Reform Encourages Int'l Organizations to Increase Financial Support: Economists

Addis Ababa December 29/2018 The ongoing reform in the country has led international development organizations to increase financial assistance and loan to Ethiopia, according to some economists.

2018 was a year when many international organizations financed various sectors in the country through loan, direct aid and other forms of assistance.

The World Bank has, for instance, extended to Ethiopia about 1.35 billion USD loan, the Development Bank of Africa around 15 million USD, and European Union Commission 20 million USD.

Commenting on this, Addis Ababa University Economics Lecturer, Berhanu Denu, said the reform underway in the country, especially in the political and economic spheres has been encouraging many organizations to fund Ethiopia, particularly in a form of loan.

Getting loan from international organization is not easy, he stated, adding that the organizations have preconditions to give loan for countries.

 “As we are observing, Ethiopia has been undergoing through reform; and the government is, for example, unveiled its plan to partially privatize government organizations and big projects. This obviously encourages development partners,” the scholar said.

With regard to political measures, the government “has released many political prisoners, revised policies and increased the participation of women at senior executive level. These are among the major achievements that lead international organizations to grant assistance to Ethiopia.”

Birhanu pointed out that international organizations have started believing in Ethiopia, and “this is a major advantage for the country to continue the journey to development.”

 “I consider this as an advantage; the country is in a critical limitation of foreign currency due to the instability occurred in the previous four and three years, so receiving money in grant will have an importance to solve this problem.” he said.

Civil Service University Development Economics, Dessalegn Shamebo, however, urged caution in taking financial loans.

Loans are dreadful unless proper cautionary measures are taken, he argues. Taking Countries like Mexico in 1982 were for instance overburdened with debt and ended up in economic crisis as they failed to pay, the scholar elaborated.

Dessalegn stated that the government needs to utilize the money properly to invigorate profitable economic sectors which help the country to ease debt burden.

According to him, the debt burden of Ethiopia is increasing throughout the last ten years. The credit burn increased from 2.8 billion USD in 2008 to 26.4 billion USD in 2017/2018.

He recommends that investing the loan in manufacturing and export oriented sectors is necessary in order to pay the debt on time and increase the confidence of lenders.

 “I recommend investing on projects that boost and encourage export. We have to focus on areas that will improve export. We have to seriously review some of our huge projects; we need to answer the question why the projects are delayed so that we can learn from them,” Dessalegn elaborated.

He further suggested that diversifying export options in areas of leather, value added products and intensifying efforts to increase tourism can help to pay debt timely.

The other Economics Lecturer at Civil Service University, Tesfaye Chofena said “I appreciate that lenders are providing money for Ethiopia, but the government should work on deciding which kind of credit it prefers. Huge debt interest may affect negatively the growth of the country. So I recommend long term loan with low interest rate.”

Healthy usage of debt money is crucial, according to Tesfaye. “Improving control and monitoring systems is thus necessary to prevent corruption which is a serious problem.”

 “The government should work on monitoring institutions and strengthening controlling system in the executive body, they need to seriously control the progress of projects and the proper usage of the money and profitability of the investments”, he said.