By Staff Reporter
September 10, 2019 (Ezega.com) -- The Executive Secretary of the United Nations Economic Commission for Africa (ECA), Vera Songwe, said Ethiopia’s plan to grow from GDP per capita of 865 to 2219 is “very ambitious,” but doable, citing the success stories of China, Laos, and Vietnam.
Vera Songwe was speaking while the government of Ethiopia unveiled on Monday what it described as a “Homegrown Economic Reform” agenda aimed to unlock the country’s development potential and address the macroeconomic imbalance the nation has faced for some time.
However, Ms. Songwe cautioned that "Ethiopia currently has a $10 billion gap - $6 billion in new investments and $4 billion of annual debt reduction - that must be bridged in order to achieve its reform aspirations."
“If you continue to accumulate debt the way you’re doing now, you will likely fall into debt distress in the next two years and a lot of the structural reforms you’ve put in place will not bring in private sector investment because you will not be a credit-worthy country,” she added.
Ms. Songwe said credibility is what the private sector will be looking for in the reform package. She recommended paving the way for IPPs in a reformed energy sector as a quick-win that can demonstrate the country’s credibility.
Representatives from the World Bank, IMF, UN Agencies and other development partners attended the event at UN conference center in Addis Ababa where Prime Minister Abiy Ahmed urged all stakeholders to “support the government in crafting Ethiopia’s economic miracle.”
“Several months in the making and spearheaded by some of Ethiopia’s finest minds, our initiative aims to propel Ethiopia into becoming the African icon of prosperity by 2030,” said Prime Minister Abiy Ahmed while unveiling the reform to representatives from UN, members of the diplomatic community, World Bank and other international financial institutions at the UN conference center in Addis Ababa.
Last week, the government tabled the economic reform for discussion where the ministry of finance and international cooperation disclosed that the country has faced critical macro-economic imbalance which is being exhibited through record high debt burden, critical shortage of foreign currency, and rising inflation.
In 2018, Ethiopia recorded a government debt equivalent to 60 percent of the country's Gross Domestic Product (GDP). Government Debt to GDP in Ethiopia averaged 34.57 percent from 1991 until 2018 but reached an all-time high of 60 percent in 2018, from a record low of 24.70 percent in 1997.
Prime Minister Abiy Ahmed said “in just over one year,” his government has taken a series of measures to change the economic landscape of the country, by reforming investment laws and business climate, which have helped remove regulatory obstacles that hamper investments.
Abiy stated that the private sector is crucial for the next stage of growth and development. Consequently, he said, we have “opened up key economic activities to private investments.” He added that these measures will “surely be reflected in Ethiopia’s ease of doing business ranking.”
The new economic reform outlines macroeconomic, structural and sectoral reforms that will pave the way for job creation, poverty reduction, and inclusive growth that would prioritizes sectors such as agriculture, manufacturing, mining, tourism, and ICT.
According to him, the government prioritized the success of key sectors such as agriculture, manufacturing, mining and ICT with the vision for building a prosperous nation. “Our priority is to create economic environment that closes income inequality gap by creating opportunities and access to sources for all.”
The government is required to boost savings up to 30 percent of the nation’s GDP and increasing income from local sources up to 20 percent of the GDP. In addition, it plans to create at least two million jobs every year to implement the reform.
Governor of the National Bank of Ethiopia, Yinager Dessie is optimistic that any winning party of the next national elections will implement the three-year economic reform agenda, regardless of differences in political ideology.
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