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Month: March 2023

Association Requests Central Bank to Loosen Grip

Posted on by Tizita S.

Bankers propose the National Bank of Ethiopia (NBE) mitigate its regulations and assist in providing loans to their assets that sustained losses during the war in Tigray Regional State.

The 22 commercial Banks under the Ethiopian Bankers Association submitted an assessment report on the impact of war in the regional state last week, indicating a staggering amount of damage to physical assets and jeopardised loan and advance repayments.

Regulators at the central bank had requested the banks to classify loans disbursed in Tigray as non-performing three months ago.

According to Demissew Kassa, secretary general of the Association, the banks performed a month-long assessment of asset quality following the Pretoria deal where 600 of their branches were operational before the conflict.

The report recommends relaxation on the requirements for the borrowers who have not been able to provide the renewed trade license, updated financial statements, tax clearance, and other documents to the banks.

It also suggests that the central bank loosens the asset classification and provisioning directive while suspending terms set for renegotiating loans and advances affected by the war until the situation improves.

The loan portfolio composition requires Banks to keep at 40pc short-term, 40pc medium term and 20pc long-term loans for five years.

Demesew said the percentage of long-term loans should be adjusted to address more businesses affected during the war.

“They can’t provide those documents,” he said.

Elias Geberemariam is one of the businesses affected by the war. He lives with his family in Mekelle city, the seat of the regional state.

He leased 4000sqm of land in the Ayder Industrial Park to manufacture machines such as stoves and other agricultural machinery over three years ago.

With plans to pay his loans back in five years, he took out a 12 million Br loan with 18pc interest rate from Lion Bank.

Unfortunately, the war broke out only a year after his factory became operational.

“I haven’t even started paying back,” he told Fortune.

The father of five is contemplating between the ideas of resuming work by taking out more loans or repaying the existing loan by selling the machinery.

He fears that the foreign currency crunch will hinder him from importing essential raw materials apart from getting finance.

The bankers also suggested the Central Bank suspend treasury bond payments, pay back of the outstanding balances of NBE bills and avail dedicated funds to alleviate their liquidity problems.

Aklilu Wubet, President of Wegagen Bank is hopeful regulators will intervene and make the suggested changes.

Wegagen was one of the banks highly impacted by the civil war in the north, suffering significant financial losses due to the disruption of services and closure of depositors’ accounts, where it has one of its most extensive networks of 112 branches.

Over a quarter of the Bank’s branches underwent closure and became out of the range of management supervision.

Asfaw Alemu, President of Dashen Bank, with over 30 branches in the region echoes his peer.

He is looking forward to the decision of the regulators at the central bank to start the recovery journey and address the cases.

According to Asfaw, proper evaluation of each case is necessary to make the decision of providing additional loans or putting up collaterals for auctions.

“It’s depositors’ money,” he said.

The report along with a letter signed by Abe Sano, as President of the Association was sent to the Governor of the National Bank of Ethiopia last week.

“We’re looking through it,” confirmed Mamo Mihretu, Governor of the Central Bank.

Atelaw Alemu (PhD), an economics lecturer at Addis Abeba University believes the federal and regional government should actively be involved in the recovery and rehabilitation by providing finance from donations and fundraisings.

He recommends providing finance to businesses and banks from funds collected from international donors.

“None of this was their fault,” he said.

Debt Vulnerability Looms as IMF Representatives Land in Addis Abeba

Posted on by Tizita S.

As Ethiopia grapples with its escalating external debt, the arrival of an International Monetary Fund (IMF) team in Addis Abeba earlier this week marks a crucial step toward negotiating a potential deal with foreign creditors. Ethiopian authorities welcome the visit with hopes of securing program arrangements that foster economic stability and growth.

Mamo Miheretu, central bank governor, expressed optimism about the IMF’s visit.

“We look forward to engaging with them as we embark on the second phase of our Homegrown Economic Reform Program,” he told Fortune.

During their visit, the IMF team will meet with senior Ethiopian officials, including Governor Mamo, to discuss monetary policy issues such as foreign currency reserves, foreign exchange, fiscal matters, and inflation. The team’s goal is to reach a staff-level agreement that could lead to the resumption of the IMF’s multi-billion-dollar program in Ethiopia, a person close to the matter disclosed to Fortune.

The IMF’s three billion dollars program, initially agreed in 2019 to support Ethiopia’s “home-grown economic reform,” was interrupted after the outbreak of a civil war in the country’s northern region in November 2020. The IMF team last visited Ethiopia in June 2022 to discuss the authorities’ economic reform and growth plans.

Eyob Tekalegn (PhD), state minister for Finance, told Fortune that the government aims to focus on reform priorities identified in the second edition of the homegrown reform agenda, referred to as HGER 2.0.

“We look forward to a constructive engagement,” said Eyob.

The HGER initiative encompasses macroeconomic, structural, and sectoral reforms pointed at stabilizing the macroeconomic environment, reducing inflation, addressing foreign exchange shortages, and promoting export-oriented industries. The program’s designers seek to improve the business climate and enhance the competitiveness of vital sectors, including agriculture, manufacturing, and tourism.

The HGER plan also incorporates a job creation and poverty reduction component that targets the growing youth population by supporting entrepreneurship and small and medium-sized enterprises (SMEs). Poverty reduction efforts feature social protection schemes and targeted interventions to improve the livelihoods of vulnerable groups such as women, children, and people with disabilities. On the governance and institutional reforms front, the program aims to boost public sector efficiency, transparency, and accountability through the rule of law, decentralization, and capacity building for regional and local governments.

Realizing the reform`s ambition has not been without challenges.

Ethiopia’s economy has been beleaguered by multiple shocks, including severe drought, the pandemic, war, and the impact of Russia’s war in Ukraine. These events have dampened growth and fueled inflation, placing stress on the country’s monetary and fiscal health.

These economic challenges are significant, causing food insecurity, humanitarian crisis, inflation, and foreign exchange shortages, according to Julie Kozack, the IMF’s communications director, who spoke about Ethiopia during a press conference last week.

Amidst alarmingly low foreign exchange reserves, several senior Ethiopian officials in the economic sphere have visited Washington D.C., Paris, and Beijing to plead for external debt restructuring. Ethiopia faces mounting debt service payments on its external debt, with data analyzed revealing a steady rise in payments over the past two years.

From 2018/19 to 2020/21, the country’s total debt service payments increased by 6.76pc, reaching over two billion dollars. This increase was primarily due to a surge in payments to bilateral creditors, especially China, which saw a 21pc rise in payments in 2019/20, amounting to 174.38 million dollars, according to data from the Ministry of Finance.

This situation prompted Ethiopian authorities to visit Beijing, urging Chinese officials to consider debt restructuring. China, together with France, co-chairs a bilateral creditors committee that examines Ethiopia’s applications for debt restructuring.

The delegation, led by Finance Minister Ahmed Shedie, included Governor Mamo and State Minister Eyob. The latter two had a similar visit to Paris a couple of months ago, discussing Ethiopia’s external debt stock with French authorities.

Wu Peng, director of African Affairs under China’s Foreign Affairs Office, deemed the delegation’s visit to China “successful.” State Minister Eyob echoed the sentiment in a Twitter post, calling it a “very fruitful discussion.” However, no formal agreement has been reached or disclosed on the visit’s outcome.

China is one of Ethiopia’s major creditors, providing loans to finance much of the country’s energy and infrastructure sectors over the past two decades. Over one-third of Ethiopia’s 27 billion dollars in external debt is owed to China.

