiru, say outages brought on by miltarised conflict and instability at nearly 3,500 sites were a hamper.

Mobile voice services provided to 64.5 million subscribers accounted for 51pc of total revenues while data and internet made up a quarter of earnings. The company generated close to 147 million dollars from its international business operations.

Ethio telecom’s Telebirr mobile money platform facilitated remittances of almost one million dollars last year.

The operator was one of over two dozen of the country’s largest state-owned enterprises to come under the purview of the Ethiopian Investment Holdings (EIH) earlier this year. Others include the Ethiopian Airlines Group, the Commercial Bank of Ethiopia (CBE), and the Ethiopian Insurance Corporation.

CBE Records 27.5b Br in Profits

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The Commercial Bank of Ethiopia (CBE) registered 27.5 billion Br in profit before taxes last year.  By far the largest commercial bank in the country, the CBE’s deposits reached reached 890.1 billion Br, a 21pc jump from the previous year. Private deposits account for 74pc, or 655 billion Br, of the aggregate.

The state-owned Bank collected 2.6 billion dollars in foreign currency. A little over 10pc of the total was collected from export dealings, while 2.2 billion dollars came in the form of remittances. The Bank disbursed 7.7 billion dollars in credit for imports and other payments.  The CBE collected 120.6 billion Br in loan repayments, providing 179 billion Br in credit last year. Less than a fifth of the allotments went to the private sector.

The Bank opened 124 branches last year, bringing its total branch network to 1,824. Close to two billion Birr, from close to three million accounts, was mobilised from its new branches.  The Bank’s CBE Birr platform garnered 3.9 million subscribers last year, bringing the total to 5.4 million.

CBE executives say more than 100 branches have ceased operations due to the militarized conflict in the country’s north.

CLEAN UP

Posted on by Web Master

In front of Sheraton Addis, workers fix the small compound, removing the weeds and trash like plastic containers. The area is part of Addis Abeba were major rehabilitation work is being conducted to make it more sightly. Plastic bottle refuse is not making the job easy.

END OF DAYS

Posted on by Web Master

Workers are demolishing the top part of a structure considered a landmark in the National Theatre area. The building, Bego Adragot, is one of the oldest built in Addis Abeba and has been housing recognisable brands such as Shi Solomon Supermarket and Lion Bar. Ethiopia Hotel’s owners, Belayneh Kindie Group, had been planning an expansion that covers the buildings’ area.

WARMING THE SEASON

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A vendor is displaying hats and scarfs near a foot-traffic-heavy area of Mexico. Such accessories are popular in the rainy season, especially as it becomes colder every year. A seasonal trade, prices of the items picks up during the rainy season and settles down during sunny times, especially for scarves.