If former Minister of Finance Sufian Ahmed had said the foreign exchange shortage is structural and will remain with Ethiopia for decades to come, that is precisely what Eyob Tekaleign (PhD), state minister for Finance, would want to see changed. The foreign exchange crunch should stop defining the Ethiopian economy, Eyob declared early on last week, standing before members of the international community, briefing them on the new economic reform agenda conveniently characterised as “homegrown”.

The audience was receptive to the "ambitious" reform the administration of Prime Minister Abiy Ahmed (PhD) rolled out and agreed it is "doable".

"The Reform Agenda is our pro-job, pro-growth, and pro-inclusivity pathway to prosperity," said the Prime Minister. "Join us on this path."

In the making for over one and a half years, the tabled reform agenda sees a major departure from the previous dogmatic approach in its aim to rebalance macroeconomic fundamentals and sustain growth. A team of experts from the Ministry of Finance, the macroeconomic team of the Prime Minister, and the National Bank of Ethiopia (NBE) designed the plan to be implemented in the next three years. In his address to the international community, the Prime Minister praised members of this group as "Ethiopia's finest minds."

Bringing the private sector to the forefront, the reform aims to create jobs, address the foreign currency shortage, push down inflationary pressure, reduce debt stress and address access to credit problems while capitalising on the unlocking power of technological advancement.

"Acknowledging that the next chapter of Ethiopia's growth and development requires a more active private sector, we opened up key economic activities to private investment," said Abiy, appearing before an international audience gathered at UNECA, on Monday, September 9, 2019. "We moved the needle further than many had anticipated, and we continue to push further with renewed vigour and enthusiasm."

His enthusiasm is evident in his administration's determination to depart from two decades of statism in economic policy making, perceived as having a mixed outcome. The Prime Minister pins his hope on the reform agenda to "propel Ethiopia into becoming the African icon of prosperity" by 2030. It is the year he wants to see his country join the list of middle-income countries, thereby moving the goal post by five years from what was designed in the two generations of growth and transformation plans.

From the Sustainable Development & Poverty Reduction Programme (SDPRP) of the 1990s and the Plan for Accelerated & Sustained Development to End Poverty (PASDEP) of the 2000s to the transformation plans of the second decade of the 21st century, policymakers had believed in the might of the activist state in effecting an economic miracle. Eyob has acknowledged the successes of such a miracle, which has brought impressive growth in GDP and per capita income as well as expansion in the provisions of infrastructure and social services in health and education.

The statist policy has helped the country reduce child death significantly while cutting back the ratio of the population that lives in abject poverty by half.

Zemedeneh Negatu, a consultant and board chairman of Fairfax Global, noted that one good thing about the tabled plan is recognising past achievements and capitalising on them.

"It's built on the successes of the last 15 years," Zemedeneh told Fortune.

These achievements and growth were driven by public investments financed through the mobilisation of domestic savings and prioritisation of credits, according to Eyob.

"[However], the economic progress has not been entirely successful in inspiring structural transformation," said Eyob.

His admission in what ails the economy was hailed by members of the Development Assistance Group (DAG) as "candid". Formed in 2002, it is a group comprising 22 multilateral organisations and countries, co-chaired by the World Bank and Sweden, which are providing financial support for Ethiopia. Eyob accepted the challenges that come along in the form of inflationary pressure, a massive trade deficit, a chronic shortage of foreign currency and increasing unemployment.

The reform agenda was designed in response to these constraints, as well as the inefficiencies in the economy, according to Mamo Mihretu, senior policy advisor to the Prime Minister. He also serves as Ethiopia's chief trade negotiator and is a member of the team that authored the reform agenda.

Foreign currency shortages, access to reliable electricity, corruption, bureaucratic inefficiency, poor internet services, and access to finance have been the most problematic factors in doing business. The expansionary fiscal policy appears to have crowded out the private sector’s access to finance, and might have contributed to high inflation, which has averaged about 15.5pc since 2005. As a result of the persistent current account deficit, foreign currency shortages have become one of the defining binding constraints to businesses, according to Eyob.

"Rapid increases in external debt in the context of poor project executions and export performance led to a high risk of debt distress," he said.

As of last March, the total outstanding debt growth of Ethiopia stood at 26.9 billion dollars, of which a large share of the debt was owed by state-owned enterprises. In addressing these problems, the reform agenda outlines three responses: macroeconomic, structural and sectoral reforms.

The responses at the macroeconomic level aim at re-balancing and safeguarding financial stability through encouraging savings to get invested in the financial system, strengthening public sector finances, controlling inflationary pressure, improving access to land and developing capital markets. Maintaining a "prudent fiscal policy stance and mobilising foreign currency through privatisation and concessional loans" are also the macroeconomic objectives of the reform.

On the structural front, the reformers focus on creating a conducive investment climate for the private sector by amending legal frameworks, administrative procedures and policies. The reformers want to see a facilitating bureaucracy, away from one that is there to "police".