It is two narratives of the same economy, as seen and felt from the perspective of two broadly categorized entities risk analysis companies and the Bretton Wood Institutions, and the very businesses operating in the Ethiopian economy. The former may see an economic contraction, especially in relation to the pre-El Nino-induced drought years, albeit more robust than a weak domestic resources mobilization, a swelling debt accumulation, a double-digit inflation and a forex crunch would have one believe.
However, the most recent projection, by the World Bank (WB), for instance, foresees Ethiopia’s gross domestic product (GDP) growing by 8.2pc, faster than any other African and most other nations in the world. The government is even more ambitious, hoping to score in excess of an 11pc growth in GDP.
It is a different story for those expected to lead the economy towards such a development though. State enterprises in critical sectors such as the telecom monopoly and logistics are starved for hard currency, let alone the private sector that is lamenting that the devaluation of the Birr by 15pc, against a basket of major currencies last October, has only made things worse.
Banks are likewise feeling the pinch, despite a, by and large, favorable performance in the past fiscal year. They point to a declining deposits, which they ascribe to the 16pc credit cap mandated by the National Bank of Ethiopia (NBE) as a means of arresting the money supply in the market, and thus inflation. The fruits of the directive though are yet to be reaped as far as a single digit inflation is concerned, with broad money supply having reached over 573 billion Br in the past fiscal year.
Prime Minister Hailemariam Desalegn’s administration hopes to cure the economy by bringing fiscal discipline, while some economists argue that supply side reforms are the most effective long-term solutions, and the International Monetary Fund (IMF) suggests a more flexible forex regime can go a long way in streamlining the major economic bottlenecks. Any of which are policy prescriptions that would determine the fate of one business owner who said, “I am struggling to sustain my business”.
[addisfortune.net]