Ethiopia’s debt is divided into three main categories: central government, government- and non-government-guaranteed. Although government-guaranteed debt is larger and more expensive than other types, private creditors, such as banks and financial institutions, also have a significant share of debt service payments.

Bilateral creditors are the largest with claims on Ethiopia’s debt service payments, followed by government- and non-government-guaranteed creditors. Multilateral creditors, such as the World Bank and the African Development Bank (AfDB), have the smallest share of debt service payments, although their share increased slightly last year.

Exchange rate fluctuations between the US Dollar and the Birr have also contributed to the rise in debt service payments. Despite the Dollar amount being slightly lower, the total debt service payments in Birr last year were higher than the previous year, reflecting the weakening of the Birr against the Dollar.

The visit to China by Ethiopian authorities highlights the country’s growing debt burden, which is expected to continue to increase. This has led to concerns about Ethiopia’s ability to repay its debt and maintain its economic stability.

Ethiopia’s debt crisis is not unique, with several other African countries facing similar challenges. According to the World Bank, debt-to-GDP ratios in sub-Saharan Africa grew from 35pc in 2013 to 56pc in 2020. Ethiopia’s ratio was 23.6pc at the end of September last year.

Ethiopia’s rising debt service payments on external debt underscore the need for debt relief and restructuring efforts to address the country’s growing debt burden. Other African countries such as Zambia, Chad and Ghana struggled with unsustainable debt levels. This has raised concerns about the long-term sustainability of debt levels in Africa, particularly against the economic impact of the Covid-19 pandemic.

There have been calls for debt relief and restructuring for African countries, particularly those facing unsustainable debt levels. In 2020, the G20 group of major economies agreed to suspend debt service payments for low-income countries until the end of 2021, providing some relief for African countries struggling with debt. Ethiopia has benefited from this initiative after its officials signed a memorandum of understanding (MoU) with the Paris Club Secretariat two years ago. This allowed the country to freeze payments to bilateral creditors for over a year until June 2021, saving 216 million dollars in debt servicing. A further extension for six months expired in December 2021.

Discussions have continued on the G20 common framework (CF) agreement, although little progress has been made. An internal document of the Ministry of Finance disclosed that failure to advance in these talks “might potentially raise the country’s debt distress rating from moderate to high risk.”

The IMF team’s visit this week with the prospect of signing a staff-level agreement is considered a vital path to move forward.

“With the end of the conflict in the north, the government is now committed to reviving and deepening its economic reform agenda for 2023 and beyond – to address both immediate macroeconomic imbalances and to deliver sustainable and inclusive growth,” Governor Mamo told Fortune. “We’re updating our economic reform program. It’s expected to provide an overarching framework to guide the Government’s policies aimed at boosting investment, improving productivity, raising exports, creating jobs, and improving living standards.”

The fate of Ethiopia’s economic stability hangs in the balance, as the IMF delegation commences its critical mission. As Ethiopia’s leaders look to the future, they hope to secure the resources and support needed to confront its formidable debt crisis and lay the groundwork for a more sustainable future.

However, entering into a deal with the IMF will only be the start of a long journey in the debt treatment process, according to a person knowledgable about the procedure. Ethiopian authorities need to secure a “letter of commitment” from creditor countries, mainly China, to pursue debt restructuring under the G20 agreement.

Ethiopian authorities visited Beijing in February this year. China holds the key to Ethiopia’s success in negotiating with its creditors for debt restructuring.

Parched Addis Struggles to Provide Water to Booming Population

Posted on by Tizita S.

At a crossroads, Addis Abeba finds itself on the precipice of monumental transformation. Nearing four million residents (the World Bank puts it at 4.8 million), the bustling city boasts a young, relatively educated, and literate population fueling its economic growth. The city’s demographic evolution speaks to a place in transition, teeming with opportunities for expansion, rooted in its cultural heritage and historical significance.

However, the challenges of housing shortages, traffic congestion, and limited access to essential services threaten the quality of life for its inhabitants.

Addis Abeba’s growth has outpaced its infrastructure, with housing expansion and pollution not adequately accounted for in the design. The city’s water supply and distribution system has reached a breaking point. As water resources become overdrawn and capacity dwindles, domestic, industrial, and commercial waste only compound the issue. Water governance and a convoluted web of institutions suffer from a lack of coordination and integration, further exacerbating the crisis.

With per capita water consumption at a mere 150 litres—well below the international average of 200 litres—Addis Abeba’s water demand far outstrips its supply. Rapid population growth, inefficient supply and distribution systems, and poor conservation practices contribute to the burgeoning water crisis. The city’s annual water supply, sourced primarily from Dire (40 million cubic metres), Legedadi (47 million), and Gefersa reservoirs, falls dramatically short of the demand exceeding 150 million cubic meters annually.

The World Bank and the Africa Development Bank (AfDB) have been at the forefront of helping the city administrations overcome their challenges in quenching the thirst of residents. In the 90s’, the World Bank supported a project for improving efficiency and increasing water supply and sanitation services, building treatment plants, distribution networks, and storage facilities.

The Bank paid for three phases of a water supply and sewerage project initiated in 2010. It focused on increasing water production capacity, expanding the distribution network, improving wastewater treatment, and enhancing management and operations. Under this project, a water treatment plant was built in the Akaki River Basin. Three years later, the oldest dam on the Gefersa River was rehabilitated; and in 2018, reservoirs, pumping stations, and distribution networks were built in Koye Feche area.

Funded by the AfDB, a supply and sanitation program launched in 2008 aimed at expanding the supply network and improving sanitation infrastructure.

However, a study conducted a few years ago revealed that, despite these and other investments in water infrastructure and a 48.4pc increase in water supply since 1996, demand has skyrocketed by 231pc over the same period. Population growth, urbanization, and industrialization are the main drivers of this escalating demand. The capital’s population has swelled over the years, with a recent influx of migration of those fleeing conflicts in various parts of the country.

This influx has stressed the city’s water supply, as more people need access to this vital resource.

Addis Abeba’s youthful population, with the 15-29 age group comprising 32pc of the total, is more likely to consume water intensively than other age groups. The number of households in the city has steadily increased, with over 1.5 million homes registered. This growth further strains the water supply as more households require access to clean water.

The study also highlighted significant disparities in water distribution across the city.

Another study published in the journal “Water” in 2018 found that the water supply coverage was 85pc. Around 40pc of the water supplied to the city was lost due to leaks and breakages in the distribution system. This same study estimated that the service was intermittent, with only 10pc of the residents receiving a continuous supply. It highlighted that water rationing is common, with some areas receiving water only a few days a week while others lack access to piped water.

Another study conducted three years earlier discovered significant disparities in water distribution between the city’s different areas. The highest connection density was in the Arada branch of the Addis Abeba Water & Sewerage Authority (AAWSA), while the lowest was in the Nefas Silk branch. Analyzed through a consumption ratio for a population size and household numbers, Gulele, Nefas Silk Lafto and Lideta districts stood out as the highest consumers. Per capita consumption for population size in Gulele was 93.6m³, followed by Nefas Silk (91.4m³) and Lideta`s 89.1m³. Computed for household consumption, Gulele had 394.1m³, Nefas Silk Lafto (366m³) and Lideta (282.5m³).

The disparity in water supply and consumption paints only part of the picture. The water supply efficiency ratio for the year the data was collected revealed that only 78.7pc of the maximum water supply capacity was utilized. Of the water supplied, 45.7pc was lost due to leakages and illegal connections, and a mere 34.1pc of the potential water use was utilized.

