Ethiopia: IMF projects 8.7% growth, urges for more private sector role

IMF projects Ethiopia to grow 8.7% and 8% for the current and the next fiscal years, respectively. Whereas, the World Bank estimated 9.5% and 10.5% for the two periods.

An International Monetary Fund (IMF) team projected Ethiopia’s real GDP growth to be around 8.7% and 8% for fiscal years 2014/15 and 2015/16, respectively.

“Ethiopia’s state-led development model has delivered rapid and broad-based growth over many years”, read the statement IMF issued at the end of last week. “It has also reduced poverty significantly, while keeping inequality low. The outlook for Ethiopia remains highly favorable…”, it added.Logo - International Monetary Fund (IMF)

Public investmentin infrastructure, for which Ethiopia have the third highest rate in the world, is already helping alleviate limitations on private sector development, the statement observed. Yet, advised for increasing the efficiency of customs clearance and other administrative procedures, improving the quality of logistics, and increasing access to credit.

The statement deemed the single digits inflation rate “an important achievement for macroeconomic stability”, however recommended for “a continued cautious monetary policy stance” in light of “food prices pushing inflation close to 10 percent”.

The statement was came after IMF’s team spent the past two weeks in Addis Ababa – meeting with Prime Minister Hailemariam Desalegn, Governor of the National Bank of Ethiopia Teklewold Atnafu, Minister of Finance and Economic Development Sufian Ahmed as well as the private sector, diplomats and the civil society, as part of its “Article IV Consultation” for 2015.

Boosting domestic and foreign resource mobilization, and reducing bottlenecks to doing business are two “key factors” to be focused on to sustain rapid and broad-based growth over the medium term, IMF’s team advised, adding that “these should allow for a growing role for the private sector, which holds the key to job-rich growth going forward”.

The statement urged for transparency in state-owned enterprises and for more credit to flow to the private sector, among others, noting that:

On public investment, which is to a large extent executed by state-owned enterprises, [IMF] advised that its pace should remain consistent with macroeconomic sustainability, and with allowing for more credit to flow to the private sector. Given the importance of maintaining debt sustainability, the team encourages the government to consider innovative forms of financing, such as private-public partnerships and other options that could help mobilize private non-debt financing. Enhancing oversight of public enterprises by the general government, and making information on their operations available on a more timely basis, is also critical for establishing a solid fiscal anchor.

On the other hand, The World Bank, in its update last month, projected Ethiopia’s economy to grow by 9.5% and 10.5% for fiscal years 2014/15 and 2015/16, respectively.

The Bank also projected inflation to remain in single digits in the next two years while it expects falling oil prices to help accelerate Ethiopia’s growth in 2015/16.



Fetsum Berhane is an Ethiopian resident, economist researcher and a blogger on HornAffairs.

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