Commentaries | Sep 10,2022
Jul 1 , 2023
By Shewangezaw Seyoum ( Shewangezaw Seyoum is a senior consultant at the Ethiopian Management Institute. Views expressed here do not reflect that of the institution. He can be reached at email@example.com. )
Ethiopia’s new economic reform agenda is being crafted in the eye of a perfect storm. The process is fraught with challenges from the past, present, and the looming future. Only a meticulously crafted, all-encompassing reform that adequately addresses these concerns may yield sought-after stability and economic revival. Thus, policymakers must seize this as an opportunity to generate robust, inclusive, and responsive economic reforms that not only chart a pathway to recovery but also put Ethiopia firmly on the road to long-term, sustainable growth.
On the threshold of a significant juncture in policy-making, officials of the Ministry of Finance had convened with donors tabling the second edition of the home-grown economic reform agenda. The consultations followed an initial deliberation by parliamentarians, denoting a forward stride on the road to legalisation. Intriguingly, this occurs amid the glaring shortcomings of the initial round and the gathering momentum of fresh challenges.
The forthcoming reform proposal is bullish, exhibiting signs of optimism about economic recovery, potential growth, and the restoration of macroeconomic stability. However, these lofty expectations stand in stark contrast with the realities experienced in the initial phase.
Ethiopia’s economic landscape has experienced a precipitous deceleration in GDP growth over the years. The initial economic reform agenda was initiated in response to severe macroeconomic imbalances, including runaway inflation, a dwindling foreign currency reserve, rampant unemployment, deficient social services, and an underperforming public infrastructure. Rather disconcertingly, these challenges persist today, with some evolving into more critical crises.
Particularly noteworthy is the rampant inflation, a menace that not only cripples economic performance but also threatens socio-political stability.
Recent times have seen Ethiopian private banks grappling with acute liquidity and credit management crises. This predicament has pushed many banks to fall back on short-term loans from the central bank, leveraging a standing facility window. Initially designed as a safety net for short-term liquidity challenges, this facility is now under strain, indicating its unsuitability as a long-term solution.
This financial quagmire could dishearten savers, undermining their confidence in the financial system and discouraging investment. It could deny investors the predictability and financing required for productive ventures while hindering consumers from efficiently utilising the financial system. From a regulatory standpoint, the formulation of monetary policy and the central bank’s primary mandate must remain unfettered by perennial worries over the banks’ health.
Adding to Ethiopia’s economic woes are emerging challenges. Of particular concern are the issues encircling the integrity of the financial system and fiscal sustainability at the sub-state level. There is a growing concern over the financial sustainability of regional states, with some unable to meet obligations such as paying salaries for members of the civil service. In extreme cases, arrears have accrued over several months, pushing these states to seek help from the Ministry of Finance, consequently raising macro-financial stability issues.
To compound these issues, the country’s unstable political climate poses a significant barrier to the increased production and investment desperately needed to stimulate the economy. The shifting sand of identity among the populace, from a national to an ethnic-centric, is fuelling political instability, sowing division, and igniting conflicts.
Internationally, geopolitical and geoeconomic rivalries, particularly those between the United States (US) and the Sino-Russian bloc in the Horn of Africa, have the potential to destabilise Ethiopia’s economic recovery efforts.
In the face of such multifaceted challenges, the economic reform agenda must exhibit extraordinary adaptability and foresight to stand a chance at success.
In the coming weeks, as the agenda will be presented to diverse stakeholders, the officials tasked to promote it should transition from a mode of unidirectional communications to a more open and receptive approach. By adopting an attitude of listening and incorporating ideas from participants, rather than merely disseminating preconceived plans, the reform agenda can become more nuanced and tailored. This approach will likely increase its chances of approval when it reaches the Parliament floor for the second time and, subsequently, donors for possible funding.
PUBLISHED ON Jul 01,2023 [ VOL 24 , NO 1209]
Commentaries | Sep 10,2022
Fortune News | Sep 24,2022
Radar | Sep 18,2023
Radar | Aug 07,2021
Radar | Jun 22,2019
Editorial | Dec 11,2020
Viewpoints | Jun 27,2020
Sunday with Eden | Mar 23,2019
Commentaries | Mar 26,2022
Photo Gallery | 77290 Views | May 06,2019
Photo Gallery | 69297 Views | Apr 26,2019
Fortune News | 55996 Views | Jul 18,2020
Fineline | 55051 Views | Oct 03,2020
Commentaries | Sep 23,2023
Life Matters | Sep 23,2023
My Opinion | Sep 23,2023
Sunday with Eden | Sep 16,2023
Agenda | Sep 23,2023
Editorial | Sep 23,2023
Dec 24 , 2022
Biniam Mikru heads the department of cabinet affairs under Mayor Adanech Abiebie. But...
Jul 2 , 2022 . By RUTH TAYE
On a rainy afternoon last week, a coffee processing facility in the capital's Akaki-Qality District was abuzz with activ...
Nov 27 , 2021
Against my will, I have witnessed the most terrible defeat of reason and the most sa...
Nov 13 , 2021
Plans and reality do not always gel. They rarely do in a fast-moving world. Every act...
Leaders of the National Election Board are in a charm offensive mood, of a sort. Last week, they organised a rare tour for members of the me...
When the country's most senior diplomats and envoys return back to their posts after two-week debriefings, they leave behind a point or two...
Sep 23 , 2023
Ethiopia's contemporary political leaders and the policy wonks under their command ha...
Sep 16 , 2023
The Ethiopian economic narrative oscillates between pockets of resilience and signifi...
Sep 10 , 2023
Earlier this Ethiopian fiscal year, the heralding of a peace deal became synonymous w...
Sep 2 , 2023
An unfolding horror story revealed the human cost of desperate migration in the arid...
Heading to an unfamiliar destination recently, I ordered service from one of the taxi-hailing companies. I had a chance to discuss several a...
Sep 23 , 2023
In the misty break of dawn, the usually scuttling Lamberet Bus Terminal in Addis Abeba stood comparatively quiet. This terminal serves as a...
Sep 23 , 2023 . By AKSAH ITALO
In the wake of a devastating two-year war, SUR Construction Plc, one of Ethiopia's premier contracting fi...
The Ethiopian Commodity Exchange (ECX) executives were taken aback by an unexpected decision from the Sta...
Sep 23 , 2023 . By MUNIR SHEMSU
Ethiopians living abroad for over a year and non-residents of Ethiopian origin can now deposit foreign cu...
Or see contact page