In response to these challenges, Addis Abeba’s leaders must adopt a holistic approach encompassing investment in water infrastructure, demand-side and water resource management, and governance reform. Their responsibility is to ensure equity, a sustainable environment, and economic efficiency in the management and use of water resources.

The AAWSA, the sole agency for water supply, should embrace an integrated approach to water resource management, addressing water depletion through catchment management and land use change control. Measures must be taken to prevent unlicensed private wells from competing with production wells. The Authority should conduct a comprehensive inventory of all boreholes in the city to maintain accurate and up-to-date data for proper planning.

Alternative water sources, such as rainwater harvesting and recycling wastewater, should be explored for non-potable uses. By improving efficiency in the water distribution system, AAWSA can shift from an engineering-based supply-side model to a technology-based demand-side management approach. Using digital water meters, leakage detectors, and state-of-the-art technologies can help combat the inefficiency that undermines the system, depriving residents of a vital provision for life.

Addis Abeba’s water crisis is complex and requires a multi-faceted and comprehensive approach. By investing in water infrastructure, implementing demand-side and water resource management strategies, and reforming governance, the city’s leaders can ensure a more equitable and sustainable water supply for residents. As the city continues to grow and evolve, addressing these challenges will be paramount to maintaining the quality of life.

Upgrading and expanding the city’s water infrastructure is crucial.

Addressing these issues also requires significant investment in new dams on the Sibilu and Gerbi rivers, located northwest of the capital. These projects, which have been stalled for several years due to lack of financing, could supply three times more water than the Authority provides daily.

An efficient water management plan is vital, emphasising demand management, equitable distribution, and water conservation. This entails fixing leakages, expanding storage capacity, and constructing new water distribution networks. Concurrently, public awareness campaigns can instil a culture of conservation, encouraging practices such as water waste reduction, greywater reuse, and the adoption of water-efficient appliances. This needs a robust regulatory framework and enforcing compliance to curb water wastage and pollution.

Adopting Integrated Water Resources Management (IWRM) principles can balance competing water demands and promote sustainable use by considering social, economic, and environmental aspects. Considering population growth, urbanisation trends, and future climate scenarios, a long-term water security strategy is vital for Addis Abeba’s water security.

Investing in climate-resilient water infrastructure can help the city adapt to climate change impacts. This includes designing infrastructure to withstand extreme weather events and planning for future climate scenarios. Enhanced wastewater treatment facilities will reduce pollution and improve water quality while promoting the reuse of treated wastewater for non-potable purposes, such as irrigation and industrial uses.

Waste Tower: What’s Next?

Posted on by Tizita S.

On a cloudy morning one of the days last week, Genet Gebre was immersed in a pile of dirt searching for metal scrapes at the top of the Koshe dump site.

She does not seem to mind the reeking smell or vultures hovering around. A cold wind breeze takes the plastic bags into the air while three other women toil beside her on the wasteland.

Genet earns 500 Br weekly if she finds someone to buy the scrapes.

“This is what I do to get by,” she told Fortune.

There was hardly a moment during her life she could call comfortable, as she was forced to take care of herself at a young age. She worked as a cleaner and housemaid until getting married three years ago. She is the breadwinner for the family, living in a one-room shabby house paying 1,000 Br rent.

Genet comes to the dumpsite every day, walking a distance of no less than 20Km to search for swarf and scrapes. She observes buyers have gone down and she has been saving up her collected metals until better days come along.

“I’m finding it difficult to find buyers these days,” she said. “Even when I sell, the money is not enough.”

Koshe is an open dumpsite in Addis Abeba established 60 years ago. It lies on 30hct land and 26m in height around the Jemo area. Close to 3,000 people hauled in the site, with some making their permanent residence.

Dumped waste is continuously layered on top of Koshe, creating cliffs. Experts warn internal heat from decomposed manure can reach up to 65 degrees Celsius risking a blowout.

In 2017, a treacherous landslide unfolded in the land of Koshe that was deadly for over 115 residents.

Authorities paved the way for rehabilitation projects the following year by installing a venting pipe system that reduces the heat inside by converting methane to carbon dioxide.

Methods such as creating compacted roads, increasing water runoff and reducing water leaks through the garbage have been implemented in partnership with the Japanese government.

“A palpable technology was missing,” said Ephrem Sisay, landfill management directorate director at the site.

Ephrem has been managing the site for more than five years and observed that solid waste collection has increased over the years, attributing the upward trend to the decline of informal dumping.

Although the streets of Addis Abeba are far from reflecting the essence of a clean metropolitan city with wastes indiscriminately disposed inside drainage lines and roadsides, authorities disclose they got the hang of a good collection and disposal system.

According to Ephrem, the proper waste collection and disposal rate in the capital has reached 85pc which stood at 43pc a few years ago. He observes plastic bottles are prominent on the site, with a 10pc increase last year.

Waste collection and disposal have become a means of making a living for many. An average of 2,500tns of waste is damped at Koshe daily, where 300 to 500 trucks make their way to the area to unload.

Elias Abdu daily unloads his truck at the Reppie garbage storage facility near the dump site. He has been working as a driver under Tigist & Gashaw Waste Collectors Association for seven years.

Elias did not have a previous job and found a monthly salary of 7,000 Br, unloading about 1,000tns of solid waste daily, a blessing in disguise.

“Traffic is the only hurdle,” Elias told Fortune.

Reppie Waste to Energy Power Plant was constructed by China National Electric Engineering in 2018, commencing operation the following year.

Wastes are stored in the facility for up to three days and taken to the power plant, where 25pc is ash from heavy metals and dissolvable salts.

It was expected to generate 50MW power, but the plan could not be actualised as the power generation dwindled to only 25MW using two operational steam turbines.

At total capacity, close to 1,400tns of waste is processed in a day at a minimum temperature of 850 degrees Celsius, with the released heat generating superheated steam converting steam to electrical energy.

However, it has stopped power generation for almost two years because of a turbine breakdown, plummeting its overall waste combustion to 600tns a day.

“We’ve got a long way before generating proper power from waste,” said Wubshet Haile, plant operational shift leader at Reppie.

According to Wubshet, they are waiting for the Chinese company to repair the turbines.

The facility has built Flue Gas Treatment (FGT) that consistently monitors emission levels and absorbs toxic greenhouse gases.

The waste production rate per person increases by five percent every year, with a person generating close to 0.5kg of waste every day.

Close to 70pc of Addis Abeba’s waste is collected from households with over 7,000 collectors through 90 associations. The associations have created employment opportunities for more than 70,000 people.

The collectors go to households in the 118 woredas of Addis Abeba. The collected wastes are distributed to 216 temporary storage points in every district, which will be transferred to Koshe within the day.

Wastes from commercial facilities and factories constitute nine percent and are collected by close to 32 private companies directly taken to the dump site.

Around the Tor Hailoch area, seven men in yellow and orange uniforms covering half their faces are toiling effortlessly to put the collected waste in the bag.

Tolossa Holela gives orders to wrap up the process from the truck’s passenger seat. He is the head of the Addis-Meiraf Solid Waste Collectors Association, with 31 employees under its fleet earning close to 4,000 Br a month.

The truck makes ten stops on the different sides of the woreda before making its way to the destination to the temporary storage facility in the district, before it is taken to the final dump site.

“It is a hefty work,” said Tolossa.

