Addis Ababa August 31/2011 Ethiopia is working on comprehensive economic reforms to address the shortage of foreign exchange which is putting heavy stress on the country’s economy, officials said.
“We have now designed a comprehensive reform strategy to sustain and advance the economic growth and development in the country”, Minister of Finance Ahmed Shide told ENA.
The fundamental objective of the economic reform is to achieve sustainable growth with significant job creation for the youth with the private sector taking the lead by engaging in various development projects.
“So, forex is one of the major bottlenecks currently and we are working comprehensively to address that. The privatization we are embarking on will contribute significantly to that, it will bring significant forex,” the Minister said.
Ahmed added “we are working on easing [ways of getting] remittance and broadening the remittance income [flow] into the country from various parts of the world where a lot of Ethiopians are living.”
Zemedeneh Negatu, an Economist agreed on the need to work on enhancing remittances, referring Ethiopia’s low performance compared to other countries.
According to the economist, Ethiopia’s remittance, estimated at four billion USD, has to be increased as it should be part of the mechanism to increase foreign exchange reserve.
Zemedeneh said the remittance that Ethiopia gets from its Diaspora is low even compared to African countries, such as Nigeria and Egypt that have approximately the same number of Diaspora. These countries annually secure 20 and 26 billion USD respectively.
Zemedeneh said foreign exchange, has been a discussion point in Ethiopia for a while because of mainly the imbalance between supply and demand.
“Now we need to export more. I think that is the number one strategy we need to have as a country. Because this year we exported [items] approximately two point six billion dollars, in fact in the last four years the trend has been declining. So that needs to be reversed and not only in reverse but we have to increase exports,” he stressed.
According to Zemedeneh, privatizing the economy is also important in improving forex reserve, as it would bring more investment to the country.
“Privatization brings in very significant hard currency. Now it’s a one-off but at least it’s a big boost to the government to the national treasury. This year is telecom and the sugar. So when that is finalized the government will expect to receive very substantial in my view billions of dollars from the privatization so that will help at least in the short term a levy or reduce the gap but does a one-offs,” Zemedeneh elaborated.
According to Zemedeneh, this would introduce competition to the marketplace, which could lead to a more efficient economy and stimulate supply.
For Yinager Desse, Governor of the National Bank of Ethiopia, low productivity and rapid economic growth have contributed a lot to foreign exchange shortage.
“Low productivity in agriculture, particularly the export items, have not been to the expected level. Similarly, export items from the industrial sector have not increased both in type and volume, thus inhibiting the fulfillment of the national target for gaining foreign exchange from the two sectors,” he said.
Agreeing that low productivity in various sectors led to shortage of foreign exchange reserve, Ahmed Shide said the government is working to enhance productivity and encourage exporters to improve the amount and diversify of export items.
“We are also working on boosting our export performance and productivity on agricultural commodities, mining, tourism and other components of the service sector. All those strategies will help to significantly support our earnings from exports,” he elaborated.
Yinager agrees with Ahmed on that the measures that have been introducing in the area in enhancing forex reserves.
Yinager, who is confident with the effectiveness of the measures, said the new home-grown economic measures are helping to solve all types of economic problems including foreign exchange shortage.