Ethiopian crippling Foreign currency shortage

Effects of Ethiopia's currency devaluation could take few years

Ethiopia needs $7.5 bln

Ethiopian Prime Minister Abiy Ahmed on Friday said the East African nation needs $7.5 billion to finish infrastructure projects such as a massive dam and roads that the government hopes will drive industrialization.

Speaking to parliament before its vote on the 2018/19 budget, Ahmed said the government needed to be more efficient and prudent in its spending of public funds.

He said many state-owned enterprises were heavily indebted and export earnings were a third of the $10 billion annual target.

Abiy took office in April and has pledged sweeping political and economic reforms.

Reuters

Economics Professor Disproves Double Digit Economic Growth Of Ethiopia

Economy

 June 28, 2018 Newbusiness

The narratives of double digit economic growth of Ethiopia for over a decade was wrong and obtained as a result of cooked data, according to a high profile economics professor at the Addis Ababa University.

Ethiopia’s economy has not been growing more than 6% or 7% per year, according to Professor Alemayehu, who proved government’s date wrong with his scientific research.

“In my calculation there is no such exaggerated [double digit] growth rate. The official figure is probematic and structural change became illusive (share of manufacturing in GDP, exports etc), ” he said, presenting his paper on Tuesday in Addis Ababa at a forum organized by the Addis Ababa Chamber of Commerce and Sectoral Association.



“Where did that 11% GDP came from? It should be either from capital accumulation, or from labor, or it is coming from efficiency or technology. When we look at the case of Ethiopia the government data says, capital is around 2.2%; labor is also around 2% and around 7% has come from efficiency and technology. But as we all know for the past 3,000 years we are farming using oxen,” Professor Alemayehu said, making the audience laugh and implicating that the government has been cooking those numbers.

“So that figure has problems. If we look the efficiency of other countries OECD countries, their efficacy is around 2.2% when they are rowing fast. When the economic growth in East Asia was growing at fastest rate, the efficiency was around 2.2%. For instance, China when it was growing at the fastest rate, the efficacy was around 4%. Before the Ethiopian economy data was manipulated, the research I have done shows that our efficiency was only 1%,” he said. So when we add up the three [capital, labor and efficiency] the GDP growth we get is half of what the government has been claiming.

The so called double digit economic growth of Ethiopia has manifested itself by its major results – poverty and unemployment, according to the professor. He research shows that some 60% to 70% of the Ethiopian population is currently living below poverty line while the government data indicates that it is only 23%.

“This also confirms that the growth was not inclusive. When we look to the unemployment youth, the government data says it is around 25%. But 40% is under employment. Government says the informal sector is 20% but it is 40%. In addition 60% to 70% of employed are working poor [earning less than 1.95 per day] population, according to my calculation,” he said.

The high profile economists in Ethiopia have reflected at the panel that aims to get independent professionals views on the current challenges the economy of Ethiopia is facing and the potential opportunities.

The panelists reflected their views on how to rescue the economy from collapsing by quickly solving the multiple traps the country has fallen into as a result of loan and aid driven economic growth the country has been bragging about for over a decade.

Currently Ethiopian economy is struggling with foreign currency shortage, widening trade deficit, high unemployment, poverty and inflation, growing inequality, liquidity problem and corruption.

Professor Alemayehu listed top five socio economic challenges of the country:
1. Non-Inclusive Growth: Unemployment and Poverty
2. Inequality, and Conflict/Politics
3. Macroeconomic miss management
4. Corruption and Conflict/Politics
5. Education Quality, State Capacity and Lack of Professionalism

When added all together the challenges will lead to conflicts as seen in many fragile states in Africa, according to professor Alemayehu, who advised the need for exercising professionalism to fix the economy and independence of professionals from politicians influence.