The World Bank report suggests the lack of proper collection of containers and poor infrastructure exacerbated by a poorly designed collection route system has created hurdles in the solid waste collection system in the capital.

Alemayhu Habdisa (PhD), an environmental health lecturer at Jimma University, observes that population growth has been contributing to the detrimental waste generation rate in Addis Abeba.

According to Alemayehu, a high generation of solid waste through onion peels contributes to the age of methane gas, which contributes to the greenhouse effect. He recommends expanding dumping sites to different areas.

“There is a lack of planning and design on the waste management systems,” he said.

Alemayehu warns that accumulated wastage in the city causes a deadly chemical found in soils and ponds known as Lichet that may contaminate the food commodities produced through irrigation.

He expects the river-side projects to sustain waste stocked around rivers used as irrigation for crop production, as there should be colossal care for waste contamination that could not haul onto rivers.

Samson Wakuma, public health assistant professor at Addis Abeba University, concurs. He observes that the city lacks proper disposal of waste that creates health impacts when transferred to river sides during flood season.

“It contributes to cancerous diseases,” he told Fortune.

Research conducted by Ethiopian Public Health Insititute (EPHI) in 2017 shows Akaki river, due to its proximity to factories, has been endowed as one of the most polluted rivers in Addis Abeba. Toxic wastes, urban runoff, fuel storage, and disposal of chlorinated solvents have contributed to the contamination.

This has made life difficult for the surrounding dwellers who depend on the river to irrigate their vegetable patches and drink the river water.

Samson believes dumping sites should be as far from rivers with sanitary disposal systems as possible.

He recommends regulations to be placed in sorting out waste collections.

The Mayor’s Office directorate responsible for monitoring services has been trying to  oversee the waste management from collection to dumping. Officials dispatched 15 experts to create awareness to differentiate the disposals from disposable to bio-degradable to hazardous.

According to the Service Director, Mihiret Degife, they plan to create household awareness.

Urbanisation coupled with population growth has increased waste generation in the city, making it challenging for the City Administration to provide safe and sustainable solid waste management.

Over 60pc of the collected waste from the city appears to be organic, while five percent is recycled.

The Addis Abeba Cleaning Management Agency has been working to improve the waste management system by recycling, reusing and recovering collected wastes.

The Agency has been focusing on recycling waste materials attributing a high employment rate and revenue-generating capacity with a 1.1 billion Br budget for the year.

Bayush Tadesse, recycling & reuse head at the Agency, said there is an inclination towards recycling plastic bottles availing a high rate of employment in the last three years.

According to Bayush, the recycled number of plastics has shown a nine percent increase, with 49,000tns recycled in 2021, generating 141 million Br annually. Last year, plastic companies generated 254 million Br by recycling 64,000tns of bottles.

“Solid waste will be converted to resource in the long run,” said Bayush.

Urban waste management has been a challenge in the developing world due to poor infrastructure and limited institutional capacity.

“Population in the capital has expanded greatly,” said Girma Hailu, solid waste service director at the Agency.

The last national census was conducted 16 years ago, with the census commission reporting 2.7 million residents. In this period, Addis Abeba experienced several socioeconomic transformations that could contribute to extreme changes in demography.

“That has made it difficult to extract data on the city’s waste generation,” Grima told Fortune.

Insurance Industry Pledges 75m Br Amid Misgivings Over Shareholders` Rights

Posted on by Tizita S.

The Ethiopian insurance industry has pledged to donate 75 million Br to support a series of state development projects, including the “Gebeta Le’hager” initiative.

This move comes as a response to the call made by the National Bank of Ethiopia (NBE) Governor Mamo Mihretu, who urged banks and insurance firms to contribute to the country’s development agenda. The state-owned Ethiopian Insurance Corporation (EIC) will contribute 50 million Br, while 17 private insurance firms will cover the remaining 25 million Br.

Pledges by the financial sector are part of a series of fundraising initiatives launched by Prime Minister Abiy Ahmed’s administration to raise funds for the construction of projects, including the Koysha, Wonchi, and Gorgora projects, which have a total projected cost of six billion Birr. The government plans to cover half of the financing through fundraising efforts.

While some believe this initiative is an opportunity for corporations to meet their social responsibilities and create employment, others express concerns over the decision to contribute to state projects without shareholders’ consent. Shareholders who had anticipated dividends are upset to learn that some will be used to finance state projects, seeing it as a violation of their rights.

This comes amid a series of fundraising initiatives launched by Prime Minister Abiy Ahmed’s (PhD) administration, such as “Dine for Sheger,” “Dine for the Generation,” and “Dine for Ethiopia,” which aim to raise funds for the construction of projects. The Koysha, Wonchi, and Gorgora projects are projected to cost six billion Birr, with plans to cover half of the financing from fundraising efforts. The three initiatives will be implemented in the Oromia, Amhara, and Southern regional states.

One of the CEOs confirmed receiving the letter last week. He feels that they were left with no other choice but to contribute following the approval from their board of directors.

“The board represents shareholders,” said the CEO.

Two years ago, 4.2 billion Br was raised towards the projects, exceeding the initial target of three billion Birr through “Dine for Ethiopia.”

Jemila Kibert, a board member at Global Insurance, believes the initiative presents a good opportunity for corporations to meet their social responsibility while providing employment opportunities.

“Corporates usually allocate budgets for social initiatives,” said Jemila.

Not everyone is pleased with the decision to contribute to state projects. A founding shareholder of one of the veteran insurance firms expressed dismay over the decision made without his consent. He contemplates stopping buying shares altogether as they have become less rewarding.

Sewale Abate, a finance lecturer at Addis Abeba University, shares the concern. He argued that the amount pledged by insurance companies is greater than what is usually allocated for social responsibility.

“Shareholders assign a board of directors to represent their best interests,” Sewale said.

However, he suspects that the boards may have consented to the contributions out of fear of potential consequences that could follow a nonacceptance. Sewale also questioned the timing of the request, as financial institutions have not yet recovered from the bond requirements of the central and the state-owned Development Bank of Ethiopia (DBE).

In September of last year, authorities pressured heads of financial institutions to contribute up to two percent of gross profits to the Ethiopian National Defense Forces (ENDF). They chipped in no less than 800 million Br. Abe Sano, president of the Ethiopian Bankers’ Association, asked last week private banks to disclose the amount they are willing to contribute to the cause.

The Commercial Bank of Ethiopia (CBE) has already pledged 1.2 billion Br, equivalent to 7.2pc of its profits from the previous fiscal year. The DBE has committed to giving six percent of its net profit from the previous year, while private banks have agreed to contribute five percent of their profits towards the projects. Close to 16 private banks made an aggregate of 20.7 billion Br in net profit last year.

Banks that have not yet turned a profit, as they have begun operations this year, have been asked to lower their contribution to 0.5pc of their capital.

However, shareholders who had anticipated dividends are upset to learn that some of it will be used to finance state projects.

Tesfaye Chane, a shareholder of Awash Bank with stakes worth more than a million Birr, was unhappy to discover the decision made on his behalf. Awash Bank recorded a 5.3 billion Br profit from its operation last year.

Tesfaye had planned where his dividend would be invested. He believes the management should have used text messages to get shareholders’ consent, at the very least.

“It’s one of my income sources,” Tesfaye told Fortune. “This is a violation of shareholders’ rights.”

According to Abie, also president of the CBE, the government’s efforts to mobilize funds from the financial sector reflect its commitment to achieving the country’s long-term development. He highlighted the importance of collective contributions towards the betterment of Ethiopia.

Post-war Demobilization, Reintegration Cost Ethiopia 29.7b Br

Posted on by Tizita S.

As Ethiopia emerges from one of the deadliest conflicts in recent history, the country faces the formidable challenge of demobilizing and reintegrating a quarter of a million former combatants at the cost of nearly 29.7 billion Br. This will be Ethiopia’s most expensive post-war rehabilitation program, eclipsing previous efforts in the 1990s.

The disarmament, demobilization, and reintegration process (DDR) will involve ex-combatants from various regional states, including Tigray, Amhara, Afar, Oromia, Benishangul-Gumuz, Gambella, and Southern Nations. Ethiopia’s National Rehabilitation Commission (NRC) will oversee the program, which is expected to cost twice as much per ex-combatant as the DDR following the Ethiopia-Eritrea war in the late 1990s.

International assistance will be crucial to financing the ambitious project, as Ethiopia faces a high debt-to-GDP ratio of nearly 23pc and a foreign exchange squeeze. The federal government is expected to cover one-fourth of the budget, with the balance coming from bilateral partners, the UN, EU and multilateral financial institutions.

The Commission, established four months ago for a two-year period, is led by Teshome Toga, a former ambassador and once speaker of Parliament. The first meeting between the Commission and development partners took place three weeks ago in Meqelle, Tigray Regional State, followed by a follow-up meeting in Addis Abeba last week.

A joint statement by the Commission, UNDP, and Ministry of Finance announced further consultations in Bahir Dar and Semera cities, in Amhara and Afar regional states, which were also affected by the war. While the peace agreement stipulated a rapid demobilization period of 30 days without foreign assistance, Ethiopia’s financial challenges made domestic financing unrealistic.

The Ministry of Finance had previously estimated that up to 20 billion Br would be required to reconstruct the war-stricken regions.

The accelerated implementation Pretoria Accord and Nairobi Declaration has been praised by international observers. The appointment of Getachew Reda as the head of the interim regional government of Tigray Regional State and the delisting of the TPLF from designation as a terrorist organization by Parliamentarians is seen by donors as Ethiopia’s commitment to upholding the peace deal.

Disarmament and demobilization processes have been carried out globally by the UN Department for Peace-Keeping Operations (DPKO), the UN Development Programme (UNDP), and the World Bank, with 73 implementations since their inception in the 1970s. Ethiopia has twice before undertaken successful post-conflict harmonization efforts.

The recent conflict in Ethiopia, which claimed an estimated a million lives, highlighted the importance of a comprehensive DDR program for long-term peace and stability.

Yonas Adaye (PhD), an associate professor of Peace Studies, argues that Ethiopia must learn from its own and international experiences to ensure the success of the new initiative.

One key lesson, according to Yonas, is the need to separate political affiliations from military allegiance, as was done following the fall of the DERG regime. He emphasized the importance of treating ex-combatants with dignity and respect during the DDR process.

Yonas also noted that the “monopoly of violence [by the state] is important in preventing the creation of a state within a state,” making DDR programs crucial to post-conflict peace. A successful DDR program, he argued, must be supported by unified political will and should not be compromised by donations or the involvement of non-political actors.

One of the nine lessons an internal UN document listed includes that “successful DDR is only possible in an inclusive political process.” It asserted “peace and stability” as a vital strategy for government activities.

Yonas suggested that coordinating development projects alongside DDR efforts and addressing the psychological trauma of combatants will increase the likelihood of success.

As Ethiopia embarks on the latest DDR program, the government and international partners struggle to draw on past experiences and lessons learned from past and global contexts.

Ethiopia’s two previous DDR programs offer important insights into the current effort. The first, a 198 million-dollar project following the fall of the Derg regime 32 years ago, demobilized half a million soldiers but faced challenges in reintegrating them, particularly in urban areas. A study by Tufts University in 2016 found that combatants returning to rural areas fared better, while those in cities needed food rations, pocket money, employment support, and technical assistance.

The second DDR attempt, a 174 million-dollar effort over five years following the conflict with Eritrea, demobilised and reintegrated nearly 150,000 former combatants into civilian life. Both programs, despite their mixed results, relied heavily on funds from foreign financiers, with the World Bank accounting for 97pc of the financing in the second DDR program. Several studies suggest that properly implementing a DDR program requires orientation towards clear objectives, centralization of parties to the conflict (rather than loosely associated coalitions), and an inclusive political process.

The experiences of former soldiers from previous DDR efforts provide a perspective on the challenges faced during demobilization and reintegration. A former soldier during the military regime, speaking anonymously, recalled feeling abandoned after demobilization. A security personnel in his early 60s, he believes “a soldier fights for his country, not any one government.”

“In that, there is solace,” he said.

However, the struggles faced by many of his comrades post-demobilization still cause him pain.

Contractors Call for International Bid Threshold Adjustment

Posted on by Tizita S.

Local contractors plea for the international bid price threshold to be raised as the conversion rate has made it easier for foreign-based companies to outperform.

The proposed entry is to be set up to two billion Birr as discussed in a meeting that saw the attendance of officials from the Ministry of Urban Development & Infrastructure and the Ethiopian Roads Authority a fortnight ago.

Gebeyaw Yitayew, head of the Public Procurement & Property Authority, agree the threshold does not reflect the current purchasing power even though it was tripled to 600 million Br over a year ago by the Ministry of Finance.

“The experts at the Authority will assess and adjust,” he told Fortune.

Gebeyaw also disclosed the door has not been closed for contractors that are able to work on projects requiring more than the appropriated amount.

Ethiopian Contractors Association, which lobbies for 2,500 members, presented a study focused on the challenges of the sector that was conducted over the span of six months.

It reveals the local contractor’s participation is only three percent in federal projects although the capital budget accounts for up to 70pc of the total.

According to Girma Habtemariam, head of the Ethiopian Contractors Association, local contractors possess high tolerance during delayed payments, seeking bank loans to remain operational.

“We’re struggling,” he said.

Over 25,000 construction companies are operating in the country. A report from the central bank shows the sector’s growth rate has plummeted to 4.9pc, the lowest in the past five years.

Wendimu Seta, state minister for the Ministry presented an assessment conducted by the experts, which received a 60 billion Br budget for the current budget year.

The assessment reveals that the number of national bids retendered due to insufficient bidders was six in 2018 rising for consecutive years and reaching 38 in 2021.

“Competence is declining while infrastructure appetite is increased,” said Wendimu.

Of the 32 major construction projects five years ago, 80pc were contracted to Chinese firms, known for their better performance and delivery records outdoing local and international competitors.

Last year, Ahmed Shide, minister of finance endorsed the injection of billions of Birr to contractors handling university projects, covering them from cost escalations in construction materials and inputs. However, budgetary limitations forced federal Authorities to allocate a budget for  projects on the pipeline rather than commencing new constructions this year.

Bright Construction has been in business for over two decades with a 10,000 Br initial capital. The owner Zeratison Girmay said federal offices get into a deal with foreign companies for the associated funds they bring.

He claims to have witnessed the drainage of foreign currency without technology and knowledge transference.

Local contractors are finding it difficult to operate under the skyrocketing inflation, delayed client payments, and lack of short-term credit options.

Incorporated in 2008, Stiffcon Engineering is among the construction companies struggling to maintain their business. The grade two construction company is unable to put two of its three projects worth 160 million Br to the finish line.

Seyoum Dawud, owner of Stiffcon believes the local contractors should be subcontracted in the mega projects to alleviate their financial problems.

According to Seyoum, segmenting out construction into roads, buildings and general construction after gaining a license limits the contractors.

“We have the competence just not financial strength,” he said.

For Argaw Asha (PhD), a board member at the Ethiopian Association of Civil Engineers, adjusting the threshold cannot be the long-term solution while the value of Birr keeps depreciating.

The expert who has been in the construction sector for 17 years recommends easing the financial burden through loan disbursements.

He believes the focus should be on enhancing the capacity of local contractors, making joint ventures and subcontracts mandatory.

“Capacity building is important,” he said.

Chinese Footwear Behemoth Returns to Ethiopia, Raising Labor Rights Concerns

Posted on by Tizita S.

Huajian Dongguan Hua Bao Shoes Co., a leading global producer of women’s footwear, is set to restart its operations in Ethiopia after a two-year hiatus.

The company, which manufactures nearly 20 million pairs of shoes annually and employs over 25,000 people, primarily exports its products to the U.S. and European markets. Its local production was halted due to the pandemic, Ethiopia’s suspension from the African Growth & Opportunity Act (AGOA), and supply chain disruptions.

Three weeks ago, Ethiopia’s Minister of Industry, Melaku Alebel, and Huajian’s Chairman, Zhang Huarong, signed agreements to facilitate the resumption of the company’s operations. Sources within the Ministry confirmed that agreements enabling the reinstatement of operations had been signed with Huajian. The Chinese shoe manufacturer began seeking overseas operations in the early 2010s to reduce production costs, in addition to its two plants in China.

Established in 1984, the company produces footwear for well-known international brands such as Naturalizer, Nine West, and GUESS.

Huajian initially began production in Ethiopia after a visit by the late Prime Minister Meles Zenawi to Dongguan, China, where he persuaded the company’s chairman to invest in his country. A few months later, Huajian started operations in Ethiopia, leasing space in the Eastern Industrial Zone, a Chinese private industrial park 35Km east of the capital, intending to invest two billion dollars. At the time, the company produced over 2,400 pairs of shoes daily.

In 2015, Huajian established its own industrial park on the outskirts of Addis Abeba to source raw materials more easily. Ethiopia has built 20 industrial parks, with 14 currently operational, where 87pc are women, according to a report released by the World Bank. With over 50 million cattle, Ethiopia has the largest cattle population in Africa. In 2016, Huajian accounted for 60pc of Ethiopia’s leather exports, using hides as one of its inputs.

However, Huajian’s labour practices attracted public attention in 2017 when “China Labor Watch”, a rights organization, revealed footage of working conditions at the company’s Jiangxi and Dongguan facilities. Li Qiang, the founder of “China Labor Watch”, described the factory in Ganzhou as among the worst he had seen in nearly two decades.

The company’s operations in Ethiopia were also marked by resistance to labour unions, low wages, and high exports.

Since their introduction, labour rights issues in industrial parks have been a sensitive topic. The former head of the Industrial Park Development Corporation (IPDC) dismissed allegations of worker mistreatment as “baseless”.

Employees at Huajian participate in a quasi-military exercise drill and sing the company’s anthem each morning, as recently shown in a documentary entitled “Why is Ethiopia the African Eldorado.” The film features hundreds of young men and women marching in place while Chinese managers issue instructions through a bullhorn. Company executives claim that the marching exercises improve coordination and team cooperation.

Huajian executives were not available for comment.

The cut-make-trim (CMT) segment of garment production, where women constitute approximately 80pc of the total workforce and 95pc of the operator-level workforce, employs 18-25-year-olds who have left their rural family homes. The World Bank report highlights that this pattern of industrial work is similar to international export processing zones, which have often been criticized for exploiting cheap female labour in the global south.

“Most manufacturers within the parks prefer to employ women in their production lines,” says Ayalew Ahmed, deputy president of the Confederation of Ethiopian Trade Union (CETU), which oversees nine industrial federations.

Ayalew recalled an attempt to establish a workers’ union within Huajian a few years ago, which the company quickly disbanded.

Unions in the Ethiopian textile and apparel industry are organized under the Industrial Federation of Textile, Leather, & Garment Workers Trade Union, with members representing about 13pc of CETU’s total membership. Angesom Gebreyohannes, president of the Federation, states that they are working to address workers’ concerns through an association that includes all members of the industrial parks without singling out specific companies.

The Federation is nearing the establishment of a 9,000-member-strong workers association across the Eastern Industrial Zone.

Experts recommend rigorous enforcement of existing labour protocols to ensure worker rights as industrialization expands in the country. Kibur Endidawork (PhD) from Addis Abeba University, who has conducted extensive studies on workers within Ethiopian-owned textile parks, advises caution in promoting the country as a source of the world’s cheapest labour, as it could be misused.

“It should be measured with conditionalities,” he told Fortune.

Kibur suggests that continuous inspections by the Ministry of Labor & Skills, voluntary employee reporting, and politically independent labour unions should all work together to protect against potential infringements of workers’ rights. As Huajian resumes operations in Ethiopia, addressing labour rights concerns and ensuring adherence to international labour standards will be crucial for the company and the country’s growing industrial sector.

Huajian’s park, located on 135 hectares of land in the Lebu area, was named “Huajian International Light Industry City” and aimed to employ up to 100,000 workers upon completing its planned one billion dollars budget. In 2019, Huajian also leased the entire Jimma Industrial park on 75hct of land 365Km from the capital, with plans to invest 100 million dollars before ceasing operations two years later.

Following supply chain difficulties in 2021, Huajian left the park, and the IPDC handed over responsibility for the park to Akshay Jain Plc, a lessee engaged in avocado processing.

The 97-year-old Addis Abeba tannery S.C. anticipates a positive business relationship with the Chinese manufacturer. Endris Ibrahim, manager of the share company that had suspended operations for a year due to flooding at their Asco plant, expressed excitement about re-engaging with Huajian. The company hopes to take advantage of Huajian’s preferential forex access, as it faces difficulties importing chemicals.

Lion Bank Faces Uphill Battle to Compete with Industry Peers

Posted on by Tizita S.

Lion International Bank (LIB) has exhibited promising growth in recent years but lags behind its peers in key financial indicators.

The past two years have been daunting for the executives of the second-generation commercial bank following the outbreak of a civil war in the Tigray Regional State, where it had more than half of its branch networks. The war caused losses in its branches, resulting in immense financial loss for the Bank.

“Several branches suffered looting and damage to property,” Gebrehiwot Ageba (PhD), board chairman of Lion Bank, told some of the 12,000 shareholders gathered at the Hilton in December 2022.

The net profit of Lion Bank has been declining for consecutive years, reaching 268.81 million Br in the last financial year, a 19pc decline from the previous year and a significant drop from two years ago. It fell short of its peers in the industry, such as Zemen (1.4 billion Br), United (one billion Birr), Bunna (881 million Br), and Abay (933.3 million Br).

Lion Bank’s profitability was lacklustre compared to its peers. Its net profit margin of 7.1pc was the lowest in the industry, showing that it may be less efficient at converting interest income into net profit. Zemen Bank leads not only the pack; its net profit margin of 60.6pc was the highest for all banks.

Gebrehiwot blamed the “unfounded defamation” the Bank was subjected to and the “poaching of experienced” employees for the lacklustre performance.

According to Abdulmenan Mohammed, a financial statement analyst, several factors contributed to the disappointing results, such as declining net interest income, significant losses in foreign exchange dealings, soaring loan charges, and other asset impairments.

The Bank made a substantial loss from foreign exchange operations, making a loss of 176.73 million Br.

“It’s a shocking result that needs the management’s attention,” said Abdulmenan.

While the interest income slightly increased by 2.99pc to 3.79 billion Br, its interest expense rose by 13.5pc, resulting in a declining net interest income. Fees and commissions plummeted by 54.1pc to 73.58 million, while other incomes dropped by 32.8pc to 127.37 million Br.

Lion Bank’s executives have faced the daunting task of addressing Lion Bank’s weaknesses in profitability and efficiency to maintain its upward trajectory and become a trendsetter in the banking sector. They will have to focus on cost management and streamlining lending to avoid over-reliance on loan operations, which may expose the Bank to higher risks in case of loan defaults.

Lion Bank’s asset base of 32.9 billion Br is smaller than larger banks such as Awash Bank (183.3 billion Br) and Dashen Bank (117.1 billion Br). However, its size is relatively similar to its peers, such as Zemen (35.1 billion Br), Bunna (34.1 billion Br), and Abay (40.6 billion Br). Its subscribed capital of 3.8 billion Br was the lowest among its contemporaries, falling behind Zemen’s 6.3 billion Br, United (7.2 billion Br), Bunna (five billion Birr), and Abay (5.9 billion Br).

Lion Bank’s loan-to-asset ratio stood at 72.2pc, indicating that two-thirds of its assets are loans and advances. A common feature of the industry, banks in Ethiopia strongly focus on lending activities. Lion’s loan-to-deposit ratio of 91.7pc shows that it uses a significant portion of its deposits for lending activities, which may expose the Bank to higher risks in case of loan defaults.

The Bank’s net interest margin at 53.5pc was moderate in profitability from lending activities. However, its efficiency ratio was relatively high at 87.2pc, signalling potential room for improvement in cost management. Lion Bank’s return on assets (ROA) was low at 0.82pc, with modest profitability to its total assets.

To rebuild Lion Bank, the burden falls on the executive team led by Daniel Tekeste, appointed a year ago, following the departure of Getachew Solomon. Daniel has a couple of decades of experience under his sleeves, climbing the corporate ladder, starting as a junior officer with the state-owned Commercial Bank of Ethiopia (CBE). Daniel studied business management and completed his post-graduate studies in business administration at Addis Abeba University.

He is the fifth CEO of Lion Bank since its incorporation in the mid-2000s, with a 108 million Br capital raised from 3,739 founding shareholders. The Bank’s paid capital increased by a low rate of 2.4pc to 2.57 billion Br, and the capital adequacy ratio (CAR) was 14.6pc.

Mikiyas Fikadu, a shareholder, has a 30,000 Br stake he bought six years ago when he was a staff member. He observed the last two years were challenging, but the Bank kept thriving because of loyal customers.

“The hard times have passed,” Mikiyas told Fortune.

Mikiyas advises the bank to become a trendsetter focusing on creative technology, as the banking sector habitually releases identical products.

The Bank opened only two branches in the capital last year, bringing its total to 278, where 4,189 workforce are serving.

Yonas Getachew is one of these, serving as a branch manager for two years at Saris Branch. He received the last financial year report with mixed feelings, acknowledging the conflict’s impact on the Bank’s performance in the preceding years.

“I believe that better days are coming,” he said.

Coffee Authority Avails Regional Quality Inspection Centers

Posted on by Tizita S.

Coffee producers, exporters and processors are in a dilemma as the Ethiopian Coffee & Tea Authority readies new quality inspection and certification centres built in Jimma and Hawassa cities to become operational next month.

The Authority receives about 70pc of the coffee supplies from the Southern and Western part of Ethiopia with plans to take produce from Metu, Illubabur, Buno Bedele, Kefa, Sheka and Benchmaji towns to Jimma centre while Yirgacheffe, Sidama, and Guji will go to Hawasa centre.

According to Director General Adugna Debela (PhD) constructing the centres will ease labour, and save high logistics costs for stakeholders.

The Authority has been working through its branches in Addis Abeba and Dire Dewa cities.

The additional quality centres bear good news for Kirubel Fikresellasie, export manager at Daye Bansa Coffee. He believes it will result in better efficiency and productivity.

Daye Bansa Coffee is a coffee producer and exporter based in Addis Abeba that earned 36 million dollars in revenue last year. The company has been in the business for the past 25 years.

According to Kirubel, the company would save time and transportation costs by 40pc if they export coffee directly from Hawassa as they were compelled to wait for a long time due to the overload at the Addis Abeba branch.

He predicts that experts who make their way to the coffee farms will get the chance to experience how the coffee is produced than being confined to tasting.

The idea seems lost for Reqiq Haile who fears it will create more hustle for international buyers.

She anticipates they will be losing foreign customers that make regular visits with their experts to check the quality. Incorporated in 2016, Moredocofe is a coffee grower, processor and exporter company around the Kality area.

“They won’t be toiling around different places to taste each coffee sample,” she said.

Close to 80pc of exported coffee is sent by 60 of the 1,500 exporters in the country.

The head of the Office for the Director of the Authority, Mohammed Shemsu, remarks the centres will address problems in vertical integration where buyers would have a delay of the product after the payment has been made. He said the centres are set to be operational in the coming month, with an ambition to expand to other regional states.

The centres are expected to facilitate effective cost management, getting rid of more than a dozen intermediaries from the supply chain and making the price less expensive and internationally competitive, according to Mohammed.

“We foresee direct coffee export from growers in the future,” he told Fortune.

He said technical facilities and professional human resources have been prepared alongside construction for the past two years.

Experts argue the idea of constructing centres from scratch while there are sufficient infrastructure and experienced professionals is not practical.

Mengistu Tadesse owner of a private coffee consultancy firm established eight years ago worked at the Ethiopian Coffee Quality Inspection & Certification Centre for 14 years from junior coffee sommelier level to director of the centre. He consulted 11 coffee exporters that joined the business last year.

For Mengistu, transporting empty containers from the capital to the towns such as Jimma adds extra cost if the plan entails using the Djibouti ports.

“It won’t alleviate high logistics costs,” said Mengistu.

Last year Ethiopia generated 1.4 billion dollars in revenue from more than 280,000tns of coffee exported, with plans to reach 1.8 billion dollars this year. The Authority stands 22pc short of its revenue plan according to the past eight months’ report where 143,762tns of coffee was exported, generating 787 million dollars in revenue.

Mengistu says the last year’s result was achieved probably due to high increase in number of exporters or due to the increased demand in the global coffee market coupled with the rise in the global average coffee price. He suggests seriously controlling informal intermediates and focusing on balancing local prices with international ones.

Tuberculosis: The Unseen Pandemic Ravaging the World’s Poor

Posted on by Tizita S.

The infectious disease that killed the most people last year is one we have heard almost nothing about: tuberculosis. In 2022, it likely claimed 1.4 million lives, more than the total toll of COVID. And yet, in rich countries – where virtually nobody dies from tuberculosis any longer – attention has moved on.

Even in developing countries, where the wealthier can afford treatment, it is often the poorest, most disconnected and disadvantaged that suffer from this disease.

The world has long promised to do better. As part of the UN’s global goals, known as the Sustainable Development Goals (SDGs), all nations promised to fix almost every global problem by 2030, including tuberculosis. That is not going to happen. With tuberculosis, we will be decades late.

Indeed, we are failing on almost all the world’s promises. Based on current trends, the world will be half a century late delivering on all its promises. The reason is apparent: politicians made impossible promises. Having 169 priorities is indistinguishable from having none.

Crucial targets on nutrition, education, and tuberculosis are put alongside much more peripheral promises like boosting recycling, more urban parks, and promoting lifestyles in harmony with nature.

The world will be at halftime for its promises this year, yet it will be nowhere near halfway. It is time to identify and prioritize the most crucial goals. With several Nobel laureates and more than 100 leading economists, the Copenhagen Consensus, a think tank, has worked for years to identify where each Birr can do the best.

A new, peer-reviewed study shows that a dramatic reduction in tuberculosis is possible and one of the most effective priorities leading up to 2030.

Almost a quarter of all people in the world carry tuberculosis bacteria. Even in prosperous Europe and the United States, every 10th person has it. It would not develop into disease for most well-off, well-nourished people, but it is a risk for the less fortunate.

Tuberculosis is a disease of hunger and poverty.

Each year, more than 10 million people develop tuberculosis. Because of a lack of resources, in 2021, only about six million cases were diagnosed, of which more than 100,000 were in Ethiopia. Almost half of the untreated people would die. Those who do not die would continue to spread the infection – on average, actively infected people can transmit it to five to 15 others through close contact over a year.

Those who are diagnosed and offered treatment are in for a rough time. They must take medication for as long as six months. Because the medication clears the immediate tuberculosis symptoms like fevers and weight loss in a couple of weeks, many will drop out of treatment too early.

When people stop treatment too early, it increases the chance that the disease can be passed on to others. It also makes the surviving tuberculosis bacteria more likely to develop drug resistance. The subsequent treatment could require 18-24 months and would be much costlier.

We can do much better. It is possible to diagnose many more people and ensure most TB patients stay on their medication.

Our new study shows this can be achieved for an additional 6.2 billion dollars annually. It is less than what the world has already promised – in 2018, the UN pledged to increase funding by about seven billion to eight billion dollars annually by 2022. Disappointingly, spending since 2018 has declined.

The additional funding can deliver diagnosis, care, and prevention that achieve the world’s tuberculosis promises. It would ensure that at least 95pc of people with tuberculosis will be diagnosed. It can provide simple ways to ensure people complete their six months of medication – perhaps with incentives to complete the treatment, such as food, clothing, juice boxes, or gift cards, or through support groups for patients to encourage each other.

These days, mobile apps can also help.

The extra resources would mean that high-risk, vulnerable populations can access periodic screening. Over the coming decades, 50 million people will access appropriate treatment, and 35 million people will have access to preventive treatment.

This will dramatically reduce tuberculosis deaths by 90pc. It will essentially wipe out tuberculosis, as we should have done decades ago. Up to mid-century, the additional resources will allow us to avoid an astounding 27 million deaths and untold human suffering. The total economic benefits, mainly from avoided deaths, would reach three trillion dollars. Each dollar spent will generate 46 dollars of social benefits for the world.

Global dithering has allowed tuberculosis to become the biggest infectious killer. Ending TB is one of the world’s most effective policies. We have promised way too much, but tackling tuberculosis is one of the few most effective policies we must carry through.

Central Banks Juggling Price, Financial Stability Amid Market Turmoil

Posted on by Tizita S.

When market liquidity or funding liquidity crisis occurs at a moment when inflation is above-target, the tension between the objectives of central banks – price stability and financial stability – is inevitable. In such cases, I believe that financial stability must come first because it is a precondition for the effective pursuit of price stability.

But this does not mean that the central bank should cease or suspend its anti-inflationary policies when threatened with a banking crisis or similar systemic stability risk. The conflict between the objectives of price stability and financial stability should be manageable by using the central bank’s policy rate to target inflation and by using the size and composition of its balance sheet as a macroprudential policy tool to target financial stability.

Credible communication is essential to achieve both objectives.

Financial stability in a large advanced economy is not materially impacted by a 50-basis-point increase in the risk-free short nominal rate of interest. It is impacted by the interrelated liquidity and credit risk premia and the vanishing would-be purchasers and lenders in illiquid financial markets – when credit rationing rules the roost. The Bank of England (BoE) got this right last year when, during a period of monetary-policy tightening brought on by then-Prime Minister Liz Truss’s incoherent policies, it temporarily purchased long-dated UK government bonds and postponed quantitative tightening through Asset Purchase Facility gilt sales.

The asset purchases lasted from September 28 until October 14 to counter material dysfunctionality in the longer-dated gilt markets. At its first Monetary Policy Committee meeting following the purchases on November 3, the BoE signalled its continued commitment to the inflation target by raising the policy rate by 75bps, from 2.25pc to three percent. Two further 50bps rate hikes followed on December 15 and February 2. The prudential nature of its temporary asset purchases would have been even clearer if they had been sterilized.

The European Central Bank also got it right this month when it raised its policy rates by 50bps, despite the financial kerfuffle that had blown over from the United States following the insolvency of Silicon Valley Bank (SVB). Headline Harmonized Index of Consumer Prices (HICP) inflation in February was 8.5pc, with the core HICP inflation rate (which strips out volatile energy and food prices) at 5.6pc. The ECB addressed the financial-stability concerns by stating that its “policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy.”

Moreover, “the Transmission Protection Instrument is available to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across all euro area countries.”

What will the Federal Reserve do at its upcoming meeting?

I believe that the financial stability concerns following the demise of SVB and Signature Bank were addressed effectively by ensuring that all deposits in these two badly managed institutions would be made whole. De facto, this means that all deposits in US banks are henceforth insured. This no doubt contributes to moral hazard because incompetent or reckless bank management will not be punished through a loss of informed depositors. But it is the unavoidable price of ruling out the systemic threat posed by bank runs.

Moral hazard was contained by letting the banks go bust and exposing the shareholders and unsecured creditors (and presumably even secured creditors if the losses are large enough) to whatever the banks’ mismanagement cost.

But this prudential response was not optimal because the new Bank Term Funding Program created by the Fed, which offers one-year loans to banks with the collateral valued at par, should have been made available only on penalty terms. With market value well below par for many eligible debt instruments, the lender of last resort has become the lender of first resort – offering materially subsidized loans. The same anomaly (valuing collateral at par) now applies to loans at the discount window.

At the end of last year, US banks had about 620 billion dollars of unrealized losses on securities they planned to hold to maturity. Raising the policy rate will most likely further depress the market value of long-duration securities. So be it. We do not know how much of this duration risk was hedged by the banks (and who the counterparties to such hedging are). But we do know that bank losses (in orderly markets) due to mistaken investment decisions are part of the healthy Darwinian mechanism that sustains a market economy, as is the orderly resolution of bankrupt institutions.

As a lender of last resort and market maker of last resort, the central bank must be ready to discharge its financial-stability responsibilities should illiquidity, bank runs, or other market failures pose a systemic threat.

With core personal-consumption-expenditures inflation still at 4.7pc in January, the Fed should raise its policy rate target zone by 50bps at its upcoming meeting. But I fear it may stop at 25bps, owing to an erroneous concern about the financial stability implications of a larger rate hike. Financial stability in the US is best served in the short run by the Fed standing ready to intervene as lender and market maker of last resort. In the medium and long run, the original Dodd-Frank regulations, repealed for small and medium-sized banks in 2018, should be reimposed. Perhaps limits on banks’ proprietary investment activities should be restored – or maybe fractional reserve banking should be abandoned altogether.

More assertive and competent supervision would not hurt, either.